Concord Enviro Systems Limited IPO: Check IPO Date, Lot Size, Price & Details

Introduction:

The company is a global leader in water and wastewater treatment and reuse solutions, specializing in advanced technologies such as zero-liquid discharge (ZLD). With end-to-end capabilities, it provides comprehensive solutions spanning design, manufacturing, installation, commissioning, operation and maintenance (O&M), and digitalization, including Internet of Things (IoT)-based services.

The company generates revenue through multiple streams, including:
(i) the sale of systems and plants,
(ii) operations and maintenance of installed facilities, and
(iii) the supply of consumables and spare parts for existing systems.

Its digitalization offerings, incorporating IoT-enabled platforms, facilitate real-time data capture, monitoring, troubleshooting, and predictive maintenance for enhanced system performance. As of August 31, 2024, the company serves over 289 domestic clients and 21 international clients across a diverse range of industries, including pharmaceuticals, chemicals, food and beverage, defense and energy, automotive and auto ancillaries, steel, and textiles, with operations in two countries.

IPO Details:

Objectives of Issue:

• Investment in the wholly owned Subsidiary, Concord Enviro FZE (“CEF”) for financing its capital expenditure requirements for the greenfield project to develop an assembly unit to assemble systems and plants for the treatment of water, wastewater and related membrane modules (the “U.A.E Project”);
• Investment in the wholly owned Subsidiary, Rochem Separation Systems (India) Private Limited (“RSSPL”), for financing its capital expenditure requirements for the brownfield project to expand the manufacturing facilities, storage and supporting activities (the “Vasai Project”);
• Funding capital expenditure requirements of the Company for the purchase of plant and machinery;
• Investment in the wholly owned Subsidiary, Concord Enviro FZE, for prepayment or repayment, in full or in part, of all or a portion of certain outstanding borrowings availed by Concord Enviro FZE;
• Investment in the wholly owned Subsidiary, Concord Enviro FZE, for funding working capital requirements of Concord Enviro FZE;
• Investment in the joint venture, Reserve Enviro Private Limited, to grow its pay-per-use/pay-as-you-treat business;
• Investment in technology and other growth initiatives to access new markets;
• General corporate purposes.

Key Strengths:

• Strong Customer Retention- The company has a strong track record of high customer retention, which contributes significantly to its revenue through repeat business. For the five-month period ended August 31, 2024, and during Fiscal Years 2024, 2023, and 2022, revenue from repeat business amounted to ₹1,998.05 million, ₹4,611.97 million, ₹2,695.63 million, and ₹2,639.74 million, respectively. This represented 96.43%, 92.82%, 78.54%, and 80.15% of total revenue from operations during these periods. Additionally, the company has maintained relationships exceeding three years with all of its top 10 customers in Fiscal Year 2024.
• Diversified Customer Mix - The company serves a diverse customer base spanning various industries and geographic regions. As of August 31, 2024, it catered to 289 domestic clients and 21 international clients. Its wastewater treatment solutions are utilized across industries such as pharmaceuticals, chemicals, food and beverage, defense and offshore, automotive and auto ancillaries, steel, and textiles, among others. Over the past three years, the pharmaceutical sector has accounted for approximately 20% of the company's revenue, the chemical segment contributed nearly 15%, and the food and beverage sector added another 20%.
• Expansion Strategy- The company plans to expand its industrial wastewater reuse business by targeting additional high water-consumption sectors, including paper mills, refineries, common effluent treatment plants (CETPs), power plants, solar panel manufacturing and cleaning, and treated sewage plants. It has already implemented systems at several such sites, including a paper mill in northern India, a CETP in southern India, and is currently executing an order for a water block package for a refinery. The company also aims to focus its marketing efforts on industries located in coastal regions facing water scarcity, positioning its wastewater and zero liquid discharge (ZLD) solutions as sustainable alternatives to coastal wastewater discharge. Additionally, it seeks to expand its geographic footprint by promoting its systems, plants, and O&M services in new international markets, with a particular emphasis on Latin America, Africa, Europe, and Asia.Regions such as Africa, the European Union, and the Middle East, where water availability is relatively limited, present significant opportunities for wastewater recycling and reuse, enhancing water availability for various purposes.

Risks:

• Seasonality in Sales Of Systems- The company's revenue from the sale of systems and plants, which constitutes a significant portion of its overall income, exhibits seasonal trends. Approximately 50% of these sales are typically executed during the fourth quarter of the fiscal year, as businesses plan their water requirements for the upcoming year during the final quarter of the preceding fiscal year. Consequently, any disruptions or unforeseen circumstances in the fourth quarter could have a substantial impact on the company’s revenue performance.
• Low Capacity Utilisation- The company has experienced low capacity utilization at its Vasai and Sharjah facilities, with average utilization across both plants remaining below 40% over the past three years. This low utilization results in higher production costs and reduced profitability. If the company is unable to improve capacity utilization, it may face continued pressure on profit margins in the future.

Financial Snapshot:

KPI comparison with Industry Peers

Conclusion:

A financial analysis comparing the company to its peers reveals that it outperforms in certain metrics, such as revenue growth and EBITDA margins. However, over the past three years, the company has exhibited fluctuating performance with lower efficiency, as reflected in its below-industry-average return on capital employed (ROCE) and profit after tax (PAT) margins. Additionally, the company's debt-to-equity ratio is higher than the industry average, coupled with a significantly lower interest coverage ratio compared to its peers. These factors suggest caution for potential investors, indicating that participation in the IPO may not be advisable.