Enviro Infra Engineers IPO now open for subscription: Should you apply?

The initial public offering (IPO) of Enviro Infra Engineers opens for bidding today, that is, Friday, November 22. The company is selling its shares in the range of Rs 140-148 per share where investors can apply for a minimum of 101 equity shares and its multiples thereafter. The three-day bidding for the issue shall conclude on Tuesday, November 26.  

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 Rs 650.3 crore IPO Enviro Infra Engineers includes a fresh share sale of 3,86,80,000 equity shares worth Rs 572.46 crore, and an offer-for-sale (OFS) of 52,68,000 equity shares by its promoters Sanjay Jain, Manish Jain, Ritu Jain, Shachi Jain, who will offload the shares.  

The net proceeds from the fresh issue shall be utilized towards funding the working capital requirements; infusion of funds in its subsidiary, EIEL Mathura Infra Engineers (EIEL Mathura) to build 60 MLD STP project; repayment and/or prepayment of certain outstanding borrowings; funding inorganic growth through acquisitions and general corporate purposes.  

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. The anchor book included names like Quant Mutual Fund, Motilal Oswal MF, Abakkus Diversified Alpha Fund, LIC MF, Singularity Equity Fund, Finavenue Capital Trust, Nuvama, NAV Capital VCC, Smart Horizon Opportunity Fund and Vijit Growth Fund.  

Enviro Infra Engineers participates in tenders floated by state governments and ULBs for developing WWTPs and WSSPs on an EPC or HAM basis. Till June 30, 2024, the Company has successfully developed 28 WWTPs and WSSPs across India in the last seven years, including 22 projects of 10 MLD capacity and above.  

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. The company 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. The company will command a total market capitalization close to Rs 2,600.  

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.  

Hem Securities is the 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. Here's what a host of brokerage firms said about the IPO of Enviro Infra Engineers:

Reliance Securities

Rating: Subscribe

Enviro Infra Engineers has an in-house designing, engineering and execution team with timely delivery and established track record enabling consistent increase in eligibility for high value project tenders. It has 2 HAM projects and with the money raised it will help to improve its credit ratings which will aid in funding, said Reliance Securities.  

"In line with government policies and industry trends, it is taking various initiatives to reduce carbon footprint and contribute to environmental sustainability putting the company in a sweet spot. Execution of HAM projects to qualify and bid for larger HAM projects requiring further funding and technical expertise going forward. Hence, we recommend a subscribe to the issue," it said.

 

Swastika Investmart

Rating: Subscribe for long-term

Enviro Infra Engineers is engaged in designing, operating, and maintaining water and wastewater treatment plants, along with water supply schemes. The company is expanding its footprint with new projects and backed by a strong order book, said Swastika Investmart.  

"It is showcasing robust growth in both revenue and profits. The IPO is fairly priced, offering a reasonable valuation, said the brokerage firm, recommending investors to subscribe for a long-term perspective.

 

Choice Broking

Rating: Subscribe

EIEL is in the business of designing, construction, operation and maintenance of water and wastewater treatment plants and supply schemes. The company bids for tenders issued by State Governments and ULBs for developing WWTPs and WSSPs on an EPC or HAM basis. It has demonstrated consistent performance over the years, with steadily increasing margins, said Choice Broking.  

"EIEL is demanding a P/E multiple of 23.9 times, based on its FY24 EPS of Rs.6.2, this valuation seems to be at a discount to its peer average. We believe EIEL has strong long term growth potential, supported by government initiatives in the water supply and management sector and the overall positive outlook for the industry. Thus, we recommend a 'subscribe' rating," it said.

 

Anand Rathi Research

Rating: Subscribe for long-term

Enviro Infra Engineers has an in house designing, engineering and execution team 180 engineers with diversified order book of 21 projects across India for an aggregate value of Rs 1,906.28 crore as of June 30, 2024 across India and in-house execution capabilities with timely delivery and established track record, said Anand Rathi Research.  

"At the upper price band, the company is valuing at P/E of 30.72 times, with an EV/Ebitda of 15.8 times and market cap of Rs 2,599.6 crore post issue of equity shares and return on net worth of 37.83 per cent. We believe that the IPO is fairly priced and recommend a 'subscribe for long term' rating to the IPO," it added.

 

SMIFS

Rating: Subscribe

This geographical and project scale diversification reduces operational risks and enables access to more significant opportunities, driving long-term growth. Enviro has demonstrated strong financial performance over the years, reflecting its robust operations in the water and wastewater treatment industry, said SMIFS.  

"Moving forward, Enviro's performance outlook remains positive, driven by a strong order book and consistent financial metrics, positioning the company for continued growth and profitability. The company reported ROE and ROCE of 50.85 per cent and 47.29 per cent in FY24. We recommend to subscribe to the issue," it said.

 

KR Choksey Finserv

Rating: Subscribe

Enviro Infra Engineers specializes in water and wastewater treatment projects, leveraging its in-house capabilities to execute large-scale initiatives under EPC and HAM models. With a diversified Rs 1,906.3 crore order book and a focus on renewable solutions like solar and biogas, EIEL is well-positioned in India’s growing water infrastructure market, said KR Choksey Finserv.  

"As the global water treatment market grows at a 6.10 per cent CAGR, EIEL’s operational efficiency, sustainable practices and alignment with industry dynamics offer attractive growth potential. Considering its robust project pipeline, consistent financial performance and margin-enhancing O&M contracts, we assign a 'subscribe' rating," it said.

 

StoxBox

Rating: Subscribe

EIEL is also integrating sustainable practices, such as solar power and compressed biogas (CBG) plants, into its projects to align with growing environmental concerns, said StoxBox. However, EIEL faces certain risks, including its reliance on government contracts awarded through competitive bidding, high working capital requirements, and contingent liabilities, it said.  

The current issue is priced at a P/E of 18.2 times on the upper band, based on FY24 earnings, which is relatively lower than its peers. Given the company’s strong technological capabilities and its focus on growth strategies such as geographical expansion and waste-to-energy initiatives, the company is well-positioned for continued business traction, it said with a 'subscribe' rating.

 

Bajaj Broking

Rating: Subscribe for long-term

The asking price of the issue corresponds to a P/E ratio of 21.67 times (on annualized FY25 earnings), and based on FY24 earnings, the P/E ratio stands at 23.90 times, suggesting the IPO is fully priced, said Bajaj Broking with a 'subscribe for long-term' rating. "However, the debt of Rs 305 crore as of June 30, 2024, raises some concerns," it said.