EMS IPO Review: EMS Limited is coming up with its Initial Public Offering. The IPO will open for subscription on September 8, 2023, and close on September 12, 2023.

In this article, we will look at EMS IPO Review 2023 and analyze its Price Details, GMP, strengths, weaknesses and more. Keep reading to find out! 

EMS IPO Review – About The Company

EMS Limited previously known as EMS Infracon, incorporated in 2012, is engaged in the business of providing water and wastewater collection, treatment, and disposal services.

telegram channel

The company offers water supply systems, water and waste treatment facilities, electrical transmission and distribution, road and allied works, as well as operation and maintenance of wastewater scheme projects (WWSPs) and water supply scheme projects (WSSPs) for governmental entities. 

Note: If you want to learn Candlesticks and Chart Trading from Scratch, here’s the best book available on Amazon! Get the book now!

The company is self-reliant in every aspect of its business thanks to an in-house team for designing, engineering, and construction. In order to assure compliance with and adherence to the quality standards established by the industry and government agencies & departments, it also has a team of 61 engineers who are assisted by outside consultants and industry experts. 

As of March 24, 2023, EMS is managing and operating 13 projects, comprising WWSPs, WSSPs, STPs, and HAM, totalling Rs.1,38,909.00 lakhs and 5 O&M projects, totalling Rs. 9,928.00 lakhs as of February 28, 2023,  i.e. unbilled amount. These projects are located across five states.

EMS IPO Review – Industry Overview

The following are the overviews of the different segments the company operates in:

Water supply and wastewater management system in India

The government has set up an increasing number of initiatives in recent years to improve India’s water supply and sewage infrastructure. JJM, Jal Shakti, and Atal Bhujal Yojana are just a few of the programs that have been launched in the previous seven years. The budget for JJM/National Drinking Water Mission has grown from ₹550 billion in FY23 to ₹700 billion in FY24, a 27.3% increase.

Railway Industry

The backbone of the Indian economy and the biggest train network in the world is the Indian Railways, which is governed by the Indian government. Over 24 million people and 203 million tonnes of freight are transported by over 9,000 freight trains and 13,500 passenger trains operated by Indian railways. 

It also employs the most people in India, contributing over 1.5% of the country’s GDP and over 45% of its modal freight. It is the economic engine of India and is regarded as a reliable, practical, and sustainable mode of transportation there. The government proposed a budget increase of ₹2,400 billion rupees (70% year-on-year) for railways in Budget FY24.

Roads and Highway Industry

The development of highways, bridges, airports, and railroads is essential to the economy of the nation. Construction of roads is a significant component of infrastructure improvement, economic expansion, and employment creation. Infrastructure is currently the government’s main priority.

₹111 trillion dollars in infrastructure investments are anticipated by the Task Force on National Infrastructure Pipeline (NIP) for FY20–FY25, with the road sector accounting for 18% of the overall investment. The recently built Asset Monetization Pipeline will also monetize roughly ₹1,600 billion through highways.

Power sector

Power is one of the most important components of infrastructure for the nation’s economic growth and well-being. The availability and development of suitable infrastructure are critical for the Indian economy’s long-term prosperity. Power demand is predicted to climb higher in the future as the population and economic activity grow. 

The government implemented a Revamped Distribution Scheme with a Rs.30,40,000 million outlay during a five-year period from FY22 to FY26.

EMS IPO Review – Financial Highlights

If we look at the financials of EMS Limited we find out that their assets have roughly doubled from ₹378.31 crores in March 2021 to ₹638.72 crores in March 2023. 

Their revenues also follow a similar trend, increasing from ₹336.18 crores in March 2021 to ₹543.28 crores in March 2023. The rise in revenues is accompanied by increasing profits, which have increased from ₹71.91 crores in March 2021 to ₹108.67 crores in March 2023.

Though the revenues and profits of the company have increased, its net profit margins have remained consistent at a range of 20-22% in the past three years.

In terms of return ratios, it has a ROE of 22.27% and a RoCE of 28.26% as of FY23. These ratios indicate a good return to shareholders’ capital and an efficient use of company resources.

