EMS Limited IPO

About the company:

EMS Ltd. is in the business of Sewerage solution provider, Water Supply System, Water and Waste Treatment Plants, Electrical Transmission and Distribution, Road and Allied works, operation and maintenance of Wastewater Scheme Projects (WWSPs) and Water Supply Scheme Projects (WSSPs) for government authorities/bodies. WWSPs include Sewage Treatment Plants (STPs) along with Sewage Network Schemes and Common Effluent Treatment Plants (CETPs) and WSSPs include Water Treatment Plants (WTPs) along with pumping stations and laying of pipelines for the supply of water. The treatment process installed at STPs and CETPs is compliant with Ministry of Environment, Forest and Climate Change of India norms and the treated water can be used for horticulture, washing, refrigeration and other process industries. The company has an in-house team for designing, engineering and construction, making it self-reliant on all aspects of its business.  As on July 31, 2023, the company operates and maintains 18 projects including WWSPs, WSSPs, STPs & HAM aggregating of Rs. 1744.92 crores & 5 O&M projects aggregating to Rs. 99.28 crores.

Objects of the Offer:

The company intends to utilize the net proceeds from the fresh issue towards the following objects:
- Funding of working capital requirements of the company
- General corporate purposes.

Key Strengths and Opportunities:

- In-house designing, engineering and execution team: EMS Ltd. has been focusing on design capabilities for complex and critical projects. This capability enables it to correctly bid with project specifications and provide quality services in a timely and cost-effective manner. The in-house engineering and design team of 61 engineers has the necessary skills and expertise to prepare detailed architectural and /or structural designs based on the conceptual requirements of the clients. The engineering and design team reduces our dependence on outsourcing engineering and design work to third-party consultants.

- Experienced Promoters and senior management team: The promoters of EMS, Mr. Ram Veer Singh and Mr. Ashish Tomar are qualified professionals with an individual experience of more than 3 & 1 decades respectively in the water & waste-water treatment industry and have been instrumental in driving growth since the inception of the business. The senior management team is well qualified and experienced in the execution of WWSP & WSSP projects.

- Scalable and Asset Light Business Model supported by Strong Financial Position: The business model of EMS Ltd. relies on the strength of its brand, project execution and management capabilities as well as well-established relationships with its clients, architects and contractors. Leveraging these capabilities and relationships, EMS seeks to transition to a combination of designing and execution-based business model. It believes the asset-light business model results in efficient utilisation of capital resulting in lower debt and regular income, allowing it to have higher Return on Capital Employed (ROCE).

- Robust Order Book: As of July 31, 2023, EMS operates and maintains 18 projects including WWSPs, WSSPs, STPs & HAM aggregating of Rs.1,744.92 crores & 5 O&M projects aggregating Rs.99.28 crores. The company believes that consistent growth in its order book has materialized due to the continued focus on projects and its ability to successfully bid and win new projects. The experience in designing, engineering, construction, operations and maintenance of projects, technical capabilities, timely performance, reputation for quality and timely delivery, financial strength as well as price competitiveness has enabled EMS to successfully bid and win projects.

Risks:

- As 100% of the projects are works related to tenders floated by government or semi-government agencies funded through World Bank, the business of EMS is highly dependent on working with government entities or agencies. The company’s dependence on the government projects and changes in government policies related to the environment and water treatment, in particular, may adversely affect its business, financial condition and results of operations.

- The projects of EMS are typically subject to a completion schedule. It is also required to provide performance guarantees to customers to complete projects on schedule. Any failures to adhere to a contractually agreed schedule for reasons other than the agreed force majeure events could result in being required to pay liquidated damages, which would usually be a certain percentage of the total project cost, or lead to forfeiture of security deposits or invocation of performance guarantees.

- Since the business of EMS is highly dependent on working with government entities or agencies, if it fails to procure Government projects, the future results of operations and cash flows may fluctuate materially depending on the timing of contract awards.

- The company has been black-listed in the past by the two government bodies, and may face blacklisting in future that will affect its operations & future cashflows. The company has been black listed in the past by the two government bodies & the same black-listing has been lifted with the retrospective effect.

Financial Snapshot: