EKI Energy Services: Why this Stock delivered 6,000% returns in just 9 months?

Well, 2021 has been a great period for Stock Market. Many stocks have given Multibagger returns. But there is one Green Energy linked stock which delivered massive 6,300% returns in just 9 months! That stock is EKI Energy Services.

EKI Energy turned ₹2 lakh into ₹1 crore in less than 10 months! Headquartered in Indore, company listed its shares on BSE SME segment in 2021.

Before we dig about the company, let’s be clear that this article is for educational purpose only. No recommendation has been given.

So, Why EKI Energy Services turned so BIG?

EnKing International (EKI Energy) help project owners to get their projects registered / verified under various GHG (Green House Gases) programs. They help companies to build a ‘carbon neutral strategy’ and thereafter, helps them to get carbon offsets/credits.

A carbon credit is a tradable certificate, which permits its holder, a right to emit, over a certain period, carbon dioxide or other greenhouse gases. One carbon credit is equal to one ton of carbon dioxide. These offsets are issued to entities whose projects reduce carbon dioxide emissions.

Once companies have decided to acquire carbon offsets to achieve their carbon neutrality goals, EKI Energy search for appropriate type of carbon offset. They identify purchasers of carbon credits across countries and corresponding suitable supplier. The company studies the project requirements, credibility, quantum and profile of the buyer to offer the suitable credits at a competitive price and complete the transaction.

EKI locate sellers internationally with the requisite carbon credits. Before executing any contract, it is ensured that the credits are quantifiable and verified by a third party.

Trading of “carbon offsets” is an emerging market. EKI Energy claims to be the world’s largest carbon credit developer and supplier. As per latest reports, worth of carbon offsets market was estimated at ₹6,000 crore.

Many Investment Bankers expect this market to rise by multifold times in next 10-20 years. Focus of the World is shifting towards how they can reduce Carbon emissions and save the Earth from Global Warming issues.

• More than 70 countries have committed to work toward net zero emissions by 2050 and to enhance their International climate commitments.
• India’s international climate commitments include a reduction goal in greenhouse gas (GHG) emission intensity of GDP by 33-35% until 2030 (compared to 2005 levels) and a target to increase the share of non-fossil fuel energy sources to 40% by 2030.

Beside of Climat change and Carbon offset businesses, EKI provides integrated solutions for ISO standards implementation. It also helps industries in evaluating potential hazards and recommend corrective measures for improvement in electrical installations.

Clients of EKI Energy Services

Client Circle of company is actually quite Big. Azure Power, Kerala State Electricity Board, National Thermal Power Corporation (NTPC), GAIL, GMR Energy Limited, NHPC, Indian Railways, Aditya Birla Group, Renew Power, GMR, JSW, Emami Group, etc. are some of its customers.

Shareholding Pattern

As per September 2021 Shareholding data, Seven promoters held 73.47% percent stake in the firm and 262 public shareholders owned 26.53 per cent at the end of September quarter.

Out of them, 221 public shareholders with individual capital up to Rs 2 lakh owned 5.98 lakh shares of the firm. Five shareholders with individual capital above Rs 2 lakh held 3.96% stake or 2.72 lakh shares.

Shares Listed on BSE SME Platform

Because EKI Energy Services is still in the SME segment of BSE, it is not easy to Buy shares of the company. When stock of company was initially listed on BSE, lot size of EKI was 1200 shares.

Any investor who was interested to buy shares of this company will had to buy atleast 1200 shares. If investor wants to buy more shares, then they could buy only in multiple of 1200, like 2400 or 3600.

At the time of listing, share price was around Rs 150. That means, investor will had to spend atleast Rs 1,80,000 (150 price ×1200 minimum quantity) to buy shares of EKI Energy Services.

Today, share price of company is trading around Rs 9,000 levels. Therefore, minimum lot size has also been reduced to 50 shares. But, minimum lot size will still cost you Rs 4,50,000 if you buy shares of EKI.

That could be the reason why there are less number of Investors in EKI Energy Services. Many Individual investors doesn’t invest more than ₹1,00,000 in a single stock.

Why Lot Size is High in BSE SME?

In normal stocks listed on BSE or NSE, we can buy even 1 share whether share price is ₹0.20 paisa or ₹10,000. But those which are listed on BSE Segment normally have high lot sizes. This helps to restrict trading of shares and entry of small investors in the stock.

Shares listing on BSE SME or NSE Emerge segment (quite similar to BSE SME) generally have higher risk. Very small companies choose to list on these platforms.

Though, trading pattern on Normal or SME segment is almost same. Limitations come out on only Lot Size and few other aspects. But, EKI has now turned into a BIG company and has Market Capital of ₹6,000 crore plus. So, there are good chances of EKI getting shifted to Normal segment of Exchanges in future soon.

Financials of EKI Energy Services

Between 2017 to 2021, Revenue of company grew with amazing 200% CAGR (Compound Annual Growth Rate). From mere Rs 7 crore revenue in 2017, total Annual Revenue today is Rs 191 crore. As per latest quarter, Net Profit margins are hovering around 20%.

In long run, it is unlikely that Company will be able to maintain such high growth rate of 200% CAGR. But if they are able to maintain even 100% CAGR rate for several years, that would be massive considering today’s size of the business.

Latest Update on EKI Energy

EKI Energy Services will soon form a joint venture (JV) with oil major Royal Dutch Shell. Under this joint venture, Royal will invest ₹12,000 crore over a period of five year.

This JV will cater to Green requirements of Royal Dutch Shell in India as well as other domestic industries in the backdrop of India’s commitment to net-zero carbon emission goals. EKI Energy will hold 51% in the joint venture, while Shell will own the remaining 49%.

Future Plans of EKI Energy Services

EKI Energy has plans to do backward integration of its carbon credit business by investing in low-cost environmental projects in India like Cook stove, biogas, tree plantation etc. , so that it can generate and sell carbon credits as project owners.

Company is constantly identifying projects within & outside Indian territory that reduce carbon emissions, protect biodiversity, and deliver measurable benefits aligned with the aims of the Kyoto Protocol, Paris Agreement and the UN Sustainable Development Goals. To expand the company further, EKI will keep exploring new avenues of business.

Conclusion

Growing global carbon credit demand, increasing net-zero commitments by various countries and voluntary emission reduction pledges by corporates are helping EKI Energy company to report Triple Digit Growth numbers. Promoters of the company are confident of continuing strong growth momentum in near future too.

Increasing awareness for reduction in global emissions and collective efforts of various regulatory bodies is expected to increase the scope of carbon pricing instruments over time.

Overall, EKI Energy Services is experiencing a lot of good things (Tailwinds) in the Industry which is benefiting the company a lot.

Hope this article gave you some glimpse of how new growth opportunities are arising in the Renewable Energy sector.

No Stock Recommendation presented here.

Good Luck : )