Enviro Infra IPO review

https://www.eiel.in

Rating: 3/5 Verdict: Neutral

About the Company

Enviro Infra Engineers Limited (EIEL) specializes in designing, building, and maintaining water and wastewater treatment plants (WWTPs) and water supply schemes (WSSPs). These include projects like sewage treatment plants (STPs), water treatment plants (WTPs), and pipelines for water supply. The company focuses on eco-friendly solutions like zero liquid discharge (ZLD) compliance and renewable energy initiatives like solar power and bio-gas plants for sustainable development.

EIEL has completed 28 projects in the last seven years, with some joint ventures to meet technical and financial qualifications for large government contracts. The company’s major clients are government bodies and urban local authorities, benefiting from government funding schemes like AMRUT, NMCG, and Jal Jeevan Mission.


IPO Details

  • Total Issue Size: ₹650.43 crores at the upper price band.
    • Fresh Issue: 3,86,80,000 shares worth ₹572.46 crores.
    • Offer for Sale (OFS): 52,68,000 shares worth ₹77.97 crores.
  • Price Band: ₹140 – ₹148 per share.
  • Face Value: ₹10 per share.
  • Subscription Dates: November 22, 2024, to November 26, 2024.
  • Post-IPO Market Cap: ₹2,597.84 crores at the upper price band.
  • Listing: BSE and NSE.

Proceeds from the IPO will be used for:

  • Working capital needs (₹181 crores).
  • Funding a subsidiary for building a 60 MLD STP (₹30 crores).
  • Repayment of debt (₹120 crores).
  • General corporate purposes.

Financial Highlights

  • Strong Revenue Growth:
    • FY22: ₹225.62 crore revenue, ₹34.55 crore profit.
    • FY23: ₹341.66 crore revenue, ₹55.34 crore profit.
    • FY24: ₹738 crore revenue, ₹108.57 crore profit.
  • Margins: PAT margin consistently around 15%.
  • Order Book: ₹1,906.28 crores as of June 30, 2024.

The company has shown significant growth since FY24, but the sharp increase in financial performance raises concerns about sustainability.


Valuation

  • Price-to-Earnings (P/E):
    • Based on FY24: 23.90.
    • Based on FY25 annualized: 21.67.

The IPO is priced similar to its peers, making it fully priced, which means investors might not see significant short-term gains.


Key Strengths

  1. Niche Expertise: Proven track record in water and wastewater projects.
  2. Sustainability Focus: Integration of renewable energy and eco-friendly solutions in projects.
  3. Government Projects: Beneficiary of schemes like Jal Jeevan Mission and AMRUT.

Key Concerns

  1. Debt Levels: ₹305 crores debt as of June 2024.
  2. Highly Competitive Sector: Relies on government contracts, making revenue dependent on policy and tender success.
  3. Fully Priced IPO: Limited scope for quick gains.

Verdict

EIEL operates in a critical infrastructure sector with long-term growth potential, backed by government initiatives. However, the IPO is fully priced, and investors should have a medium-to-long-term horizon to consider this investment.

Rating: 3 (Neutral)
Apply if you believe in the company’s sustainability-focused growth and are comfortable with moderate returns over time. Otherwise, you may skip.

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