IPO Analysis


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EMS IPO: Everything you need to know

EMS, a leading water and waste treatment provider, has come out with its IPO (initial public offering). Here's a breakdown of the company's strengths, weaknesses, and growth prospects to help investors make an informed decision.

In a nutshell

  • Quality : The three-year average return on equity (ROE) and return on capital employed (ROCE) of EMS are 22.3 and 30.5 per cent, respectively. In FY23, the company's ROE and ROCE were 22.3 and 28.3 per cent, respectively.
  • Growth : Its topline grew by 49.6 per cent and 8.8 per cent in FY23 and FY22, respectively, due to increasing income from the installation of sewerage treatment plants.
  • Valuation : The stock will be priced at a P/E and P/B of 10.9 and 1.8 times, respectively, as compared to its peer's median and average of 94.1 and 1.9 times, respectively.
  • Overview : The increasing urban population in India will lead to rising demand for clean sources of water, which can help the company grow. Various social initiatives introduced by the government can also benefit the company. However, changes in government policies and high dependence on them for revenue generation remain a threat.

About EMS

EMS (incorporated in 2010) is involved in providing water and wastewater collection, treatment and disposal services for various government entities such as New Okhla Industrial Development Authority, Agra Development Authority and Uttar Pradesh Jal Nigam, among many others. Additionally, the company is also actively engaged in the construction of infrastructure such as roads and buildings, as well as electricity and power transmission.

Strengths of EMS

  • Almost all of the company's projects are funded by the World Bank which helps in reducing reliance on debt.
  • Operates on an asset-light business model which helps in minimising costs and improving profit margins.

Weaknesses of EMS

  • High dependence on government projects (100 per cent of revenues are generated through them) - Any change in government policies related to environment and water treatment can adversely affect the topline of the company.
  • A high working capital-intensive business with long gestation periods and delayed collection of receivables.
  • Company has been able to procure only 12 per cent of the tenders that it applied for in the last five years.

IPO details

Total IPO size (Rs cr) 321
Offer for sale (Rs cr) 175
Fresh issue (Rs cr) 146
Price band (Rs) 200-211
Subscription dates September 8, 11 and 12, 2023
Purpose of issue To fund working capital


M-cap (Rs cr) 1172
Net worth (Rs cr) 634
Promoter holding (%) 69.7
Price/earnings ratio (P/E) 10.9
Price/book ratio (P/B) 1.8

Financial history

Key financials 2Y growth (% pa) FY23 FY22 FY21
Revenue (Rs cr) 27.6 538 360 331
EBIT (Rs cr) 22.4 146 110 97
PAT (Rs cr) 22.3 108 78 72
Net worth (Rs cr) 488 380 302
Total debt (Rs cr) 45 4 3
EBIT is earnings before interest and taxes
PAT is profit after tax

Key ratios

Ratios 3Y average (%) FY23 FY22 FY21
ROE (%) 22.3 22.3 20.8 23.8
ROCE (%) 30.5 28.3 29.5 33.7
EBIT margin (%) 29 27.1 30.6 29.4
Debt-to-equity 0.1 0 0
ROE is return on equity
ROCE is return on capital employed

Risk report

Company and business

  • Are EMS's earnings before tax more than Rs 50 crore in the last 12 months?
    Yes. The company's profit before tax for FY23 was Rs 147 crore.
  • Will EMS be able to scale up its business?
    Yes. Increased spending on infrastructure projects and new social initiatives introduced by the government for this sector can help the company scale up its business.
  • Does EMS have recognisable brands with client stickiness?
    No. The company has to procure new client projects through a competitive bidding process.
  • Does the company have a credible moat?
    No. It faces stiff competition from other players.


  • Do any of the company's founders still hold at least a 5 per cent stake in the company? Or do promoters hold more than a 25 per cent stake in the company?
    Yes. Promoters' stake will be 69.7 per cent post-IPO.
  • Do the top three managers have more than 15 years of combined leadership at EMS?
    Yes. Ramveer Singh (Chairman and Executive Director) and Ashish Tomar (Executive Director) have been with the company since its inception in 2010.
  • Is the management trustworthy? Is it transparent in its disclosures, which are consistent with SEBI guidelines?
    Yes. No information to suggest otherwise.
  • Is the company's accounting policy stable?
    Yes. No information to suggest otherwise.
  • Is EMS free of promoter pledging of its shares?
    Yes. No shares have been pledged.


  • Did the company generate a current and three-year average return on equity of more than 15 per cent and a return on capital employed of more than 18 per cent?
    Yes. The company's three-year average ROE and ROCE are 22.3 and 30.5 per cent, respectively. In FY23, the company's ROE and ROCE were 22.3 and 28.3 per cent, respectively.
  • Was the company's operating cash flow positive during the last three years?
    No. The company reported negative cash flow from operations in FY23.
  • Is the company's net debt-to-equity ratio less than one?
    Yes. The company's net debt-to-equity ratio, as of March 2023, is -0.16 times (i.e., a net cash position).
  • Is EMS free from reliance on huge working capital for day-to-day affairs?
    No. The company's business affairs are working capital intensive. They rely on short-term loans to fund these requirements.
  • Can the company run its business without relying on external funding in the next three years?
    No. Almost all of the projects undertaken by the company are funded by the World Bank.
  • Is EMS free from meaningful contingent liabilities?
    No. Contingent liabilities as a percentage of equity stood at 52 per cent.


  • Does the stock offer an operating earnings yield of more than 8 per cent on its enterprise value?
    Yes. The stock will offer a 13.3 per cent operating earnings yield on its enterprise value.
  • Is the stock's price-to-earnings less than its peers' median level?
    Yes. The company will trade at a price-to-earnings ratio of 10.9 times. Currently, it has only one listed peer (VA Tech Wabag) which is trading at a price-to-earnings ratio of 94.1 times.
  • Is the stock's price-to-book value less than its peers' average level?
    Yes. The company will trade at a price-to-book ratio of 1.8 times compared to VA Tech Wabag's price-to-book of 1.9.

Disclaimer: This is not a stock recommendation. Do your due diligence before investing.

Suggested read: What to look for in a company before investing?

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