- November 10, 2022
- Posted by: Santosh Singh
- Category: IPO
Enviro Infra Engineers Limited has filed DRHP with SEBI on 3rd, October, 2022 to launch its IPO.
The IPO comprises Fresh Issue only. The size of Fresh Issue is up to 95,00,000 Equity Shares of face value of Rs. 10 each.
Business Model of Company
The Company is in the business of designing, construction, operation and maintenance of Water and Wastewater Treatment Plants (WWTPs) and Water Supply Scheme Projects (WSSPs) for government authorities/bodies. WWTPs include Sewage Treatment Plants (STPs) alongwith Sewage Network Schemes and Common Effluent Treatment Plants (CETPs) and WSSPs include Water Treatment Plants (WTPs) alongwith pumping stations and laying of pipelines for supply of water. The treatment process installed at most of the STPs and CETPs is Zero Liquid Discharge (ZLD) compliant and the treated water can be used for horticulture, washing, refrigeration and other process industries.
WWTPs and WSSPs are partly funded by the Central Government under schemes like the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and National Mission of Clean Ganga (NMCG) for projects in urban areas. WSSPs are similarly funded by the Central Government schemes like the Jal Jeevan Mission (JJM) for rural areas of the country. The states or Urban Local Bodies (ULBs) under their respective schemes fund the WWTPs and WSSPs along with the Central Government.
The Company bids for tenders issued by State Governments and ULBs for developing WWTPs and WSSPs on an EPC or HAM basis. As on August 15, 2022, The have successfully established 22 WWTPs and WSSPs with capacity of more than 10 MLD across India having an aggregate capacity of 550.80 MLD. The Company has an in-house team for designing, engineering and construction which makes the Company self-reliant on all aspects of the 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.
Who is the Management of the Company?
As on the date of this Draft Red Herring Prospectus, the following is the management of the company:
(i) Sanjay Jain is the Chairman and Whole-time Director of our Company. He holds a bachelor’s degree in Chemical Engineering from Mangalore University. He has been associated with the Company since incorporation. He has over two decades of experience in the water and wastewater treatment industry. He looks after the designing, procurement of raw material and machinery in connection with construction and operation & maintenance of projects of the Company.
(ii) Manish Jain is the Managing Director of the Company. He holds a bachelor’s degree in Chemical Engineering from the Punjab University. He has been associated with the Company since incorporation. He has over two decades of experience in the water and wastewater treatment industry. He looks after bidding, execution and operation & maintenance of projects of the Company. He also looks after functions such as finance and business development in the Company.
Why is the company raising funds via IPO?
The Company proposes to utilize the Proceeds of the Issue towards funding the following objects-
- To meet the Working Capital Requirements.
- General Corporate Purposes.
- To meet issue expenses.
In addition to this, the Company expects that listing of the Equity Shares will enhance its visibility and brand and provide liquidity to its existing Shareholders. Listing will also provide a public market for the Equity Shares in India.
Is there any OFS in the IPO?
The IPO of Enviro Infra Engineers Limited includes Fresh Issue only. There is no OFS ( Offer for Sale) in the IPO. The size of Fresh Issue is up to 95,00,000 Equity Shares of face value of Rs. 10 each.
Financials of the company?
As per the DRHP filed with SEBI, in FY22, the total revenue of the company has reported an increase of 79% to Rs. 226 crore as against Rs. 126 crore in the previous financial year. The expenses of the company have increased 57% to Rs. 179 crore as against Rs. 115 crore in the previous financial year. The Profit Before Tax of the Company has increased 283% to Rs. 46 crore as against Rs. 12 crore in the previous financial year. The Net Profit of the company has reported an increase of 289% to Rs. 35 crore as against Rs. 9 crore in the previous financial year.
In FY22 , net assets of the company increased 32% to Rs. 148 crore as against Rs. 112 crore in the previous financial year. The total equity and liabilities of the company also increased 32% to Rs. 148 crore as against Rs. 112 crore in the previous financial year.
In FY22, the net cash generated from operating activities of the company was Rs. 32 crore as against Rs. 5 crore in the previous financial year. The net cash used in investing activities of the company was Rs. 11 crore as against Rs. 3 crore in the previous financial year. The net cash used in financial activities of the company was Rs. 17 crore as against Rs. 1 crore in the previous financial year. The net cash and cash equivalents at the end of the year of the company was 5 crore as against Rs. 1 crore in the previous financial year.
Risk in The IPO
Reduction in Budgetary Allocation to This Sector
The Company bids for WWTPs and WSSPs funded by the Central and State Governments and derives its revenues from the contracts awarded to it. Any reduction in budgetary allocation to this sector may affect the number of projects that the government authorities/bodies may plan to develop in a particular period. The Company’s business is directly and significantly dependent on projects awarded by them.
Competitive Bidding Process
The projects 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 its business and results of operations. In addition, the government conducted tender processes may be subject to change in qualification criteria, unexpected delays and uncertainties. There can be no assurance that the projects for which the Company bids will be tendered within a reasonable time or will ever be tendered.
Insufficient Cash Flows
The business of the Company is working capital intensive. If the company experiences insufficient cash flows to meet required payments on its working capital requirements, there may be an adverse effect on the results of its operations. The working capital requirements for Financial Year 2023 and 2024 are estimated at ₹ 20,110.99 lakhs and ₹32,938.23 lakhs, respectively. An amount of ₹ 10,000 lakhs in Financial Year 2023 and an amount of ₹ 5,000 lakhs in Financial Year 2024 towards working capital requirements will be funded out of the Issue Proceeds, whereas the balance, if any, would be arranged from internal accruals and/or loan funds.
Actual Cost in Execution May Differ from Bid Estimated/Bid Cost
The actual cost in executing WWTPs & WSSPs may vary substantially from the assumptions underlying bid or estimates. The Company is vulnerable to the risk of rising and fluctuating raw materials prices, steel and cement, which are determined by demand and supply conditions in the global and Indian markets. Any unexpected price fluctuations after placement of orders, shortage, delay in delivery, quality defects, or any factors beyond control may result in an interruption in the supply of such materials and adversely affect the business, financial performance and cash flows of the Company.
Limited Ability to Negotiate the Terms of Contracts
The contracts with government authorities/bodies usually contain terms that favor them, who may terminate contracts prematurely under various circumstances beyond the company’s control and as such, the Company has limited ability to negotiate terms of these contracts and may have to accept restrictive or onerous provisions. The inability to negotiate terms that are favorable to the Company may have a material adverse impact on the financial condition and results of operations of the Company.