EMS IPO overall booked 22 times on day 3 so far; issue closes today

The Rs 321-crore initial public offering (IPO) of EMS Ltd continued to see a strong response from the investors during the final day of the bidding process. The issue, which had opened on Friday, September 8, was overall booked 3.82 times on day 1 and ended the day 2 with overall 15.26 times bidding.

EMS is selling its shares in the range of Rs 200-211 apiece during the three-day bidding process and investors can make a bid of a minimum of 70 equity shares and its multiples thereafter. The issue includes a sale of fresh equity shares worth Rs 146.24 crore, while an offer-for sale (OFS) of up to 8,294,118 equity shares worth Rs 175 crore.

According to the data, investors made bids for 23,73,34,090 equity shares, or 22 times, compared to the 1,07,87,431 equity shares offered for the subscription by 12.20 pm on Tuesday, September 12. The three-day bidding process will conclude today, that is, Tuesday, September 12.

The allocation for non-institutional investors fetched 46.38 times bids, while the portion of retail investors saw a subscription of 22.12 times. However, the portion reserved for qualified institutional bidders (QIBs) was subscribed 2.65 times as of the same time.

Incorporated in December 2010, EMS provides various services, ranging from EPC and O&M, in sewerage solutions, water supply systems, and wastewater schemes for government authorities and local bodies. EMS has its own civil construction team and employs over 57 engineers, supported by third-party consultants and industry experts.

Brokerage firms are mostly positive on the issue and have suggested to subscribe to it citing its growth potential and infra-based niche business model, supported with strong fundamentals and financials. However, they have also flagged negative cash flows, heavy dependence on government projects and working capital requirements as the key risks for the business.

The company has a strong in-house designing, engineering and execution team. They have a strong execution capability with industry experience. At the upper price band company is valuing at P/E of 10.7 times FY23 earnings with a market cap of Rs 1,171.7 crore post issue of equity shares and return on net worth of 22.31 per cent, said Anand Rathi Shares with a 'subscribe' tag.

The strong order pipeline coupled with healthy execution shores up well for the company's growth. The sector has huge growth potential considering the requirement of wastewater treatment in urban areas. The high OPM and strong balance sheet will help reduce future working capital requirements, said Indsec Research with a 'subscribe' rating to the issue.

A day before its IPO, EMS mopped up Rs 96.37 crore from six anchor investors, namely- NAV Capital Emerging Star Fund, Abakkus Diversified Alpha Fund, Saint Capital Fund, Meru Investment Fund PCC - CELL 1, BofA Securities Europe SA - ODI, and Morgan Stanley Asia (Singapore)- by allocating 45.67 lakh equity shares at a price of Rs 211 per equity shares.

EMS intends to leverage its presence in the sewerage solutions, water supply systems, water and waste treatment plants segment. The company has a robust and industry-leading order book-to-sales ratio of 3.4 times. This provides for visibility of growth in coming years, said Nirmal Bang Securities.

"We believe the asset light business model results in efficient utilization of capital resulting in lower debt, high EBITDA margins and strong ROCE. We believe EMS possesses higher growth and return ratios compared to peers and is also available at cheaper valuations. Thus, we recommend 'subscribe' to the IPO," it added.

Khambatta Securities is the sole manager to the issue, while KFin Technologies has been appointed as the registrar to the Issue. Shares of the company will be listed on both BSE and NSE, with September 21, Thursday, as the tentative date of listing.

 

Disclaimer: Under no circumstances should any person at this platform make trading decisions based solely on the information discussed herein. You should consult a qualified broker or other financial advisor prior to making any actual investment or trading decisions. All information is for educational and informational use only. Business Today does not guarantee, vouch for, endorse any of its contents and hereby disclaims all warranties, express or implied, relating to the same.

Also read: Hot stocks on September 12, 2023: NIIT, Adani Power, Texmaco Rail, Infibeam Avenues, Cochin Shipyard and more

Also read: Stocks that share market analysts recommended on September 12, 2023: HDFC Bank, Zomato, PowerGrid and GAIL India

Also read: Retail inflation data for August to be out today, iPhone 15, Apple Watch Series 9 launch at Apple Event 2023 in Top News on September 12: Share markets, Bank Nifty outlook, Kundan Edifice IPO to open

Also read: L&T, PowerGrid, Jupiter Wagons, HFCL, other stocks to watch on September 12, 2023