About the company:
Corporate Profile
Antony Waste Handling Cell is one of
India’s leading players in Municipal Solid Waste (MSW) management providing a
spectrum of MSW services such as solid waste collection, transportation, processing
and disposal across the country. It primarily caters to Indian Municipalities
and undertakes MSW collection and transportation projects, MSW processing
projects and mechanized sweeping projects. The issue period opens on 21st
December till 23rd December with a price band of Rs. 313 to Rs. 315
per share for a minimum lot size of 47 shares. The total issue size is Rs. 300
Crs with a fresh issue of Rs. 85 Crs and OFS of Rs. 215 Crs. The IPO proceeds will be used to reduce
the consolidated borrowings of the company and subsidiary by infusing debt in
their subsidiary - AG Enviro for repayment / prepayment of a portion of their
outstanding borrowings. The proceeds will also be used to partly finance Pimpri
Chinchwad Municipal Corporation Waste/gas-to-energy (WTE) project through
investment in subsidiaries, AG Enviro and Antony Lara Enviro Solutions Pvt. Ltd
(ALESPL).
Business Overview
Service
provider with end-to-end capabilities: Company is one of the top five
players in the Indian MSW management industry and one of the key players in
landfill construction and management sectors having in-house expertise for
landfill construction along with its management. It is also present in the
emerging waste management area in India which is MSW based
WTE. The Company has managed to develop internal capabilities across
various stages of solid waste management projects, beginning from collection to
disposal, which has enabled it to grow into a comprehensive service provider.
Strong
track record of project execution: Being one of the top
players, Antony has demonstrated a track record as a comprehensive service
provider equipped with the resources to handle large-scale projects for
municipalities and private players. It has managed to establish a renowned
track record of more than 19 years in executing solid waste projects. With specialized
MSW C&T projects, MSW Processing projects and mechanized sweeping projects
for municipalities and private players, it has undertaken more than 25 projects
as of November 15, of which 18 are on-going. Its major clients include
various municipal corporations of Delhi, Mumbai, Thane, Nagpur among others.
Diversified business
model: Out of the 18 on-going projects, 12 are MSW C&T projects, 2 MSW
processing projects and 4 mechanized sweeping projects. In addition to this, Antony
has also managed to take projects with different time periods which expire at
different times, thereby de-risking its business by providing a staggered revenue
stream.
Technology backed
vehicles and equipment: As of November 15, 2020, it had a fleet of 1,147
vehicles of which 969 were equipped with GPS technology. This helps to operate the
projects efficiently giving them a competitive advantage.
Financial Outlook:
Looking at the
financials, the company has
delivered decent growth over the last 3 years in terms of revenue as well as profits.
Company relies on high working capital to operate their business.
From FY18 to FY20, it's revenue increased by CAGR 17.72%, EBITDA increased by CAGR
18.28% whereas bottomline improved at a 15.90 percent CAGR in 3 years. Financial profile of
the company has slightly improved in terms of debt to equity ratio which
currently stands at 0.66 times.
Key Opportunities
Urbanization is a critical factor
driving the MSW generation in the country. Changing lifestyle patterns and
increasing disposable incomes have paved way for consumerism and has also
contributed to waste generation in urban India. MSW generation is expected to
grow at a CAGR of 8.9% (FY 2020-25) to reach 115.00 million TPA by
Fiscal 2025. The MSW Management market is estimated at Rs. 50,000
million for FY2020 and is expected to reach Rs. 98,000 million by FY2025 at a
CAGR of 14.4%. Increasing participation of professional players in
collection and transportation services, development of scientific recycling and
disposal methods for management of MSW are expected to be key drivers for the market.
Key Risks
Highly
dependent on municipal authorities: Antony is highly dependent
on municipal authorities for substantial proportion of its business and
revenue and will continue to depend on them. Municipalities are
in-turn highly dependent on state/ central grants/ budget allocations. Any dent
in budget allocation towards MSW projects will have an adverse impact
on the business conditions. Out of 18 ongoing projects 17 projects have
been awarded by municipal corporations.
Clientele
concentration: The Company is dependent on a limited
number of customers for a significant portion of its revenue. Though
contribution by top five clients have been continuously reducing, they still contribute
to over 77% of its total revenue. Therefore, Antony faces high clientele concentration
risk.
High
working capital requirement: The business of
cleaning of waste demands to employ large numbers of workers along with
other services require deployment of heavy transport vehicles which constitutes
transportation and fuel costs for them. Given that it is highly
dependent on municipal authorities for revenue any significant delays in
progressive payments or release of retention money or bank guarantees from
clients may increase working capital needs. Working capital as a percentage of
total revenue has considerably increased from 10.87% in FY2018 to 42.19% for
half-year ended September 2020. This may pose a huge risk going forward.
Competition
from local participants: Municipal waste management industry is highly
competitive with approximately 25 players providing similar services. There are
also various local participants such as transport companies and small firms
which provide only transportation and fleet management services.
Conclusion:
Antony Waste Handling Cell is valued at
a P/E of 20x on H1FY21 EPS, however, there are no other listed players in the
Municipal Solid waste management industry in India. The company does have
several positives but for the moment it faces a number of risks. Given the
small size of the IPO and the current liquidity gush in the market, investors
can subscribe to this IPO for listing gains only. Investors must keep their
liquidity and risk appetite in mind before applying for IPOs from a listing
gain perspective.
Source: RHP filed with RoC
Easy & quick