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Review By Dilip Davda on November 21, 2024
• The company is engaged in providing comprehensive solutions for water, wastewater treatment, recycling.
• Its customer list included big corporate like HUL, Hero MotoCorp, Ashok Leyland, Honda, M & M, Jubilant etc.
• The company gained momentum in its performance from FY23 onwards following state and central government support.
• Based on its latest financial performance, the issue appears fully priced.
• Well-informed investors may park funds for medium to long term.
ABOUT COMPANY:
Apex Ecotech Ltd. (AEL) is an ISO 9001:2015 certified company. It is fronted by experienced & knowledgeable engineering professionals and undertakes turnkey projects in the industry providing comprehensive solutions for water & wastewater treatment, recycling and reuse for myriad applications. Its services include setting up Raw Water Treatment for industrial processes, Effluent & Sewage Treatment Plants to meet pollution norms, providing Sludge Dewatering Equipment, recycling of pre-treated wastewater through Membrane systems (Ultrafiltration, Nano Filtration, Reverse Osmosis, Disc Type RO etc.) and Thermal / Vapor Compression-based Evaporators & Crystallizers for Zero Liquid Discharge Systems. Furthermore, the company offers and provides after sales support along with Operation & Maintenance services to clients.
AEL's primary objective is to provide value added, sustainable, reliable and energy efficient solutions in line with global standards and advanced technologies. It strives to achieve optimized recovery & efficiency from systems, minimized generation of rejects & sludge, the treated water is then reused for different applications such as industrial processes, cooling tower makeup, boiler feed, flushing water makeup, horticulture etc. It is AEL's constant endeavour to meet customer expectations, increase uptime with sustained and reliable deliverance.
The in-house team is adept in designing, engineering, total project management & after sales services along with having accomplished professionals to manage accounts, finance, commercial, logistics and statutory obligations thus making it self- sufficient and self-reliant in all aspects. In line with its core strengths, the company has the expertise to customize optimal solutions for treatment, recycle and reuse. AEL over the years has been trusted by large domestic & global MNCs and some of its esteemed clientele includes Aditya Birla Group, Ashok Leyland, Apotex Research, Bharatiyam, Escorts Kubota, Haldiram, Hero MotoCorp, Honda Cars, Honda Scooters & Motorcycle, HUL, Jubilant, Kohler, Lenskart, Mahindra & Mahindra, PepsiCo, Piramal Pharma, Reckitt Benckiser, Shimizu Corporation, SMCC, Takenaka and many more valued users. It has successfully delivered complete ZLD systems achieving high overall recovery for water reuse applications.
''Zero Liquid Discharge' means that the complete waste water being generated from industrial processes e.g. utilities, manufacturing processes, blowdown etc. is being treated and the total treated water is then reused for various non potable applications. That would relate to 100% recovery however there are few inherent losses accruing to 1.5% to 5%. As of the date of filing this offer document, it had 119 employees on its payroll. As of the said date, it had orders on hand worth approx. Rs. 100 cr.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 3499200 equity shares of Rs. 10 each to mobilize Rs. 25.54 cr. (at the upper cap). The company has announced a price band of Rs. 71 - Rs. 73 per share. The issue opens for subscription on November 27, 2024, and will close on November 29, 2024. The minimum number of shares to be applied is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.54% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, the company will utilize Rs. 17.00 cr. for working capital, and the rest for general corporate purposes.
The IPO is solely lead managed by Share India Capital Services Pvt. Ltd. and KFin Technologies. Ltd. is the registrar to the issue. Share India Group's Share India Securities Ltd. is the Market Maker for the company.
Having issued initial equity shares at par value so far, the company issued further equity shares at a fixed price of Rs. 160.00 per share in March 2024. The company issued bonus shares in the ratio of 9 for 1 in July 2024. The average cost of acquisition of shares by the promoters is Rs. 1.00 per share.
Post-IPO, company's current paid-up equity capital of Rs. 9.69 cr. will stand enhanced to Rs. 13.19 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 96.25 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit/ - (loss) of Rs. 20.03 cr. / Rs. - (0.66) cr. (FY22), Rs. 34.92 cr. / Rs. 3.52 cr. (FY23), and Rs. 53.47 cr. / Rs. 6.63 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 1.55 cr. on a total income of Rs. 21.83 cr. The company posted bumper growth in its top and bottom lines from FY23 onwards. However, arithmetically, H1 of FY25 has seen declining trends in top and bottom lines.
On page no. 90 of the offer document, it has shown Rs. 211.77 cr. as trade receivables as of September 30, 2024, which is not only shocking but also a big surprise. (It appears to be a typo error and needs clarification). Sundry debtor holding period of 179 days as of the said date also raises alarm.
According to management, it is gaining grounds with its specialized services with latest technology that brings cost effective water treatment across the board.
For the last three fiscals, the company has reported an average EPS of Rs. 4.79 and an average RoNW of 48.95%. The issue is priced at a P/BV of 4.10 based on its NAV of Rs. 17.80 as of September 30, 2024, but its post-IPO NAV data is missing from IPO price band ad.
If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 30.93, and based on FY24 earnings, the P/E stands at 14.51. The issue appears fully priced.
For the reported periods, the company has posted PAT margins of - (3.38) % (FY22), 10.18 % (FY23), 12.49% (FY24), 7.15% (H1-FY25), and RoCE margins of - (5.73) %, 54.49%, 59.61%, 12.02% respectively for the referred periods.
DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects.
COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown ION Exchange, and Va Tech as their listed peers. They are trading at a P/E of 43.2, and 40.7 (as of November 21, 2024). However, they are not truly comparable on an apple-to-apple basis. These compare appears to be an eyewash.
MERCHANT BANKER'S TRACK RECORD:
This is the 16th mandate from Share India Capital in the last four fiscals. Out of last 10 listings, all listed with premiums ranging from 5.33% to 120% on the listing date. (Withdrawn IPO of Archit Nuwood is not considered in this list).
Review By Dilip Davda on November 21, 2024
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Apex Ecotech Limited offers an early investment opportunity in Apex Ecotech Limited. A stock market investor can buy Apex Ecotech IPO shares by applying in IPO before Apex Ecotech Limited shares get listed at the stock exchanges. An investor could invest in Apex Ecotech IPO for short term listing gain or a long term.
Read the Apex Ecotech IPO recommendations by the leading analyst and leading stock brokers.
Apex Ecotech IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Apex Ecotech IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Apex Ecotech IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Apex Ecotech IPO.
The Apex Ecotech IPO allotment status will be available on or around December 2, 2024. The allotted shares will be credited in demat account by December 3, 2024. Visit Apex Ecotech IPO allotment status to check.
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