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Apex Ecotech

• Apex Ecotech is coming out with an initial public offering (IPO) of 34,99,200 equity shares in a price band Rs 71-73 per equity share.
• The issue will open on November 27, 2024 and will close on November 29, 2024.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 7.10 times of its face value on the lower side and 7.30 times on the higher side.
• Book running lead manager to the issue is Share India Capital Services.
• Compliance Officer for the issue is Kirti Jain.

Profile of the company

Apex Ecotech 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 pretreated 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, it offers and provides after sales support along with Operation & Maintenance services to its clients.

The company was founded by Anuj Dosajh, Ramakrishnan Balasundaram Aiyer, Ajay Raina and later joined by Lalit Datta (who is now retired from active service). They have a combined experience of more than 120 years and are involved in daily functioning and operations of the company.

The company’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 the company’s constant endeavor to meet customer expectations, increase uptime with sustained and reliable deliverance. 

Proceed is being used for:

• Meeting working capital requirements
• General corporate purposes
• Meeting public issue expenses

Industry Overview

Water and wastewater management is a promising subsector in India’s environmental technology segment. India’s demand for water is projected to be twice as much as the available supply by 2030. To overcome these challenges, public and private sector facilities have ambitious plans to develop comprehensive water and wastewater treatment and distribution infrastructure. Demand for high-end treatment technologies is growing in India. According to a 2022 Frost & Sullivan report, the Indian water and wastewater treatment market will likely reach $2.08billion by 2025 from $1.31 billion in 2020, registering growth at a compound annual growth rate (CAGR) of 9.7 percent. The report also ranked India as the sixth largest market for environmental technologies in the world, with sub sector rankings of second for water/wastewater management.

Every year on an average, India receives nearly 4000 BCM of water through rainfall, of which about 1999 BCM forms available water resources in rivers, lakes, reservoir, ground water and glaciers. However, the distribution of this quantity is not uniform across the country; apparently some river basins are acutely drought prone, while some are frequently devastated by flood. For example, the most flood prone basin of Brahmaputra & Barak, have an annual average water availability of 614 BCM, drains its major share into Bay of Bengal. At the same time, basins like Cauvery and East Flowing Rivers (EFR) between Pennar and Kanyakumari are facing water deficiency. On the other hand, India’s development requirements grow at an optimistically positive rate. Population growth is also not an exception. The UN’s population projection for India by 2050, which was relied upon by the NCIWRD while assessing the water demand for 2050, was 1500 million. But, it is about to cross this figure in 2030 itself. In addition, there is a surge in migration to urban centres leading to substantial growth in urban water demand.

Engineering, Procurement, and Construction (EPC) is widely favored as a project management approach. In this contractual model, the general contractor assumes most of the project's risks. The client delegates all project tasks, including design, procurement, and construction, to the contractor. Regardless of any additional expenses, the contractor sets a fixed fee, ensuring predictability for customers who highly value adherence to commissioning dates. Consequently, EPC contracts are increasingly popular for building wastewater treatment plants. Customer concern primarily revolves around project costs when constructing or expanding wastewater treatment facilities. Costs vary depending on technology, equipment, and wastewater flow rates. Additionally, regulatory compliance and wastewater composition are critical considerations to avoid fines during plant operation. 

Pros and strengths

In house designing, engineering and execution team: The company has an in-house team for designing and engineering for the projects it undertakes. Clients typically provide the scope of the project and specifications, based on which, it is required to provide structural/architectural designs and detailed project plans. It specializes in designing complex projects like water and wastewater treatment plants (WTP, WWTP, ST, ZLD), ensuring adherence to project specifications. The company’s expertise covers a wide range of design elements, including process descriptions, hydraulic calculations, and adherence to design codes. With an in-house team of experienced engineers, it delivers detailed architectural and structural designs, minimizing reliance on external consultants. Its quality control managers conduct regular inspections and tests at project sites to ensure quality management.

Integrated expertise and robust partnerships: The company has established a strong rapport with leading technology providers, industry consultants, equipment suppliers & EPC Contractors. With the advent of time Apex Ecotech has developed inhouse online systems managed by dedicated core teams headed by experienced and knowledgeable team leaders for marketing, process, electro-mechanical design, procurement, logistics, commercial, finance, site execution, aftersales & operations. The company has identified and been working with reliable and experienced vendors across the country for equipment & component sourcing, fabrication, automation, site execution and plant operations thus ensuring quality and timely delivery.

