EMS Ltd Share Price: Key Red Flags Investors Must Know Before Investing

Synopsis: EMS, a multi-disciplinary EPC (Engineering, Procurement, and Construction) player, has fallen more than 55% from its 52-week high, which may have increased the interest of retail investors. Many investors would have started buying at each dip, hoping for a recovery. Moreover, the valuation and performance also look attractive – are we missing something? Yes, maybe corporate governance! 

Before diving into the story and red flags, here is a brief overview of the company. EMS is primarily engaged in the business of EPC and O&M (Operation & Maintenance) services in water and wastewater management. It also provides EPC services in electrical transmission & distribution, building, and public infrastructure facilities. The company has a strong track record, having completed 18 projects since April 2021. It has grown its revenue from Rs 107 crore in FY13 to Rs 966 crore in FY25, growing at a 20% CAGR. For many, this introduction would not be concerning, as red flags are never to be found on the surface.

Unrelated Business Acquisition 

Although it is still unclear if EMS has some serious issues, as it is always contingent until SEBI kicks in and makes the conspiracy concrete. It all started when it acquired a 75% stake in Brijbihari Pulp and Paper Pvt Ltd (Now, EMS Industries) in August 2024. It was barely 1.5 years old at the time of acquisition (Incorporated on January 10, 2023) and had no revenue. It is registered as a paper manufacturing, completely unrelated business (operations ceased by December 2024). 

The target carried Rs 60 crore in assets, primarily Rs 39 crore in land and building (claimed to have a market value of Rs 70-80 crore, acquired via NCLT) against Rs 59 crore in related-party borrowings and zero FY24 revenue/expenses, with no depreciation booked. The company paid Rs 7.75 crores for this acquisition. But the ICRA Monitoring Report (Jan 2025) noted that Rs 27 crore of IPO funds had already been advanced for this deal, leaving a gap of Rs 19 crore.

Confusion around Brijbihari Saga 

Brij Bihari Paper & Pulp Pvt Ltd (Now, EMS Industries) had a very interesting shareholding pattern at the time of the EMS IPO and post-IPO.

• 50% – Ramveer Singh (Chairman & Promoter of EMS Ltd)
• 50% – Brij Bihari Concast Pvt Ltd

• 25% – Ramveer Singh
• 12.5% – Mrs Sakshi Tomar Parihar (his daughter)
• 12.5% – Mr Gajendra Parihar (his son-in-law)
• 50% – Brij Bihari Concast Pvt Ltd

Why was there a need to transfer the remaining 25% of the stake to the family members? Maybe to avoid direct linkage between the EMS promoter and Brij Bihari Paper & Pulp Pvt Ltd (Now, EMS Industries). The acquired company has a related party transaction of Rs 60 crore, which is a loan from directors and shareholders. 

• If the land’s market value is really Rs 70-80 crore, why is the seller (Brij Bihari Concast) exiting at cost?
• Why was there a need for the acquisition of Brij Bihari Paper & Pulp Pvt Ltd (Now, EMS Industries), which is so unrelated to the core business? Is it just to fulfil working capital requirements?
• Why is there a mismatch in the amount of general corporate purpose money? – Again, unclear communication.
• Why is there confusion among investors about whether depreciation is charged or not? – shows unclear communication from management.
• Who bears the burden of servicing Brij Bihari’s Rs 59 crore promoter loans now, EMS Limited’s obligation post-acquisition, given Chairman Ramveer Singh’s prior directorship and the circular flow of funds back to EMS leadership?
• Why were family members inserted into ownership before the acquisition was announced?

Even if we leave the Brij Bihari Paper & Pulp Pvt Ltd (Now, EMS Industries) story for a moment, many such issues persist, which can show that the company takes corporate governance lightly.

• Independence of audit committee: Promoters should stay away from the audit committee to maintain independence. It increases the transparency and builds strong corporate governance measures. Mr Ashish Tomar, CFO and part of the promoter group, is a part of the Audit Committee.
• Takeover and Management Committee: Mr Ramveer Singh, Chairman of the committee and the largest shareholder of the company, is the key player in the Brij Bihari Paper & Pulp Pvt Ltd (Now, EMS Industries) deal. It leaves the question of conflict of interest in the investor’s mind.
• Continuous selling from FII and DII: Selling of FII and DII for a shorter period of time won’t be a major concern, but if the selling persists for more than 8 consecutive quarters, it seems something is not right.
• Pledging of shares: Mr Ramveer Singh has pledged 20.90% of the total share capital, which further tanks the confidence in an investor. When the largest shareholder pledges the shares, regardless of the quantum.
• Resignation of statutory auditor: Rishi Kapoor & Co., the statutory auditor of the company, resigned in midterm in August 2025 for pre-occupation with other assignments. 
• Inconsistent Op. Cashflow and Free-cashflow: The company generated around Rs 27 crore of FCF in FY25 (vs negative Rs 148 crore in FY24 and negative Rs 4.5 crore in FY23). It generated Rs 95.8 crore in OCF in FY25 (vs negative Rs 116 crore in FY24 and Rs 4 crore in FY23).
• High receivables growth vs Revenue growth: The company has grown its non-current receivables at a 75% CAGR between FY23-25, whereas the sales grew by just a 34% CAGR, which indicates project delays, client payment lags, or aggressive revenue booking.

Corporate governance – A common blind spot for Investors 

Corporate governance forms the bedrock of long-term investing, yet EMS Ltd’s story, like the puzzling Brijbihari Pulp acquisition, promoter roles in key committees, recent auditor resignation, and many such concerns, highlight why vigilance matters amid its impressive revenue climb. Investors often chase dips and metrics, overlooking board independence and transparent dealings that safeguard long-term value.

We should never forget the past: corporate governance lapses like ICICI Bank’s Chanda Kochhar-Videocon loan scandal, Satyam’s accounting fraud that vaporized USD 2.82 billion, Yes Bank’s reckless lending crisis, or IndusInd Bank’s recent turmoil of derivative books, all erased billions, leaving shareholders in ruins.

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