Can SFC Environmental Technologies IPO deliver long-term growth for high-risk

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The Economic Times daily newspaper is available online now. Read Today's Paper Can SFC Environmental Technologies IPO deliver long-term growth for high-risk investors?By Sachin Kumar, ET BureauLast Updated: Oct 27, 2026, 06:19:00 AM ISTSynopsis

SFC Environmental Technologies is planning an IPO to raise ₹150 crore for debt repayment and ₹517.5 crore for an offer for sale. The company has reported consistent growth in both revenue and profits, with significant contributions from repeat customers. Concerns include uneven cash flow due to high working capital and reliance on government contracts for revenue.

ET Intelligence Group: SFC Environmental Technologies, a wastewater and solid waste treatment solutions provider, is positioned to benefit from rising investments in environmental infrastructure by state governments and urban local bodies. It has reported steady growth in revenue and profits, with better profit margin relative to peers. However, its cash flow has been uneven due to high working capital requirements. Also, top 10 customers contributed 64% to revenue in FY26 and government entities or government tenders accounted for 92% of revenue, exposing the company to concentration risk. Given these factors, investors with high risk appetite may consider the IPO for long term. The company plans to raise ₹150 crore through a fresh issue to repay debt and ₹517.5 crore through an offer for sale. The promoter shareholding will decline to 38.4% after the IPO from 48.2%.

Business

Incorporated in March 2005, SFC Environmental Technologies provides engineering solutions for wastewater treatment (WWT), wastewater recycling and reuse (WRR), and solid waste treatment (SWT). Its business spans technology design, engineering, equipment manufacturing and supply, installation and commissioning supervision, and operation and maintenance services. Its product portfolio includes decanters, diffusers, air blowers, fibre disc filters and solar sludge drying systems, as well as automated control and monitoring solutions for water and wastewater treatment plants. The company has a pan-India presence with 728 wastewater treatment installations across 23 states and five union territories as of July 31, 2026. According to Frost & Sullivan, it held more than 80% market share in sequencing batch reactor (SBR) technology, one of the key wastewater treatment technologies deployed in India. Repeat customers contributed nearly 92% of revenue in FY26. As of March 31, 2026, its order book reached ₹1,574.5 crore.

Financials

Revenue from operations grew 10.6% annually to ₹803.6 crore in FY26 from ₹657.5 crore in FY24. Operating margin before depreciation and amortisation (Ebitda margin) remained broadly stable at 29.3% in FY26, from 29.4% in FY24, indicating the company has largely been able to preserve margins while scaling up operations. Net profit increased 5% annually to ₹160 crore in FY26 from ₹144 crore in FY24. Return on equity (RoE) declined to 21.6% in FY26 from 29.8% in FY24, although it remained well above the peer range of 2-14%. Operating cash flow turned negative at ₹25.8 crore in FY26 compared with a positive ₹65.5 crore in FY25, largely due to higher working capital requirements arising from strong business growth. It was negative at ₹11.7 crore in FY24.

Read more: The Rs 1.5 lakh crore MTF problem: How shrinking leveraged positions are deepening India's smallcap sell-off

Valuation

At the upper price band, the company is valued at 20.2 times its post-issue FY26 earnings, compared with 34-51 times for larger peers such as Ion Exchange India and Thermax.

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Enviro Infra Engineers, which also provides water treatment solutions and reported a revenue of ₹1,146 crore in FY26, trades a trailing P/E of around 15. It had a lower Ebitda margin of around 24.2% and RoE of 15.3 in FY26 compared with SFC, which may justify the latter's valuation premium.
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