The initial public offering (IPO) of Enviro Infra Engineers continued to attract a strong response from the investors during the second of the bidding process. The issue, which kicked off on Friday, November 22, was overall subscribed more than 2 times, thanks to all-round bidding from the investors of all categories.
The New Delhi-based Enviro Infra Engineers is selling its shares in the price band of Rs 140-148 apiece. Investors can apply for a minimum of 101 shares and its multiples thereafter. It is looking to raise Rs 650.30 crore via IPO, which includes a fresh share sale of Rs 572.46 crore, and an offer-for-sale (OFS) of up to 52.68 lakh equity shares.
According to the data, the investors made bids for 22,86,91,775 equity shares, or 7.43 times, compared to the 3,07,93,600 equity shares offered for the subscription by 1.05 pm on Monday, November 25. The three-day bidding for the issue will conclude on Tuesday, November 26.
The allocation for retail investors was subscribed 5.64 times, while the portion reserved for non-institutional investors (NIIs) saw a subscription of 18.74 times. The allocated amount for employees was booked over 9.33 times. However, the quota set aside for qualified institutional bidders (QIBs) was subscribed merely 2.05 times as of the same time.
Established in 2009, Delhi-based Enviro Infra Engineers is engaged in the design, construction, operation, and maintenance of water and waste-water treatment plants (WWTPs) and water supply projects (WSSPs) for government agencies/entities.
The grey market premium of Enviro Infra Engineers has been rising higher despite the rising volatility in the broader markets. Last heard, the company was commanding a premium of Rs 50-55 per share in the unofficial market, suggesting a listing pop of over 35-36 per cent for the investors. The GMP stood around Rs 40 on the first day of the bidding.
Brokerages are mostly positive on the issue suggesting investors to subscribe to it citing the strong financials, robust & diversified order book, reasonable valuations, experience promoters and consistent execution are the key positives of the company. However, dependence on government tenders, capital intensive nature of business and rising competition are the major risks for it.
Companies like Enviro Infra Engineers are strategically positioned to capitalize on these trends. Notably, the company has outperformed its peers in several key financial metrics, including an Ebitda margin of 23 per cent and a ROCE of 33 per cent, compared to industry averages of 16 per cent and 25 per cent, respectively, said Nirmal Bang Securities.
"The company boasts a robust order book. Additionally, its price-to-earnings ratio stands at 24 times, which is lower than the industry average, making it a more attractive investment option. The water and wastewater treatment industry presents significant growth opportunities. Thus we recommend to subscribe to the IPO," it said.
Ahead of its IPO, Enviro Infra raised Rs 194.7 crore from anchor investors as it allocated 1.31 crore equity shares at Rs 148 apiece. For the period ended on June 30, 2024, Enviro Infra Engineers reported a net profit of Rs 30.78 crore with a revenue of Rs 207.46 crore. It clocked a net profit of Rs 110.54 crore with a revenue of Rs 738 crore for the financial year ended in March 31, 2024.
Enviro Infra Engineers has reserved 1,00,000 equity shares for its eligible employees who will get a discount of Rs 13 per share during the bidding. Of the net offer, 50 per cent shares are reserved for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) have 15 per cent of allocation. Retail investors will get an allocation of 35 per cent in the net offer.
Enviro Infra's revenue/Ebitda/PAT has grown at a CAGR of 115.6 per cent/107.3 per cent/101.1 per cent respectively for FY 22-24. The order bid to conversion ratio stands at 39% on an average over the last three fiscals. The growth for the company is tied to timely rollout of tenders from government schemes pertaining to wastewater treatment and water supply, said Indsec Research.
"The IPO is valued at an FY24 EV/Ebitda of 16.7 times. The tendering activity was subdued due to general election in H1FY25 and is expected to pick up in H2FY25. Despite that, their order book position as on June 30, 2024, remains strong at Rs 1,906.3 crore, offering revenue visibility of over 30 months on FY24 revenue basis," it said with a 'subscribe for long-term' rating for the IPO.
Hem Securities is the sole book running lead manager of the Enviro Infra Engineers IPO, while Bigshare Services is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with Friday, November 29 as the tentative date of listing.