What you must know about EMS IPO

EMS Ltd was incorporated in the year 2012. The company was formerly known as EMS Infracon, but later changed its name to EMS Ltd to reflect the very focused business model that is predicated around waste water and sewage treatment. It is broadly engaged in the business of providing water and wastewater collection, treatment, and disposal services. In terms of its business model, EMS Ltd provides Sewerage solutions, Water Supply Systems, Water and Waste Treatment Plants. In addition, EMS Ltd also provides Electrical Transmission and Distribution, Road, and Allied works. Apart from its basic operations, it also earns revenues from the operation and maintenance of Wastewater Scheme Projects (WWSPs) and Water Supply Scheme Projects (WSSPs) for government authorities/bodies. WWSPs include Sewage Treatment Plants (STPs) along with Sewage Network Schemes and Common Effluent Treatment Plants (CETPs). It also operates pumping stations and engages in the laying of pipelines for the supply of water.

EMS Ltd has its own civil construction team and employs a team of 57 well-qualified and skilled engineers, supported by third-party consultants and industry experts. At the current juncture, EMS Ltd is operating and maintaining 13 projects including WWSPs, WSSPs, STPs & HAM. The company also has its own team for civil construction works, thereby reducing dependence on third parties and offering a one-stop solutions. The scope of EMS Ltd services includes the design and engineering of the projects, procurement of raw materials, and execution at the site, with overall project management up to the commissioning of projects. The issue will be lead managed by Khambatta Securities Ltd. KFIN Technologies Ltd (formerly Karvy Computershare Ltd) will be the registrar to the issue.

Highlights of the IPO issue of EMS Ltd

Here are some of the key highlights to the public issue of EMS Ltd.

• EMS Ltd has a face value of ₹10 per share while the price band for the book building IPO has been set in the band of ₹200 to ₹211. The final price will be discovered within this band through the process of book building.
   
• The IPO of EMS Ltd will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion comprises the issue of 69,30,806 shares (69.31 lakh shares approximately), which at the upper price band of ₹211 per share will translate into fresh issue size of ₹146.24 crore.
   
• The offer for sale (OFS) portion of the IPO comprises the issue of 82,93,839 shares (82.94 lakh shares approximately), which at the upper price band of ₹211 per share will translate into an offer for sale (OFS) size of ₹175 crore. Mr Ramveer Singh, the promoter of the company will be offloading the entire quantum of shares as part of the OFS.
   
• Therefore, the overall IPO portion will comprise of the issue of 1,52,24,645 shares (1.52 crore shares approximately), which at the upper price band of ₹211 per share will translate into a total IPO issue size of ₹321.24 crore.

While the fresh issue will be capital and EPS dilutive, the offer for sale portion will only result in transfer of ownership. There is just 1 shareholder, Mr Ramveer Singh, who also happens to be the promoter of the company, offering the entire block of shares as part of the offer for sale (OFS). The proceeds of the fresh issue portion will be used to fund the working capital needs of EMS Ltd and also for general corporate purposes.

Promoter holdings and investor quota allocation quota

The company was promoted by Ramveer Singh and Ashish Tomar. The entire shares offered in the OFS is being offered by Ramveer Singh, one of the key promoters of EMS Ltd. Currently the promoters hold 100.00% of the company, which will get diluted post the IPO. As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while 35% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The stock of EMS Ltd will be listed on the NSE and on the BSE. The table below captures the gist of the allocation to various categories.

Lot sizes for investing in the IPO of EMS Ltd

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of EMS Ltd, the minimum lot size is yet to be determined but one can expect it to be in the range of 67 to 70 shares at the bare minimum to correspond with the base investment limit of Rs14-15K. It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for EMS Ltd IPO and how to apply?

The issue opens for subscription on 08th September 2023 and closes for subscription on 12th September 2023 (both days inclusive). The basis of allotment will be finalized on 15th September 2023 and the refunds will be initiated on 18th September 20233. In addition, the demat credits are expected to happen on 20th September 2023 and the stock will list on 21st September 2023 on the NSE and the BSE. EMS Ltd offers a very unique combination. It has an established and tested business model; it is into an industry that is considered an emerging growth area, especially with this focus on ESG among Indian companies. Let us now turn to the more practical issue of how to apply for the IPO of EMS Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of EMS Ltd

The table below captures the key financials of EMS Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (All ₹ figures are in crores)

There are few key takeaways from the financials of EMS Ltd. Firstly, the sales growth has been robust only in the latest year with the sales growth being flat in previous periods. However, the net margins have been consistently above 20% and even the ROE had been above 25%. These are extremely strong profitability ratios and an indication of the potential that the business offers. In addition, the asset turnover ratio may have disappointed but it is improving. However, in terms of pricing, the P/E is fairly attractive at just around 10 times earnings. The stock has more things loaded in its favour than against it. Investors with a slightly higher risk appetite and a longer term perspective can surely look at the stock.