“ZLD Systems, High ROE, and 232 Debtor Days – Cleaning India, One Pending Invoice at a Time”
🧠 At a Glance:
Effwa Infra is in the sexy-but-unglamorous business of environmental engineering — building sewage, effluent, and solid waste treatment plants for PSUs, industrial clients, and municipal bodies. They do all the dirty work… literally. But don’t be fooled — this is a high-growth, high-margin business with real scale.
What’s the catch?
Working capital days = 193.
Debtors = 232 days.
And if your client is a PSU? Getting paid is harder than cleaning the Ganga.
🔍 1. WTF Do They Even Do?
Effwa Infra offers:
- 🧫 Effluent & Sewage Treatment Plants (ETP, STP)
- 🚯 Solid Waste & Bioremediation
- 🧪 Zero Liquid Discharge (ZLD) systems
- 💧 Water Body Restoration
- 🔁 Turnkey EPC projects — from design to commissioning and maintenance
They cater to PSUs, municipalities, and industrial clusters. Basically, whenever a government agency says “Swachh Bharat,” Effwa hears “new order.”
📊 2. Financials – Growth Story or PSU Pledge Drive?
| Year | Revenue (₹ Cr) | Net Profit (₹ Cr) | OPM % | ROE % |
|---|---|---|---|---|
| FY21 | 55 | 2 | 8% | — |
| FY22 | 104 | 4 | 6% | — |
| FY23 | 115 | 5 | 8% | — |
| FY24 | 145 | 14 | 14% | — |
| FY25 | 185 | 20 | 16% | 30.5% ✅ |
💥 Profit 10x in 3 years
📈 OPMs rising with scale
🧱 Revenue CAGR (3Y) ~21%
🔥 Profit CAGR (3Y) ~66%
💸 3. Valuation – Is It Cheap, Meh, or Crack?
- CMP: ₹235
- EPS FY25: ₹8.69
- P/E: 27.1x
- Book Value: ₹41.0
- P/B: 5.7x
- Market Cap: ₹544 Cr
🎯 Fair Value Range (based on 18–25x sustainable P/E):
₹160 – ₹215
It’s priced optimistically, assuming 25%+ growth continues and debtor collection improves.
🔍 4. What’s Cooking – Orders, Drama, and Governance Twists
- 🏗️ FY25 revenue up 28%, profit up 46%
- 💬 Analyst meet scheduled for July 1, 2025
- 📮 Postal ballot on related-party transactions was rejected by shareholders. Later approved for a senior mgmt appointment — spicy governance drama
- ⚠️ NSE asked for clarification under Reg. 33 (LODR) on FY25 results — not a red flag yet, but definitely yellow
- 🛑 No dividends despite 30% ROE
📢 Strong numbers. But the governance friction + Reg. 33 issue is something to track.
🏦 5. Balance Sheet – Growth, but With Heavy Receivables
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| Net Worth (₹ Cr) | 23 | 37 | 95 |
| Debt (₹ Cr) | 16 | 14 | 30 |
| Total Assets (₹ Cr) | 65 | 83 | 150 |
| Fixed Assets (₹ Cr) | 0 | 1 | 1 |
| Cash from Ops (₹ Cr) | -5 | +5 | -31 |
🧾 Working capital + revenue recognition style = negative CFO in FY25
💣 Debtors = ₹118 Cr out of ₹185 Cr sales (~232 days)
💰 6. Cash Flow – It’s All in the Invoices
| Year | CFO (₹ Cr) | Verdict |
|---|---|---|
| FY23 | -₹5 | Bad but growing firm |
| FY24 | ₹5 | Finally some relief |
| FY25 | -₹31 | Huge working cap hit 💥 |
Net cash flow: positive only due to ₹39 Cr financing cash — possibly IPO/placement.
📈 7. Ratios – Sexy Ops, Stressy Collections
| Ratio | FY25 | Verdict |
|---|---|---|
| ROE | 30.5% | 🔥 Stellar |
| ROCE | 33.9% | 🔥 Efficient |
| OPM | 16.2% | Strong |
| D/E | ~0.3x | Healthy |
| Debtor Days | 232 | 🚨 PSU Problem |
| Working Cap | 193 Days | Tightening 🔴 |
Despite efficiency in execution, collections remain a problem — classic infra + PSU client issue.
📊 8. P&L Breakdown – Real Growth, Real Margins
- FY25 Revenue: ₹185 Cr
- EBITDA: ₹30 Cr
- PAT: ₹20 Cr
- EPS: ₹8.69
- Dividends: Zero (again)
So where’s the cash going? Into the projects. And into client mailboxes saying: “Payment reminder – 180 days overdue.”
🤼 9. Peer Comparison – Who Else Is in the Game?
| Company | P/E | ROE | OPM | MCap (₹ Cr) |
|---|---|---|---|---|
| EMS Ltd | 19x | 21% | 26% | 3,480 |
| Concord Enviro | 21x | 13.6% | 15.4% | 1,214 |
| Antony Waste | 26.7x | 11.3% | 20.9% | 1,862 |
| Effwa Infra | 27.1x | 30.5% | 16.2% | 544 |
✅ High ROE
⚠️ Low scale
🚫 No dividend
🟠 Expensive for current size
🧾 10. Misc – Shareholding & Other Musings
- Promoter Holding: 73.0%
- FIIs + DIIs: ~3.7% combined
- Public: ~23%
- Shareholders growing — now at 2,596 retail holders
- 💬 Postal ballot drama raises mild concern on transparency
- 🧻 No dividend in 5 years despite ₹20 Cr PAT
✅ EduInvesting Verdict™
Effwa Infra is not a scam. In fact, it’s probably India’s cleanest dirty business.
But the devil lies in the 232-day debtors, negative operating cash, and governance vibes. It’s growing, yes — but on PSU grace periods, not market terms.
If they can clean up their balance sheet like they clean up industrial effluents, this could be a ₹1000 Cr company in 3 years.
🎯 Fair Value Range: ₹160 – ₹215
(Wait for cleaner cash flows, or a price dip to low 200s)
Not a recommendation. Just a financial decontamination advisory.
✍️ Written by Prashant | 📅 June 30, 2025
Tags: Effwa Infra, Zero Liquid Discharge, effluent treatment stocks, PSU contractor stocks, SME IPO 2024, working capital stress, EduInvesting, environmental infra India, sewage EPC stocks, clean tech SME
