Enviro Infra Engineers IPO Opens: GMP Shows Growth; Should you approach this issue to the tune of Rs 650 crore?

Initial public offering (IPO) of Enviro Infra Engineers Ltd. started on Friday, November 22nd. The issue, which is a combination of a fresh issue and an offer for sale, will be available for trading until November 26th.

Enviro Infra Engineers’ gray market premium (GMP) is currently £38 on unlisted markets, indicating a premium of almost 26% to the issue price.

Enviro Infra IPO Review

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Enviro Infra Engineers has an in-house design, engineering and execution team that provides on-time delivery and proven expertise to consistently increase the number of bidders on high-value projects. The company has 2 HAM projects and with the money raised it will help improve its credit rating which will help in financing and executing HAM projects to qualify for and apply for larger HAM projects, the brokerage said.

“In line with government policies and industry trends, the company is taking various ‘waste to energy’ initiatives in projects to reduce carbon emissions and promote environmental sustainability, positioning the company for faster growth in the coming years. Therefore, we recommend subscribing to the release,” the message reads.

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At the top price band of ₹148, the company is available at a price/earnings (P/E) ratio of 23.9 times (FY24), which appears to be a fair price relative to listed peers, Geojit said in a note.

With a robust order pipeline and stable financial performance with industry-leading margins, the company is well positioned for future success, the brokerage said, adding a subscribe rating to the issue for the medium to long term.

Swastika Investmart: Sign up for the long term

Enviro Infra Engineers is experiencing strong revenue and profit growth. According to the brokerage, the IPO is fairly priced and offers a reasonable valuation. He recommended that investors subscribe to the issue for the long term.

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According to the brokerage, this geographic and project scope diversification reduces operational risk and provides access to greater opportunities, enabling long-term growth. Enviro has demonstrated strong financial performance over the years, reflecting its strong presence in the water and wastewater industries.

“Enviro’s performance outlook remains positive going forward, driven by a strong order book and solid financial performance, positioning the company for continued growth and profitability,” it said in assigning a subscription rating to the issue.

Enviro IPO Price Range

The company has set an IPO price range of £140-£148 per share. Through this offering, Enviro Infra plans to raise ₹650 crore.

Investors can bid for a minimum of 101 shares in a lot, and then for shares in multiples of 101.

The city-based company’s proposed IPO is a combination of a fresh issue of 3.87 million shares and an OFS component of 52.68 million shares by the promoters.

The promoters currently hold over 93% stake in Enviro Infra Engineers.

Purpose of Enviro IPO

Proceeds from the latest release to the tune ₹181 crore will be used to meet working capital requirements. ₹100 crores to pay off debt, ₹30 crore will be invested in EIEL’s subsidiary Mathura Infra Engineers to construct a 60 million liters per day sewage treatment plant (STP) at Mathura in Uttar Pradesh.

In addition, a portion will be used for general corporate purposes.

Enviro IPO structure

About 50% of the issue volume was reserved for qualified institutional buyers, 35% for retail investors and the remaining 15% for non-institutional investors.

Enviro’s anchor investment in IPO

The company collected about ₹195 crore from core investors, a day before the opening of the first public subscription sale of shares.

Quant Mutual Fund, Motilal Oswal Mutual Fund, LIC Mutual Fund, Abakkus Diversified Alpha Fund-2, Singularity Equity Fund I and Meru PCC Cell Mutual Fund 1 are among the anchor investors.

Business overview

Enviro Infra Engineers was founded in 2009 and designs, constructs, operates and maintains water and wastewater treatment plants (WTPs) and water supply projects (WSSPs) for government agencies or organizations.

The company’s revenue increased by 116% and profit after tax (PAT) grew by 101% during the financial year ended March 31, 2024 to March 31, 2023.

Enviro IPO BRLM

Hem Securities Ltd is the lead manager for the Enviro Infra Engineers IPO and Bigshare Services Pvt Ltd is the registrar for the issue.

The allotment of shares for the IPO is expected to be completed on November 27 and Enviro Infra will list on the BSE and NSE with a provisional listing date set for November 29, 2024.