Envirotech Systems Limited- Acoustics

Stock Opportunities Untested - but worth a good look
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The Company:

Envirotech Systems Limited is a company engaged in the business of acoustic solutions. They claim to be a leader in this niche area. Their capability to provide noise control solutions is spread over a number of domains. Envirotech is a manufacturer of noise control products and provider of acoustic solutions, both in India and overseas. The company specializes in customized acoustic enclosures for turbines, compressors, centrifugal blowers, cooling towers, and other industrial as well as commercial applications.

The Business:

Management has described the business as,

“I again repeat that we are the solution provider for several noise related problems and issues. So there are three basically verticals, one is an engineering acoustic, there’s a lot of noise equipments as you stated like the turbine, blowers, compressors and all. That are being manufactured at our organization and we provide the acoustic housing to control the noise. So beside that engineering acoustic, there are lot of opportunities for us in the project because not only these machines but several utilities also making a lot of noise like with the current urban development, there are several cooling towers, we are executing few crores of project at Bengaluru, at BALCO, at Korba, where they are facing some cooling noise. So it’s a primary project where we are providing some good works and the barriers. So yes, the SQUs are customized and designed which depends upon the site requirement and the constraint. So besides the enclosures, we also do acoustic duos is a product which allow the air to release but arrest the noise waves. For that we have a noise barrier which builds like a wall which barricade the noises. Along with this, we are having some commercial products too which are applicable for auditorium and the office space like the soundproof doors and all. So yes, the queues are in multiple.”

The business is structured around engineering acoustics (core industrial), project-based acoustics (urban infra, utilities), and commercial acoustics (auditoriums, offices). The company claims significant technical differentiation, highlighting its R&D, in-house testing, government certifications, and collaborations (e.g., with IIT Delhi for new materials). Management noted, “90% of our competitors… do not have that kind of customization that we are able to provide. That is our USP.”

To the best of my knowledge, there is no listed peer to the company.

The company started in 2007 as manufacturer of sound control products. In due course they increased their product offering and technical expertise. They have a manufacturing facility of work space area covers over 21520 sq. ft. and comprises of a range of equipment for different purposes. Their second plan is coming nearby with around 90000 sq.ft. area. The new plant is coming online, with partial operations by mid-June 2025 (40% utilization) and full operations by December 2025. Management expects “150% kickoff” in capacity utilization in FY26 versus current, with targeted revenue capacity of ₹200-250 crores per annum when fully operational.

FY26 Revenue Guidance: â‚ą100 crores, with plant utilization ramping through the year.
Transcript of the Management call is enclosed herewith.
Envirotech.pdf (1.2 MB)

Financials:

The company has been a performing well for last 5 years. The topline and the bottomline has gone up substantially.

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  • Lacklustre growth in FY 2025 appears to be due to capacity constraints.
    F26 Projection: Management has guided a topline of 100 crores with 25% EBIDTA. Depreciation is likely to be a bit higher, and thus we can expect PBT of 20 crores.

Valuation:

  • Current Market Price: Rs. 129 Market Capitalization: 242 Crores.
  • They came out with IPO, entirely fresh issue, @56 per share. Promoters hold 69% of shares.
  • In the last 4 years, the company topline and bottomline has grown at a very high pace. Such growth cannot be expected to continue in future. Nevertheless, management has guided 100% topline growth in current financial year with slightly lower margins. New capacity can scale the company to upto 200-250 crores. Taking a base value of 50 crores, I expect a decent growth in the company going forward.
  • Presently the company is trading at 17 times last year earning which looks attractive compared to the growth expectation.

Reasons for Investment:

  • New capacity is coming in line, which may give a jump to the topline and bottom line as expected by the management.
  • The company is a lead player in niche area. As the society is becoming aware of noise pollution, the company is in sweet spot. Total Addressable Market is likely to grow in this area giving benefit to the company.
  • The promoters look well experienced in this line of business, working the area for last 20 years.
  • The company is operating on impressive margins, showing some competitive advantage for the company. Though the margins are likely to fall to 25-26% range as expected by management, it still shows some competitive advantage.
  • Management gives importance to research and development activities, which will be crucial going forward in the business they are in.

Risk Factors:

  • The company is generating negative cash flow, which may affect its operations and financials.
  • Future plans are mere estimates/guess; they may not materialise.
  • Investing in Microcap companies may results in 100% capital loss.

Disclosure: Invested and Biased.

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What’s your thaughts about inability in converting the great profits in cash?

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The company has negative cash flows. But the primary reason is growth, generally growing companies will have negative cash flows as working capital/inventories are likely to increase along with rising topline. Let us have a look in Envirotech Systems balance sheet-

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Trade receivable was 4.67 crores [topline 10 Crores] in FY 2021, which has gone up to 27.53 crores [topline 52 crores] in FY 2025. In the same period inventory has gone up from 0.57 crores to 3.64 crores. It can be seen that almost complete working capital finance has been done by internal accruals. They have received arund 30 crores from IPO which have gone largely into creation of new manufacturing facility. Debt level of the company is still close to zero [interest paid is 22 lakhs, which they may have paid for overdraft facilities]. When a company finances its growth, cash flow generally remains negative.
What should be the cash flow situation going into future? Well, the company is into manufacturing custom made systems, based on contract and bidding. Thus, receivable is likely to be high, may be around 6 months sale. They appear to manage inventories rather well within limits. Going forward in the current finacial year, if they manage a topline of 100 crores, receivable is likely to reach 50 crores leading to negative cash flow of another 22 crores- and cash flow shall remain negative in the current financial year even if they manage to generate decent amount of profit in the current financial year.
Growth needs capital. One can get capital through equity sale, or debt or through internal accruals. I am okay to note that they have been able to finance their growth largely through internal accruals- yes, cash flow will be negative in such a situation.

