EMS Limited DRHP Filed

EMS  Limited has filed  its DRHP with market regulator SEBI on May 11, 2023 to raise capital through IPO. The IPO of the Company consists of Fresh Issue and Offer for Sale.  The size of IPO is Up to [●] equity shares of face value of Rs. 10 each aggregating upto Rs. 180 crore and OFS of upto 82,94,118 Equity Shares. As part of OFS, the selling shareholder is Mr. Ramveer Singh who is selling 82,94,118 Equity Shares. 

Business Model of the Company

EMS Limited is in the business of Sewerage solution provider, Water Supply System, Water and Waste Treatment Plants, Electrical Transmission and Distribution, Road and Allied works, 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) and WSSPs include Water Treatment Plants (WTPs) along with pumping stations and laying of pipelines for supply of water.

The Company bids for tenders issued by CPWD, State Governments and Urban Local Bodies (“ULBs”) for developing WWSPs and WSSPs on EPC or HAM basis. The Company has an in-house team for designing, engineering and construction which makes it  self-reliant on all aspects of its business. The Company has a team of 57 engineers who are supported by third-party consultants and industry experts to ensure compliance and quality standards laid down by the industry and government agencies & departments. The Company also has its own team for civil construction works thereby reducing dependence on third parties.

Management of the Company

(i) Mr. Ramveer Singh, aged 60 years is the founding Promoter and is currently designated as Chairman and Director of the Company. He is an Engineer by qualification. He has more than Thirty-five years of experience in civil, construction industry and business development. In the past, he has joined the partnership firm M/s Satish Kumar after taking VRS from Uttar Pradesh Jal Nigam in 2006 & later incorporated a private limited company in the year 2010, named EMS Infracon Private Limited. His vast & great experience has grown the company at a very large level & made a very reputed & believable image of the company.

(ii) Mr. Ashish Tomar, aged 34 years is the also founding Promoter and is currently designated as Managing Director of the Company. He was appointed as the First Director on the Board of the Company at the time of incorporation of the Company on December 21, 2010. He is a Civil Engineer. He is also having vast knowledge and experience in the field of projects like Sewerage work, Electricity Transmission & Distribution work. He is currently looking after Project execution areas of the Company.

Object of the Issue

Offer for Sale

The Company will not receive any proceeds from the Offer for Sale by the Promoter Selling Shareholder and the proceeds received from the Offer for Sale will not form part of the Net Proceeds. The Promoter Selling Shareholder will be entitled to the proceeds of the Offer for Sale after deducting his proportion of Issue expenses and relevant taxes thereon.

Fresh Issue

The net proceeds of the Fresh Issue of the Company  are proposed to be utilized in the following manner:

1. Funding of working capital requirements of the Company
2. General corporate purposes.

Risks in the IPO

Ongoing Legal Proceedings

The Company, the Promoters/Director and the Group Companies are parties to certain legal proceedings. These legal proceedings are pending at different levels of adjudication before various courts, tribunals and forums. Any adverse decision in such proceedings may have a material adverse effect on the business, results of operations and financial condition.

The Company has been black-listed in the past by two government bodies 

The Writ Petition was filed by the Company for quashing the order dated 22.8.2019 passed by the Principal Secretary Urban Development Department, Lucknow and Ors. for blacklisting the Company and praying for relief in the form of a mandamus commanding the Respondents not to treat the Petitioner as disqualified on account of the order dated 22.8.2019 and to permit the Petitioner to participate in the Tender issued by U.P. Jal Nigam for execution of designing and building a sewage treatment plant and a new sewage network at Jaunpur. The order of blacklisting has been withdrawn on 20.9.2019. However, the Writ Petition is currently pending.

Most of the agreement with the business of the Company contain Penalty 

Most agreements that the Company has entered into in connection with the business contain a penalty or liquidated damage clause for delay in the completion of a project that takes effect should the completion of a project be delayed.

The projects of the Company are typically subject to a completion schedule. The Company is also required to provide performance guarantees to customers to complete projects on schedule. Any failures to adhere to a contractually agreed schedule for reasons other than the agreed force majeure events could result in being required to pay liquidated damages, which would usually be a certain percentage of the total project cost, or lead to forfeiture of security deposits or invocation of performance guarantees.

Competitive Bidding Process 

The projects of the Company are awarded through the competitive bidding process by government authorities/bodies. The Company may not be able to qualify for, compete and win future projects, which could adversely affect the business and results of operations.

Capital Intensive Industry 

The industry in which the Company operates is capital intensive in nature, and involves relatively long gestation periods. It requires substantial financing for the business operations and the failure to obtain additional financing on terms commercially acceptable to the Company may adversely affect its ability to grow and the future profitability.

Financial Performance

As per the financial statements of the Company:

In FY22, EMS Limited reported a total income of Rs. 363 crore, representing an increase of approximately 8.0% compared to the total income of Rs. 336 crore in FY21.

EMS Limited’s total expenses for FY22 amounted to Rs. 255 crore, reflecting an increase of approximately 7.4% compared to the total expenses of Rs. 238 crore in FY21.

The profit before tax for FY22 stood at Rs. 107 crore, indicating an increase of approximately 9.5% compared to the profit before tax of Rs. 98 crore in FY21.

EMS Limited reported a profit after tax of Rs. 78 crore for FY22, representing an increase of approximately 9.8% compared to the profit after tax of Rs. 71 crore in FY21.

The earnings per share for FY22 were Rs. 67.27, showing an increase of approximately 9.7% compared to the earnings per share of Rs. 61.24 in FY21.

EMS Limited’s total assets for FY22 amounted to Rs. 502 crore, reflecting an increase of approximately 32.6% compared to the total assets of Rs. 378 crore in FY21.

Cash generated from operating activities in FY22 amounted to Rs. 22 crore, remaining relatively stable compared to the cash generated from operating activities of Rs. 35 crore in FY21.

Cash used in investing activities increased to Rs. 14.78 crore in FY22, indicating a significant change from the cash outflow of Rs. 8.48 crore in FY21.

Cash generated from financial activities amounted to Rs. 2.76 crore in FY22, showing an improvement from the cash outflow of Rs. 10.90 crore in FY21.

The cash and cash equivalents at the end of FY22 were Rs. 61 crore, reflecting an increase of approximately 21.3% compared to the cash and cash equivalents of Rs. 50 crore in FY21.