EMS IPO GMP (Grey Market Premium)

EMS IPO worth ₹321.24 crore comprises of an offer for sale and also of a fresh issue of shares. The offer for sale (OFS) component is by the promoters and early shareholders of the company. Here it must be noted that while the fresh issue component infuses fresh funds into the company, it also is EPS dilutive and equity dilutive. On the other hand, the OFS is just a transfer of shares so there is no fresh infusion of funds, but it also does not dilute the equity. The issue has been priced in the band of ₹200 to ₹211 per share and the IPO allotment price will be discovered post the book building of shares being completed during the IPO process. For our analysis, the upper end of the IPO price band is assumed as the benchmark price at which the IPO price will be eventually discovered in the IPO.

EMS IPO Details

EMS IPO will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion comprises the issue of 69,30,806 shares (69.31 lakh shares approximately), which at the upper price band of ₹211 per share will translate into fresh issue size of ₹146.24 crore. The offer for sale (OFS) portion of the IPO comprises the issue of 82,93,839 shares (82.94 lakh shares approximately), which at the upper price band of ₹211 per share will translate into an offer for sale (OFS) size of ₹175 crore. Mr Ramveer Singh, the promoter of the company will be offloading the entire quantum of shares as part of the OFS. Therefore, the overall IPO portion will comprise of the issue of 1,52,24,645 shares (1.52 crore shares approximately), which at the upper price band of ₹211 per share will translate into a total IPO issue size of ₹321.24 crore.

The issue opens for subscription on 08th September 2023 and closes for subscription on 12th September 2023 (both days inclusive). The basis of allotment will be finalized on 15th September 2023 and the refunds will be initiated on 18th September 2023. In addition, the demat credits are expected to happen on 20th September 2023 and the stock is scheduled to list on 21st September 2023 on the NSE and the BSE.

Understanding EMS GMP

The grey market price (GMP) trading normally starts about 4-5 days prior to IPO opening and continues till the listing date. In the case of EMS Ltd, we already have GMP data for the last 3 days, which should give a reasonable picture of the likely listing performance.

There are 2 factors that impact the GMP. Firstly, the market conditions have a deep impact on the GMP, which includes the levels of the Nifty and Sensex as well as the general IPO market and macro conditions. Secondly, the extent of subscription for the IPO across the retail and the QIB segments also has a deep impact on the GMP as it is indicative of investor interest in the stock. Generally, strong QIB subscription is a trigger for a spike in GMP.

There is one small point to remember here. The GMP is not an official price point, just a popular informal price point. However, in most cases, it has been observed to be a good informal gauge of demand and supply for the IPO. Hence it does give a broad idea of how the listing is likely to be and how the post-listing performance of the stock would be.

GMP tends to be a good mirror of the real stock story. More than the actual price, it is the GMP trend over time that gives insights about which direction the wind is blowing.

EMS IPO GMP (Grey Market Premium)

Here is a quick GMP summary for EMS IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹103, but now up by ₹88 per share. However, it must be remembered that initially the stock was trading in the grey market without the price band for the IPO being announced. The price band was just announced a couple of days ago and hence this shift in GMP may not be too reflective. However, the GMP level is still indicative of very strong traction for the IPO grey market price. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 08th September 2023, as that would have a very significant impact on the GMP. In the past, stocks which got oversubscribed in the IPO also saw a very robust positive shift in the grey market pricing. For a start, EMS Ltd has shown highly strong traction in the grey market.

If you consider the upper end of the price band of EMS Ltd at ₹211 as the indicative price, then the likely listing price is being signalled at around ₹326 per share as of the GMP indicator on 03rd September 2023. One data point to track will be the subscription update on the stock as that would chart the GMP course from here. As mentioned, the institutional QIB subscription is a key trigger for the GMP pricing.

The GMP of ₹115 on a likely upper band pricing of ₹211 indicates a listing premium of a very robust and healthy 54.5% for EMS Ltd over the listing price. That pre-supposes a listing price of approximately ₹326 per share, when EMS Ltd lists on 21st September 2023. Of course, these are approximations, so you must keep a margin of safety. However, from here on, a lot will depend on the GMP sustaining over the next few days after the issue opens, as well as the subscription flow into the company IPO.

GMP (grey market price) is an important indicator, albeit informal, of likely listing price. One cannot take this price at face value However, the GMP tends to be quite dynamic and changes direction with the flow of news and events. Investors must note here that this is just an informal indication and has no official acceptance. The best thing one can do with the GMP is to observe the trend closely as that gives the best hints on listing status. Focus on the time series trend than on numbers.

Brief on EMS Ltd business model

EMS Ltd was incorporated in the year 2012. The company was formerly known as EMS Infracon, but later changed its name to EMS Ltd to reflect the very focused business model that is concentrated largely around waste water and sewage treatment. It is broadly engaged in the business of providing water and wastewater collection, treatment, and disposal services. In terms of its business model, EMS Ltd provides Sewerage solutions, Water Supply Systems, Water and Waste Treatment Plants. In addition, EMS Ltd also provides Electrical Transmission and Distribution, Road, and Allied works. Apart from its basic operations, it also earns part of its revenues from the 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). It also operates pumping stations and engages itself in the laying of pipelines for the supply of water.

EMS Ltd has its own civil construction team and employs a team of 57 well-qualified and skilled engineers, supported by third-party consultants and industry experts. At the current juncture, EMS Ltd is operating and maintaining 13 projects including WWSPs, WSSPs, STPs & HAM. The company also has its own team for civil construction works, thereby reducing dependence on third parties and offering a one-stop solutions through a single point of contact. The scope of EMS Ltd services includes the design and engineering of the projects, procurement of raw materials, and execution at the site, with overall project management up to the commissioning of projects. The company also handles maintenance post work.

The fresh issue proceeds will be used by the company for working capital gap funding and also partially for general corporate purposes. The issue will be lead managed by Khambatta Securities Ltd. KFIN Technologies Ltd (formerly Karvy Computershare Ltd) will be the registrar to the issue.