Concord Enviro Systems IPO

Concord Enviro Systems operates in various regions worldwide, with exports to countries in North America, Latin America, Africa, the Middle East, and Southeast Asia.

As of August 31, 2024, the company serves over 289 domestic customers and 21 international clients across a wide range of industries, including pharmaceuticals, chemicals, food and beverage, defense and energy, automotive and auto parts, steel, and textiles.

Concord provides services to both Indian and multinational clients, including Diageo Mexico Operaciones, S.A. De C.V., Grasim Industries Limited, AB Mauri, Anthem Biosciences Private Limited, and others.

The company claims to offer integrated solutions with custom-designed systems and plants, including effluent treatment plants, anaerobic digesters, membrane bio-reactors, sewage treatment plants, and membrane-based systems such as ultra-filtration (UF), nano-filtration (NF), reverse osmosis (RO), desalination systems, and waste heat evaporators (WHE). Concord also provides a full range of operation and maintenance (O&M) services, including the supply of consumables and spare parts.

The company has seen a consistent increase in revenue from operations. Revenue from operations increased from Rs 329.37 crore in FY22 to Rs 343.22 crore in FY23 to Rs 496.86 crore in FY24.

Concord Enviro Systems' operations rely on its manufacturing facilities. Any adverse developments in the manufacturing process or the locations around the facilities could adversely impact the company’s business and financial performance.

The company generates a lion’s share of its revenue from its top 10 customers. These customers contributed Rs 141.43 crore (68.60%) for the five months ending August 31, 2024, and Rs 310.51 crore (62.49%), Rs 172.16 crore (50.17%), and Rs 154.49 crore (46.91%) in FY24, FY23, and FY22, respectively, to the revenue from operations. Any loss of any of these clients or a reduction in business from them could adversely impact the company’s operations and finances.

Concord's growth is dependent on successful research and development (R&D) and keeping up with the new technologies. If the company fails to develop new wastewater treatment technologies on time and in a cost-effective manner, its business and financial performance could be hampered.

There are currently 21 ongoing legal cases involving the company, its promoters, subsidiaries, and certain directors. Any adverse judgments in any of these cases can be detrimental to the company’s business prospects.

The company has experienced low profit after tax (PAT) margins in recent periods, including a margin of 0.25% for the five months ending August 31, 2024. In FY24, FY23, and FY22, the margins were 8.34%, 1.60%, and 5.00%, respectively. These low margins have persisted in the past few fiscal years. There is no guarantee that the company will improve these margins, and any further decline could negatively impact its financial results and cash flow.

The sale of systems and plants is subject to seasonal fluctuations, which can cause variability in the company’s financial results. The systems and plant sales contributed Rs 98.99 crore in the five months ending August 31, 2024, and Rs 296.18 crore, Rs 160.87 crore, and Rs 163.14 crore in FY24, FY23, and FY22, respectively, to the revenue from operations. Any seasonal or other unexpected changes in this particular segment could adversely affect the company’s financial performance.

The company’s revenue is dependent on three main business areas: systems and plants, the sale of consumables and spare parts, and operation and maintenance (O&M) services. Systems and plants contributed Rs 98.99 crore (48.01%) for the five months ending August 31, 2024, and Rs 296.18 crore (59.61%), Rs 160.87 crore (46.87%), and Rs 163.14 crore (49.53%) in FY24, FY23, and FY22, respectively, to the revenue from operations. Consumables and spare parts contributed Rs 41.02 crore (19.89%) for the five months ending August 31, 2024, and Rs 103.36 crore (20.80%), Rs 87.64 crore (25.53%), and Rs 86.43 crore (26.24%), in FY24, FY23, and FY22, respectively, to the revenue from operations. O&M services contributed Rs 66.17 crore (32.09%) for the five months ending August 31, 2024, and Rs 97.32 crore (19.59%), Rs 94.71 crore (27.60%), and Rs 79.79 crore (24.23%) in FY24, FY23, and FY22, respectively, to the revenue from operations. Any disruption or cancellation of orders in any of these areas could negatively impact the company’s revenue generation capabilities and financial standing.

As of September 30, 2024, the company had financial indebtedness of Rs 210.28 crore. Any inability to repay or service these loans could adversely affect the company’s financial position.