Z-Tech (India) coming with IPO to raise Rs 37.30 crore

Z-Tech (India) 

• Z-Tech (India) is coming out with initial public offering (IPO) of 33,91,200 shares of Rs 10 each in a price band Rs 104-110 per equity share.  
• The issue will open for subscription on May 29, 2024 and will close on May 31, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 10.40 times of its face value on the lower side and 11.00 times on the higher side. 
• Book running lead manager to the issue is Narnolia Financial Services.
• Compliance Officer for the issue is Ashish Goel. 

Profile of the company

The company originally designs civil engineering products and services with state?of?the?art specialty in Geo?Technical Specialised Solutions in the field of infrastructure and civil construction projects to India. It includes a range of techniques, methodologies, and technologies aimed at optimizing the performance and stability of structures built on or in the ground. In addition to this, it is actively engaged in the waste management sector, where its focus involves creating theme parks through the utilization of recycled scrap materials. Simultaneously, it is dedicated to implementing innovative waste water management solutions for industrial units, employing the cutting-edge GEIST technology. This dual commitment underscores its holistic approach to sustainable practices, transforming discarded materials into recreational spaces while efficiently managing industrial wastewater through state-of-the-art technology. 

The company is engaged in providing innovative, safe and eco-friendly engineering solutions to its customers. These solutions include three major categories: Sustainable Theme Park Development; Industrial Waste Water Management; and Geo Technical Specialised Solutions. Sustainable Theme Park Development includes but not limited to creating beautification artwork and infrastructure, landscape designing, sourcing and execution of waste materials and transforming them into meaningful and attractive show pieces. It involves incorporating environmentally friendly practices and responsible resource management throughout the planning, design, and operational phases of the project. It goes beyond traditional development approaches by prioritizing ecological, social, and economic considerations. 

Industrial Waste Water Management involves the systematic treatment and responsible handling of wastewater generated by industrial processes. The goal is to mitigate the environmental impact of potentially harmful substances, promote water conservation, and even extract valuable resources from the wastewater. Under this segment, it has acquired GEIST, a water treatment technology, developing solutions for the recovery of chemicals from industrial waste water streams. It offers Turnkey Solutions for achieving profitable zero liquid discharge (ZLD). This technology is also termed as WOOW (Wealth out of Waste) Technologies. Besides, Geo Technical Specialised Solutions includes but not limited to reinforcement of soil walls and slopes, slope stabilization, retaining structures, ground improvement, riverside erosion control, coastal protection and similar activities. These services are offered including designing, supplying and construction undertaken by the company’s in-house chartered engineers and backed up by a full indemnity supervision team.  

Proceed is being used for:

• Meeting out the Working Capital requirements of the company.
• Meeting out the General Corporate Purposes.
• Meeting out the Issue Expenses. 

Industry overview

India is grappling with a waste management crisis, with landfills overflowing and the problem worsening each day. Cities all over the country produce tons of waste that often goes to landfills, further polluting the environment. Metal scrap recycling in India offers a plethora of environmental and economic benefits. As the second most populous country in the world and a rapidly developing economy, India faces significant challenges related to resource consumption, waste management, and environmental sustainability. Recycling metal scrap plays a crucial role in addressing these challenges. One of the most significant environmental benefits of metal scrap recycling is the conservation of natural resources. India is a resource-rich country, but the excessive extraction of metals and minerals for industrial and construction purposes places tremendous pressure on the environment. By recycling metal scrap, the demand for primary resources such as iron ore, aluminium, and copper is reduced, leading to less habitat destruction and ecosystem disruption. This helps in conserving the country’s valuable natural resources for future generations.

Water & Wastewater treatment (WWT) includes processes that purify water & manage sewage. It utilizes technologies, products, and services to improve water quality for diverse purposes & ensure environmentally friendly wastewater disposal. The water treatment process makes raw water safe for drinking, industry, and irrigation. Wastewater treatment purifies sewage before releasing or reusing it, as untreated wastewater poses health & environmental risks due to pollutants. Proper treatment is vital for safeguarding the environment & public health. The India Water and Wastewater Treatment Market size was valued at $1.51 billion in 2022 & is estimated to grow at a CAGR of around 11.22% during the forecast period, i.e., 2023-28. This is owing to the rising water & wastewater treatment initiatives by the union government, growing urban wastewater aligned with rapid urbanization, surging wetland restorations, and rising growth of the chemical industry. The government of India has been implementing various initiatives, such as the Atal Mission for Rejuvenation and Urban Transformation, the National Mission for Clean Ganga, and Community Drinking Water Schemes, etc., in recent years. With this program, the government aims to ensure adequate, robust sewage networks & water supply, abatement of pollution & conservation of rivers, safe & adequate drinking water, etc. Consequently, the country has witnessed a surging demand for water & wastewater treatment solutions such as reverse-osmosis desalination, coagulation & flocculation, filtration, chlorination, and more in recent times.

Pros and strengths

Well organized organization structure: The company has a well-organized management structure and an experienced management team operating within a culture of strong corporate governance and commitment to social responsibility. To better manage the rapid growth and diversification of its various segments, its organizational structure has been arranged with a corporate group at the top and three business verticals, namely Marine Engineering, Civil Construction, Electrical Engineering, including Mass Excavation, Road works, Maintenance and operation of Power Plants, Leasing of its Batching Plant, etc.

