IPO Size: Rs. 650 cr

• Rs. 572 cr Fresh Issue for (i) working capital Rs. 181 cr (ii) debt repayment Rs. 120 cr, of Rs. 186 cr net debt (iii) capex Rs. 30 cr (iv) unidentified inorganic acquisitions and general corporate purposes
• Rs. 78 cr Offer for Sale (OFS) by the promoter (94% to drop to 70% post IPO)

Price band: Rs. 140-148 per share

M cap: Rs. 2,598 cr, implying 25% dilution

IPO Date: Fri 22^nd Nov to Tue 26^th Nov 2024, Listing Fri 29^th Nov 2024

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Building Water Supply and Wastewater Treatment Projects

Enviro Infra Engineers undertakes projects in the water sector, funded by central and state governments, under Atal Mission for Rejuvenation and Urban Transformation (AMRUT), National Mission for Clean Ganga and Jal Jeevan Mission schemes. It has an order book of Rs. 1,906 cr, implying book-to-bill ratio of 2.6x on FY24 revenue of Rs. 729 cr. Besides existing project execution, company plans foray into new initiatives like waste-to-energy and diversify geographically to East and South India.

Double Digit Net Margin

Company enjoys EBITDA margin of 24%, almost double of listed peers VA Tech, Ion Exchange and Vishnu Prakash. This translates into a healthy net margin of 15-16%. On Q1FY25 revenue of Rs. 205 cr, EPS stood at Rs. 2.25, against FY24 EPS of Rs. 8. On net worth of Rs. 323 cr, FY24 RoE stood at 38%.

Despite all projects being govt funded, the debtors outstanding are under 2 months, keeping working capital under check. 

Attractive Valuation vis-à-vis Peers

Historically, Q1 accounts for ~20% of annual revenue (40% generated in Q4). This leads to an estimated FY25E revenue in excess of Rs. 1,000 cr and an estimated EPS of Rs.9. IPO price of Rs. 148 per share is discounted by a PE multiple of about 16x on current year basis, which is seen attractive for double digit net margin and strong order book. Peers EMS and Vishnu Prakash, both having similar topline as Enviro, are ruling at PE multiples of over 22x.