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Can you throw some light on the management? To make it 5-10 year horizon company one needs a competent and clean management

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How is management?
I am based in Delhi NCR region and the company is based in Greater Noida. Still, I have not visited the company and not met the management. The primary reason is that I believe that I cannot learn anything by meeting the mangement. Smart and cunning managements are too good to be identified just by meeting them once. So, I don’t meet managements.
So, how to identify good managements?
Well, I believe in numbers. Balance sheet. Everything is there in balance sheet. If some red flag is there, you can identify it. Like any process, it is not full proof… But there is nothing full proof in investment.
Yes, I prefer young companies and managements. I believe is a management who has created a hundred crore company from scratch. Any person, who has created a company employing 100 persons, selling goods worth 50 crores without family wealth and backing is a good management. There is no guarantee that they will not fail, but one can trust them.
Most of the frauds are there in debt. A management which avoids debt to the extent possible can be trusted.
These are some of the yardsticks I follow… With mixed results.

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they are aiming for 4-5 times growth in revenue in the next 3-4 years (180 crore rev) as they fully utilize their expanded capacity and ultimately focus on higher-margin projects

new B2C e-commerce platform, acousticnest(dot)com

next year- margins hit confirmed as well, although the company aims to maintain a minimum EBITDA margin of 22-25% even when accepting lower-margin orders to drive capacity utilization. in past when they were at 100% capacity, they were accepting only high-margin orders, which led to them having 48% margins, so once they start using their new facility to the fullest, they will be getting better margins as well.

The company is in advanced discussions with Siemens Energy for a potential export-oriented venture in the European market. Envirotech would manufacture acoustic chambers for Siemens’ gas turbines.
They are also exploring an association with IIT Delhi for noise-related technologies.

Defence applications, such as anechoic chambers, soundproof testing rooms, and RF absorbers. High-profile clients include DRDO labs, Hindustan Aeronautics Limited, Bharat Electronics, and various Defence Research Institutes.

Envirotech is on track to operationalize an additional 8,000 SQM of manufacturing capacity in Greater Noida within the next two months. Envirotech is expanding its manufacturing facility from 2,000 square meters to 10,000 square meters. This expansion is expected to be operational in the next 2-3 months and will support the company’s growth plans
some pointers i found
their clientele Valuable Clientele | Envirotech Systems Limited
MD interview
https://www.youtube.com/watch?v=FltrXKO25Iw

MD PODCAST

more interview
part 1 Part I: Interview with MK Gupta, Managing Director, Envirotech Systems Limited | SmallCap Spotlight
part 2 Part II: Interview with MK Gupta, Managing Director, Envirotech Systems Limited | SmallCap Spotlight

iit collab 🌱🔊 Envirotech Systems Limited is excited to announce a partnership with the Indian Institute of Technology, Delhi (IIT Delhi), through its Foundation for Innovation and Technology Transfer, IIT… | Envirotech Systems Limited

Targets and Guidance Revenue Targets: For the current financial year (FY26), Envirotech Systems is targeting approximately INR 100 crores in total revenue. Upon full operationalization of their new manufacturing facility, the company projects achieving a total revenue of INR 200 crores to INR 250 crores. The management has a long-term goal of increasing their revenue by 4 to 5 times in the next three to four years. Profitability Targets: For FY25, the company reported a PAT (Profit After Tax) margin of 26.92% and an EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin of 38.17%. While initial margins might be slightly compressed due to fixed costs associated with the new facility, the company aims to maintain an EBITDA margin of at least 22% to 25%. PAT margins are expected to drop by about 5% to 8% from the FY25 level, potentially settling in the 23% to 25% range for the upcoming period. However, the absolute profit is still projected to increase. • Capacity Utilization: The company’s existing two facilities have been operating at 100% capacity. The newly acquired facility is expected to be partially operational by June 2025 and fully operational by December 2025. They aim to achieve 70% to 80% capacity utilization in the new plant as soon as possible. (edited)

Order Book & Pipeline: As of April 2025, the company has a confirmed order book of approximately INR 20 crores. They also maintain a robust order pipeline of around INR 80 crores, from which they anticipate converting roughly INR 30 crores into orders within the next three to six months, with a bidding success rate of 30% to 40%. Capital Expenditure (Capex)

The defense industry is a high-demand, high-margin segment for Envirotech, contributing around 30% of their FY24 revenues, with expectations for continued growth.

Growing Market: The management consistently describes the market for acoustic and noise control products as “very huge” and “expanding day by day”. They note that it’s a “new type of problem which society wants a solution”. -B2C Potential: The B2C segment is highlighted as a “huge market” with immense growth potential, being “much, much larger market compared to B2B and B2G”. Currently, this segment contributes about 10% to revenues but is expected to grow significantly as consumer awareness and demand rise. There is currently a lack of readily available solutions for individual consumers facing noise issues. -Defence Sector: This sector is a significant and high-margin growth area, contributing 30% of FY24 revenues, with consistent demand for specialized acoustic solutions for facilities like DRDO labs, Hindustan Aeronautics Limited, and various Defence Research Institutes across India. -International Markets: Envirotech is also exploring and planning to expand into international markets such as the US, EU, and UAE, where there is substantial demand for acoustic products. They aim to transition from part-supply operations to providing comprehensive, end-to-end services by establishing direct offices in these regions. -Diversified Applications: The company’s products cater to a wide range of industries including defense, automotive, consumer appliances, entertainment, transportation, construction, HVAC, power, and data centers, indicating broad market applicability and diverse opportunities (edited)

they are bullish on b2c segment, good bet imo. High margin business

source - concalls, interviews
not invested, but will

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