Efficient business model: The company’s growth is largely attributable to its efficient business model which involves careful identification of its projects and cost optimization, which is a result of executing its projects with careful planning and strategy. This model has facilitated it in maximizing its efficiency and increasing its profit margins. Additionally, its fleet of modern construction equipment ensures better control over execution and timely completion of projects. The company follows a strategic approach which involves undertaking technical surveys and feasibility studies and analyzing the technical and design parameters and the cost involved in undertaking the project. Its strategic approach helps it to successfully complete the projects within time. 

Strong execution capabilities with industry experience: Over the last 2 decades, the company has executed various projects under the civil construction industry. Its focus is to leverage its strong project management and execution capabilities to complete its projects in a timely manner while maintaining its quality standards of engineering and construction. Over the years, it has consistently invested and created a fleet of modern construction equipment to ensure high quality and timely execution of its projects. With multiple projects in progress at any given time, ready access to equipment is essential to execute its ongoing projects efficiently along with timely completion of projects and profitably and to bid for additional complex and challenging projects. The company is also focused on ensuring that each project is executed in conformity with the work description provided in the contracts and adheres to the quality and standard of construction associated with the company.

Risks and concerns

Operating in three distinct segments that lacks connections poses a significant risk to business: The company is engaged in three distinct sectors: Sustainable Theme Park Development, Industrial WasteWater Management, and Geo Technical Specialized Solutions. Earlier, the company was engaged in providing Geo Technical Specialised Solutions, however, it has also started providing Industrial WasteWater Management Services in the FY 2022, and Sustainable Theme Parks services in FY 2023. While this diversification brings about varied revenue streams, it presents challenges in resource distribution, strategic alignment, and operational effectiveness due to the lack of synergy between these unrelated segments. Successfully navigating these segments requires dedicated focus on each area, potentially stretching resources and requiring heightened efforts to ensure success. Requiring tailored strategies and concentrated efforts for each business domain might lead to a dispersal of resources, encompassing both human capital and financial investments, thereby influencing the overall operational efficiency.

Mismatch between water samples and actual water may cause significant financial loss: The industrial water management process involves examining samples provided by clients and subsequently developing technology tailored exclusively for each client. This technology is customized to the specific needs of the client. The company conducts thorough tests on water samples to identify the most effective process among various alternatives and after identifying the best suitable process it establishes the industrial setups which involves huge amount of expenditure. However, a critical risk may arise if the processes identified through its testing of water samples fails to accurately correspond to the properties of actual water, which may cause significant financial loss. This mismatch between the water samples and actual water poses a considerable threat which may result in huge financial losses. It may also damage the viability of its industrial setups.

Depend on government tenders: The business of Sustainable Theme Parks are highly dependent on government tenders. Further, for the period ending on March 31, 2024, 85.15% of the company’s revenue is sourced from government tenders. The emerging trend indicates a growing reliance on government tenders as a primary source of revenue. While this dependence on government contracts presents certain advantages, such as stable income streams and potential long-term partnerships, it also introduces specific risks, such as government policies change, contract dependency, political and economic factors that influence government spending, long sales cycles. 

Outlook

Z-Tech (India) is actively involved in the waste management sector, focusing on creating theme parks using recycled scrap materials. The company's businesses are underpinned by innovative, customised and eco-friendly engineering solutions to the clients, which currently include, Sustainable Theme Parks Development and Operations, Industrial Waste Water Management, and Geo Technical Solutions. This business vertical encompasses conceptualising, planning, design, construction and operations management of theme parks with environmental sustainability, social good, and economic viability at its core. The cornerstone of the company’s partnership with local administrations for development of city parks is sustainability in development, maintenance and operations for the greater social good. In order to address the significant challenges in waste material management, recycling, and processing, the company’s proposed solution to the government involves the establishment of a sustainable theme park. It has developed and nurtured inhouse capabilities for transforming scrap materials sourced from local administrations into art, beautification resources and amenities that are integral to the theme park development. On the concern side, the nature of the company’s operations carries inherent risks, including the potential for harm to individuals or property, such as accidents on site, consumption of hazardous chemical, or any similar act, which could lead to substantial disruptions in its business operations. These risks may also expose it to legal and regulatory actions, resulting in significant financial costs and liabilities. 

The company is coming out with an IPO of 33,91,200 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 104-110 per equity share. The aggregate size of the offer is around Rs 35.27 crore to Rs 37.30 crore based on lower and upper price band respectively. On performance front, Total Income of the company for the Financial Year 2022-23, stood at Rs 2,588.40 lakh whereas in Financial Year 2021-22 it stood at Rs 3,083.89 lakh, representing a decrease of 16.07%. The company’s restated profit after tax increased significantly by Rs 188.05 lakh from Rs 7.42 lakh in FY ended March 31, 2022 to Rs 195.50 lakh for the FY ended March 31, 2023. Meanwhile, the company will continue strengthening the environmental aspects of its operations and adopt measures such as cover sheds, water sprinklers and windshields for dust suppression, monitoring systems for pollutants, and green vegetation surrounding its facilities. Besides, the company has been geographically present in almost of the parts of the country except South India. The expansion of geographical presence is a business strategy that involves increasing the reach and footprint of a company into new geographic areas or markets.