Enviro Infra Engineers Limited IPO: Check IPO Date, Lot Size, Price & Details

Introduction:

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), Sewerage Schemes (SS) and Common Effluent Treatment Plants (CETPs) while WSSPs include Water Treatment Plants (WTPs) along with pumping stations and laying of pipelines for supply of water (collectively, “Projects”). 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. In addition to the execution of projects independently, it also enters into joint ventures with other infrastructure and construction companies to jointly bid and execute projects

The company bids for tenders issued by state governments and ULBs to develop WWTPs and WSSPs on an EPC or HAM basis. As on June 30, 2024, it has successfully developed 28 WWTPs and WSSPs across India in past seven (7) years which includes 22 projects with 10 MLD capacity and above. As of June 30, 2024, its  Order Book includes 21 WWTPs and WSSPs for an aggregate value of ₹ 1,90,628.06 lakhs.

IPO Details:

Objectives of Issue:

• To meet the Working Capital Requirements;
• Infusion of funds in our Subsidiary, EIEL Mathura Infra Engineers Private Limited (EIEL Mathura) to build 60 MLD STP under the project titled ‘Mathura Sewerage Scheme” at Mathura in Uttar Pradesh through Hybrid Annuity Based PPP Mode;
• Repayment/prepayment in full or in part, of certain of our outstanding borrowings;
• Funding inorganic growth through unidentified acquisitions and general corporate purposes.

Key Strengths:

• Expansion Strategy- Over the past seven years, it has significantly expanded its operations in states where it was initially awarded projects, including Gujarat, Rajasthan, Punjab, Haryana, Uttar Pradesh, Uttarakhand, and Chhattisgarh. This has enabled us to build extensive knowledge and experience across these regions, positioning it well to further penetrate additional areas and districts within these states as new WWTP and WSSP projects emerge.
  Looking ahead, it aim to broaden its business footprint into other parts of the country, with a particular focus on East and South India. Recently, it has been awarded projects in Jharkhand and Karnataka and have submitted bids for projects in Odisha, West Bengal, and Goa. Its strategic plan is to continue diversifying and expanding our presence in these regions to drive sustainable business growth
  
  
• Renewable Energy Initiatives- The company prioritizes assessing the environmental impact of its projects and has integrated a holistic approach to sustainable development, starting from the initial design phase through the construction period. Leveraging innovative technologies and strategies enables water utilities to capitalize on the energy, nutrients, and organic materials inherent in wastewater, fostering sustainable and regenerative resource utilization practices. Aligned with favorable regulatory and industry trends, it has initiated efforts to incorporate "Waste to Energy" solutions within our projects. For example, it is in the process of installing Compressed Biogas (CBG) plants at its ongoing projects in Jodhpur and Jaipur, Rajasthan. The purified CBG will either be sold directly to Oil Marketing Companies (OMCs) or utilized for power generation once the STPs are operational. In addition, the integration of solar power plants in these projects is expected to significantly reduce reliance on grid power, leading to cost savings. The production of CBG will also boost its operations and maintenance (O&M) revenue streams, reinforcing the financial sustainability of these initiatives

Risks:

• High Dependence on Government Budget Allocation – WWTPs and WSSPs are partly funded by the Central Government under schemes like the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and fully funded under the National Mission for Clean Ganga (NMCG) for projects in urban areas. Similarly, WSSPs are also partly funded by the Central Government schemes like the Jal Jeevan Mission (JJM) for rural areas of the country. Both WWTPs and WSSPs are also partly funded by the states or Urban Local Bodies (ULBs) under their respective schemes. Any reduction in the budgetary allocation or support by the Central and/or the State Governments may have a significant impact on the number of projects for which tenders may be issued by government authorities/bodies resulting in slowdown or downturn in its business prospects. Its business is directly and significantly dependent on projects awarded by them.

• Dependency on Joint Ventures- The company engages in joint ventures as an integral part of its business operations. The success of these partnerships relies heavily on its joint venture partners fulfilling their responsibilities and obligations effectively. If a partner fails to meet these expectations, the joint venture's ability to perform or deliver the agreed services may be compromised. In such situations, it may need to invest additional resources or provide extra services to ensure the project's successful execution, as it bear joint and several liabilities as a joint venture partner. As of June 30, 2024, our order book includes 21 WWTPs and WSSPs with a total value of ₹1,90,628.06 lakhs. Out of these, the company is managing 15 projects independently, one project through its subsidiaries, and five projects through joint ventures. 

• Limited Negotiation Power : Company’s ability to negotiate contract terms with government authorities or entities is significantly limited, as these terms are often structured to favor the government. For example, obligations and construction rates related to our projects are typically determined by the government, with no opportunity for the company to amend them. Such contractual terms may pose risks to its business operations. The continuation of its activities, particularly in undertaking WWTPs and WSSPs, depends heavily on these government bodies, which have the authority to terminate construction agreements in accordance with the terms outlined in those contracts. In the event of termination, the agreements usually stipulate that the company are entitled to compensation for our unrecovered investments unless the termination arises due to applicable laws or a material breach on our part. However, the compensation process can be lengthy, and the reimbursement may not fully cover its financial losses.

Financial Snapshot:

KPI comparison with Industry Peers

Conclusion:

The company has demonstrated superior performance compared to its peers, achieving higher revenue growth, stronger EBITDA and PAT margins, and better Return on Net Worth. A Price-to-Earnings (P/E) analysis indicates that the company is attractively valued, with a P/E multiple of 18 compared to the industry average of 33.

The wastewater and water supply sector is projected to grow at a CAGR of 6-7% over the next decade. With robust growth potential, strong fundamentals, and reasonable valuations, the company presents a compelling long-term investment opportunity. Furthermore, its strategic plans to expand operations in East and South India, coupled with benefits from its renewable initiatives, position it well for sustained growth.