EMS IPO: EMS IPO opens for public subscription on Friday, 8 September, and will close on Tuesday, 12 September. The bidding for anchor investors concluded on Thursday, wherein the company collected Rs 95.37 crore. The price band for its public issue at Rs 200-211 per equity share of face value Rs 10 each. At the upper end of the price band, the company’s promoters and shareholders seek to raise Rs 321.24 crore from the IPO. Ahead of the public issue, EMS shares’ GMP rose to Rs 120 per equity share, 56.87% over the upper end of the share price on offer.
The IPO comprises a fresh issue of equity shares worth Rs 146.24 crore and an Offer-For-Sale (OFS) with promoters offloading 82.4 lakh shares worth Rs 175 crore. The company intends to use the net proceeds from the IPO to bolster its capital base, catering to its future capital requirements resulting from business and asset growth. For potential investors, the bidding starts at a minimum of 70 equity shares, with subsequent bids in multiple lots of 70 equity shares each, with a maximum of 13 lots. At the upper end of the price band, the post-issue implied market-cap is Rs 1,1171 crore.
Should you apply for the EMS IPO?
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“India has 18% of the world’s total population, but only 4% of its water resources, making it among the most water-stressed countries in the world. A large number of Indians face high to extreme water stress, according to a recent report by the government’s policy think tank, the NITI Aayog. India’s dependence on an increasingly erratic monsoon for its water requirements increases this challenge. The World Bank is helping to support the government’s national groundwater program, the Atal Bhujal Yojana, to help improve groundwater management.
“EMS has successfully completed 67 projects as on July 31, 2023, and gradually intends to expand its business operations to other regions of the country, especially North-East and South India. Almost all of the company’s projects are World Bank-funded through local state government bodies. This is the main reason for their robust cash flows/timely payments, and no bad debts, which helps them to take on more projects with the help of internal accruals only. As a result, there is savings in the finance cost which helps to improve the profit margin. On the upper price band, the issue is valued at a P/E of 9.1x based on FY2023 earnings, which we feel is fairly valued compared to its peers. We, therefore, recommend an SUBSCRIBE rating for the issue.”
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“At higher price band, EMS is demanding a P/E multiple of 10.9x (to its FY23 earning), which is at discount to the peer average. Unsustainable expansion in the urbanization seems to be putting pressure on the urban wastewater management, planning and treatment. Backed by the government’s proactive policies, the domestic water & wastewater treatment market is expanding rapidly and has strong outlook in the medium term. With a strong focus on sewage treatment segment, EMS is rightly placed to benefit from the market expansion. Its robust order book & profitability, healthy balance sheet and demanded discounted valuation makes this issue attractive. Thus, we assign a “SUBSCRIBE” rating for the issue.”
(The recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)