What you must know about Urban Enviro Waste Management IPO

Urban Enviro Waste Management Ltd, is an SME IPO on the NSE which is opening for subscription on 09th June 2023. The company was incorporated in 2011, and it currently provides waste management solutions & municipal solid waste (MSW) management services. Its service palate includes solid waste collection, transportation, segregation, processing, and disposal services across the states of Gujarat, Rajasthan, Madhya Pradesh, and Maharashtra. It directly caters to the respective municipalities.

Apart from municipalities, Urban Enviro Waste Management Ltd also caters to local bodies; apart from providing direct waste management services to residential localities, institutions, hospitals, cantonment boards etc. Till date, the company has undertaken more than 24 projects of which 21 are ongoing projects. Some of its notable projects are under execution for Jaipur Nagar Nigam, Ankleshwar, NEERI, MIHAN India Ltd, NHDC Limited, Indira Sagar Power Station and many more.

Key terms of the SME IPO of Urban Enviro Waste Management Ltd

Here are some of the highlights of the Urban Enviro Waste Management IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 12th June 2023 and closes for subscription on 14th June 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a fixed price IPO issue wherein the IPO price has been fixed at ₹100 per share.
   
• The issue of the company will be a combination of fresh issue and offer for sale by the promoters and early investors in the company.
   
• As part of the fresh issue, Urban Enviro Waste Management Ltd will issue a total of 9,20,000 shares, which at the fixed IPO price of ₹100 per share translates into total fresh issue size of ₹9.20 crore.
   
• As part of the offer for sale (OFS), Urban Enviro Waste Management Ltd will issue a total of 2,22,400 shares, which at the fixed IPO price of ₹100 per share translates into total offer for sale (OFS) size of ₹2.22 crore.
   
• As a result, the total size of the overall IPO of Urban Enviro Waste Management Ltd will entail the issue of a total of 11,42,400 shares, which at the fixed IPO price of ₹100 per share translates into total IPO issue size of ₹11.42 crore.
   
• The minimum lot size for the IPO investment will be 1,200 shares. Thus, retail investors can invest a minimum of ₹120,000 (1,200 x ₹100 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO.
   
• HNI / NII investors can invest a minimum of 2 lots comprising of 2,400 shares and having a minimum lot value of ₹240,000. There is no upper limit on what the HNI / NII investors can apply for. The respective allocation can be captured as under.

• The reservation of shares for the various categories of investors can be captured as per the table given below.

• Like every SME IPO, this issue also has a marketing making portion with a market maker portion allocation of 57,600 shares. Asnani Stock Brokers will act as the market maker to the issue providing two-way quotes to ensure liquidity on the counter.
   
• The proceeds of the fresh issue component will be utilized to repay secured borrowings, including foreclosure charges and accrued interest. It will also use the fund partially for working capital purposes.

While Pantomath Capital Advisors Private Limited will also be the lead manager to the issue, Bigshare Services Private Limited will be the registrar to the issue. The total outstanding shares pre-issue is 34.10 lakh shares of Rs10 each and post issue the total outstanding shares would stand at 43.30 lakh shares of Rs10 each. Only the fresh issue portion will enhance the outstanding shares while the OFS is just a transfer of ownership.

Key dates to be aware in the Urban Enviro Waste Management Ltd IPO (SME)

The SME IPO of Urban Enviro Waste Management Ltd opens on Monday, June 12th, 2023 and closes on Wednesday June 14th, 2023. The Urban Enviro Waste Management Ltd IPO bid date is from June 12th, 2023 10.00 AM to June 14th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the 14th of June 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Urban Enviro Waste Management Ltd

The table below captures the key financials of Urban Enviro Waste Management Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

The profit margins in the latest fiscal year FY22 have been about 6.5%, largely being a project driven business. However, the revenue growth has been steady and this is a business that is largely predicated on timely and flawless execution. The business has to handle unorganized labour and that remains a challenge in the business. The company has a high debt to equity ratio of nearly 4X and that would get a boost from the repayment of loans through the IPO funds. That would improve the solvency ratios of the company.

The risk to the IPO comes from the pricing. The issue has been priced at 26.4 times FY22 earnings, which his unlikely to change much considering tepid growth in FY23 likely based on the 9-months data available. The valuation is nearly thrice what the peer group gets, so investors may not have much on the table. It is a relatively investment proposition.