The debt-to-equity ratio is another positive prospect for the company. It was reported at 0.09 for FY23 because of its asset-light model.

Financial Metrics 

EMS IPO Review - Financials
(Source: RHP of the company)

Competitors of the Company

The peer comparison of the company has been based on infrastructure companies operating under various business segments similar to EMS Limited. However, It should be noted that these peers are not limited to the segments indicated with them. They do function in other sectors as well.

Following are its competitors across various segments:

  1. Water supply and wastewater treatment: VA Tech Wabag Ltd and JWIL Infra Limited
  2. Roads, Urban infrastructure, Power and Railway sector: Simplex Infrastructures Limited, RPP Infra Projects Limited and IVRCL Infrastructures & Projects Limited

Strengths of the Company

  • The company has an in-house designing, engineering and execution team which enables it to correctly bid with project specifications and reduces its dependence on outsourcing engineering and design work to third-party consultants
  • The designing and engineering of projects are technically complex, time-consuming and resource-intensive because of unique project requirements. The company constantly upgrades its technical abilities to offer its clients the full range of services at lower cost and without compromising on quality. 
  • Most of the projects of the company are World Bank-funded through local state government bodies. This helps it have robust cash flows/timely payments, and no bad debts, which helps it take more projects and increase its profit margins. 
  • The company has a Scalable and Asset Light Business model that focuses on development management or joint development agreements or joint ventures, which requires lower upfront capital expenditure compared to a direct approach.
  • The company believes that its experience with projects, technical capabilities, timely performance, reputation for quality, as well as price competitiveness have enabled it to successfully bid and win projects.

Weaknesses of the Company

  • Most agreements that the company has entered into in connection with its business contain a penalty or liquidated damage clause for delay in the completion of a project that takes effect if the completion of a project is delayed.
  • The company requires huge working capital to run its business. The inability to acquire such cashflows can have an adverse effect on its operations.
  • The government contracts obtained by the company contain terms that favour government clients. The scope for negotiation of these contract are limited and the company may be required to accept unusual or onerous provisions in such contracts, which may affect the efficient execution and profitability of its projects.
  • The Company has availed Rs. 39.56 lakhs as unsecured loans which are repayable on demand. Any demand from the lenders for repayment of such unsecured loans may affect its cash flows.
  • For bids on specific government projects and for carrying out projects that have been awarded, the company depends on joint venture partners. Joint venture partners’ noncompliance with their obligations could impose additional financial and performance obligations on the company which could its earnings.

EMS IPO Review – GMP

The shares of EMS Limited traded at a premium of 53.08% in the grey market on September 5th, 2023. The shares tarded at Rs 323. This gives it a premium of Rs 112 per share over the cap price of Rs 211

EMS IPO – Key IPO Information

IPO Size₹321.24 Cr
Fresh Issue₹146.24 Cr
Offer for Sale (OFS)₹175.00 Cr
Opening dateSeptember 8, 2023
Closing dateSeptember 12, 2023
Face Value₹10 per share
Price Band₹200 to ₹211 per share
Lot Size70
Minimum Lots1
Maximum Lots13 (910 shares)
Listing DateSeptember 21, 2023

Promoters: Mr Ramveer Singh and Mr Ashish Tomar

Book Running Lead Manager: Khambatta Securities Limited

Registrar to the Offer: KFin Technologies Limited

The Objective of the Issue

The net proceeds from this issue will be utilized for the following purposes:

  • Financing the working capital requirement of the company
  • General corporate purposes

In Closing

In this article, we looked at the details of the EMS Limited IPO Review. Through this article, we can see that the company has shown good growth in the past and has further potential to grow provided it keeps obtaining projects from the government at desirable bids.

What do think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.

Written By Aaron Vas

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks also get updated with stock market news, and make well-informed investment decisions.

Start Your Stock Market Journey Today!

Want to learn Stock Market trading and Investing? Make sure to check out exclusive Stock Market courses by FinGrad, the learning initiative by Trade Brains. You can enroll in FREE courses and webinars available on FinGrad today and get ahead in your trading career. Join now!!