Strong client relationships: The company’s commitment to timely project completion and unwavering focus on quality has fostered enduring partnerships with its clients. The company has successfully delivered projects for a variety of esteemed clients, and are currently engaged in projects with several others.

Risks and concerns  

Maximum revenue comes from limited customers: The company has established and will continue to focus on strengthening long-standing relationships with well-known customers across the end-use industries that it caters to. However, its revenue from operations is largely dependent on a few key customers who contribute a substantial portion of its total revenue. The company garnered 79.76%, 97.53% and 92.22% of its total revenue from to 10 customers in FY24, FY23 and FY22 respectively. While the company focuses on maintaining and strengthening long-standing relationships with these well-known customers across the industries it serves, there is no guarantee that it will maintain the current level of business. However, the loss of any major customer or a significant reduction in business from them could materially affect its business, financial condition, results of operations, and cash flows. 

Relies on the state of Maharashtra for the procurement of raw materials: The company has established and will continue to strengthen its long-standing relationships with suppliers across various states. However, its procurement process relies heavily on Maharashtra for raw materials and components. In the financial year 2024, Maharashtra provided 51.48% of its total raw material procurement, amounting to Rs 1679.18 lakh. There is no guarantee that this level of procurement from Maharashtra will be maintained. If there is a disruption in the supply chain from Maharashtra, it could adversely affect project execution timelines. To mitigate this risk, the company is actively developing relationships with fabricators and OEMs in other regions. Any significant disruption in Maharashtra's supply chain could still impact its procurement process, potentially affecting ts revenue and overall operational performance.

Require sizeable amounts of working capital: The company’s working capital requirements for period ended September 30, 2024 and for the Fiscals 2024, 2023 and 2022 on the basis of its restated financial statements amount to Rs 1,544.61 lakh, Rs 1392.78 lakh, Rs 641.22 lakh and Rs 316.50 lakh respectively. Further, its working capital requirements for Financial Year 2025 are estimated at Rs 3,464.41 lakh out of which an amount of Rs 1,700 lakh will be funded out of the Net Proceeds, whereas the balance, if any, would be arranged from its internal accruals /Equity Reserves. A significant portion of its working capital is tied up in trade receivables, including progress payments and retention money. There’s no assurance that clients will pay these on time or that it can manage bad debt efficiently. These factors could increase its receivables and adversely affecting its financial condition and operations.

Outlook

Apex Ecotech provides water and wastewater treatment, recycling, and reuse solutions. The company has successfully supplied complete ZLD systems achieving more than 98% overall recovery for water reuse applications such as process water applications, boiler feed, cooling tower make-up water, air washers, horticulture, toilet flushing, etc. On the concern side, the company’s revenue from operations is largely dependent on a few key customers who contribute a substantial portion of its total revenue. The loss of any of its major customers due to any adverse development may adversely affect its business, financial condition, results of operations and future prospects. The company relies on the state of Maharashtra for the procurement of raw materials. Any shortages in the supply of components and raw materials, or increases in their costs, could adversely affect the pricing and availability of its products. Such issues may impact its business operations, financial performance, and overall financial condition.

The company is coming out with a maiden IPO of 34,99,200 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 71-73 per equity share. The aggregate size of the offer is around Rs 24.84 crore to Rs 25.54 crore based on lower and upper price band respectively. On performance front, the company’s revenue from operations increased by 53.53% to Rs 5,308.09 lakh for the financial year 2023-24 from Rs 3,457.38 lakh for the financial year 2022-23. Moreover, net profit after tax has increased by 88.31% from Rs 352.10 lakh in Fiscal 2023 to profit of Rs 663.04 lakh in the Fiscal 2024.

The company has been consistently developing, implementing, and comprehensively operating and maintaining novice cost optimal systems with a view to insure and insulate the concerns in water and wastewater management in the below mentioned industry sectors thus allowing higher up times to the sector and making the system a true utility in all regards. It has completed numerous projects, spanning across various states in India such as Punjab, Maharashtra, Andhra Pradesh, Rajasthan, and others, as well as international locations like Nigeria, Pakistan, Bangladesh, Indonesia and more. It plans to expand its footprint in North-East, South India and international markets as well. The company’s strategy involves careful selection of new locations to ensure smooth operations and uninterrupted service delivery. By diversifying geographically, it aims to mitigate risks associated with operating in specific areas and safeguard against fluctuations in business.