Enviro Infra Engineers Ltd. (Subscribe)

Highlights

Enviro Infra Engineering Limited (EIEL) incorporate on 2009, engaged 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.

EIEL bids for tenders issued by State Governments and Urban Local Bodies (ULBs) for developing WWTPs and WSSPs on an EPC or HAM basis. As on Q1FY25, they have successfully developed 28 WWTPs and WSSPs across India in past 7 years which includes 22 projects with 10 MLD capacity and above across states of Gujarat, Rajasthan, Punjab, Haryana, Uttar Pradesh, Uttarakhand and Chhattisgarh.

In addition to the execution of projects independently, EIEL also enter into joint ventures (JV) with other infrastructure and construction companies to jointly bid and execute projects. As on June Q1FY25, the company is executing 5 WWTPs and WSSPs projects in partnership with their JV partners.

In line with government policies and industry trends, EIEL are taking various initiatives towards Waste to Energy in their projects to reduce carbon footprint and contribute to environmental sustainability. They have installed solar power plants at some of projects and the solar power generated by these plants is being used for captive utilisation or supplied to the power grid.

Out of the total proceeds of Rs. 6,504 mn, Rs. 1,810 mn would go to meet working capital requirements, Rs. 300 mn would go into fund infusion in EIEL Mathura Infra Engineers Private Limited to build 60 MLD STP under project titled Mathura Sewerage Scheme at Mathura in Uttar Pradesh through Hybrid Annuity Based PPP Mode, Rs. 1,200 mn would go towards repayment of certain borrowings, Rs.  2,414 would go towards Funding inorganic growth through unidentified acquisitions and general corporate purposes. While Rs. 779 mn would go towards existing selling shareholders of the company.

Key Highlights

• India’s India water & wastewater treatment market revenue is at USD 13.87 bn in 2024 and it is expected to clock CAGR of 6.20 pct over 2024-2033 to reach at USD 23.85 bn. Waters covers about 71 pct of earth surface, only 3 pct is fresh and suitable for human consumption. The players engaged in this industry is well positioned to cater water related problems due to rapid urbanization, industrialization, and agricultural practices that have led to the contamination of these surface water bodies, further exacerbating the scarcity of clean water.
• EIEL are presently executing projects in 8 states. They intend to further expand their business operations to other regions of the country, especially the East and South India. They have recently been awarded projects in the State of Jharkhand and Karnataka and have submitted bids for projects in the State of Odisha, West Bengal and Goa.
• As of Q1FY25 the company has an orderbook of 21 WWTPs and WSSPs projects for aggregate value of Rs. 19,063 mn which is 2.61x of FY24 sales. EIEL capabilities as an established player allows them to focus on Projects with EPC/ HAM and O&M components. Post the commissioning of the project, O&M provide steady cash flows and adds to their Company’s margins.
• They have an in-house team for designing, engineering and construction which makes us self-reliant on all aspects of their business. They also have their own team for civil construction works thereby reducing dependence on third parties.
• EIEL is in the process of installing Compressed Bio Gas (CBG) plants at their ongoing projects at Jodhpur and Jaipur in Rajasthan. The CBG generated and purified will be directly sold to the Oil Marketing Companies (OMCs) in public sector or used for power generation once STPs are established and running.        
• EIEL’s key strategies includes (i) Increasing the size of projects and pre-qualification (ii) Expansion of geographical footprint (iii) Plan to further bid for HAM projects (iv) New initiatives towards Waste to Energy as a part of projects (v) Capitalize on Government policy initiatives in WWTP and WSSP sectors.
• Sales of the company has grown by 80.59 pct YoY in Over FY22-24 and EBITDA and Profit grew by 80.45 pct and 78.71 pct over same period. During FY24 the sales of the company jumped by 116 pct YoY to Rs. 7,289 mn. While EBITDA of the company grew by 107 pct YoY to Rs. 1,693 mn and EBITDA margin contracted by 93 bps to 23.23 pct in FY24. During FY24, the company reported profit of Rs. 1,105 mn, which grew 101 pct YoY.

Key Risk

• EIEL business transactions are with government or government funded entities in India, which may expose them to risk, including additional regulatory scrutiny.
• The company bid for WWTPs & WSSPs funded by the Central and State Governments and derived EIEL sale from the contracts awarded to them. Any reduction in budgetary allocation to this sector may affect EIEL business as their business is directly and significantly dependent on projects awarded by governments.

Financial Performance

Peer Comparison Based on FY24

Valuation

Enviro Infra Engineers Limited, specialize in providing comprehensive water and wastewater management solutions across India. With a focus on excellence and innovation, they deliver end-to-end services that meet the critical needs of both municipal and industrial sectors. With robust orderbook of Rs. 19,063 mn EIEL is well positioned to sail on water theme. At the upper end of the price of Rs. 148, the issue quotes PE of 21.7x on FY25E annualized earnings. The issue looks fully priced. One can subscribe this issue from a longer term perspective.

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