Concord Enviro Systems Limited IPO is an exciting offering from an established leader in industrial wastewater solutions and Reverse Osmosis technology. The company, which has been innovating in the water treatment industry since its inception in 1992, is now looking to raise ₹500.33 Crores through a combination of a Fresh Issue and Offer for Sale. The subscription for the IPO opens on December 19, 2024, and closes on December 23, 2024, with a tentative listing date set for December 27, 2024.

IPO Details

• Offer Size: ₹500.33 Crores, comprising a Fresh Issue of ₹175.00 Crores and an Offer for Sale of ₹325.32 Crores.
• Price Band: ₹665 to ₹701 per equity share.
• Lot Size: 21 shares.
• Market Capitalization: The market cap at the upper price band of ₹701 per share will be ₹1,450.80 Crores.
• Minimum Investment: ₹14,721 for retail investors, and ₹2,06,094 for High Net Worth Individuals (HNIs), based on the lot size.
• IPO Subscription: The IPO was subscribed 10.67 times on the final day, reflecting strong demand.

Financials and Valuation

For the fiscal year ended August 31, 2024, the company's revenues from operations were ₹2,080.24 Million, with a Profit after Tax of ₹-11.07 Million. While the financial performance shows a decline in profitability, the company has a solid foundation in Reverse Osmosis and Green ZLD solutions that drive its long-term growth.

The IPO offers a pre-issue P/E ratio of 30.79x, and a post-issue P/E of 34.88x, which is relatively favorable compared to the industry P/E of 49x, indicating that the IPO is priced reasonably within the current market context.

Grey Market Premium (GMP)

The GMP for the Concord Enviro Systems IPO is ₹154, suggesting a 21.97% potential listing gain. However, it’s essential to note that GMP does not reflect the final listing price, as it depends on market demand and supply. No real price discovery can be done until the shares are listed on the stock exchange.

Objectives of the IPO

The company plans to utilize the net proceeds for various strategic purposes, including:

• Investment in Subsidiaries: ₹250 million will be allocated to Concord Enviro FZE for a greenfield project in the UAE to develop an assembly unit for water and wastewater treatment.
• Expansion Projects: ₹105 million will fund the Vasai Project to expand manufacturing facilities.
• Technology Investments: ₹235 million will be used for technology development and market access initiatives.

Investment Outlook

The Concord Enviro Systems IPO is priced at a reasonable valuation with a solid industry position in water treatment. However, the company is facing some financial challenges with declining profitability over the past few years, which could affect long-term investor confidence.

Given the GMP trend indicating a potential listing gain, short-term investors may find opportunities in the listing price. For long-term investors, a more cautious approach is advisable until the company shows consistent profitability and growth.

Conclusion

Although Concord Enviro Systems has made significant strides in Reverse Osmosis technology and water treatment solutions, the company's financial performance and declining profits raise some concerns for long-term stability. Given these factors and the fairly priced valuation, we recommend avoiding the IPO if you're solely looking for listing gains. Investors with a more long-term focus and an understanding of the industry may still find potential in the company as it continues to innovate in the environmental solutions space.

The Upcoming IPOs in this week and coming weeks are Citichem India, Indo Farm, Technichem Organics, Leo Dry Fruits, Solar91 Cleantech, Rosmerta Digital and Avanse Financial.

The Current active IPO is Anya Polytech and Unimech Aerospace.

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