Is there bang for the buck in Antony Waste Handling Cell IPO?

The Rs 300-cr share offering has been subscribed 1.77 times and the last day for submitting applications is Dec 23

Kumar Shankar Roy   /   December 23, 2020
Antony Waste Handling Cell IPO

Founded in January 2001, Antony Waste Handling Cell (AWHC) is one of the top five players in the Indian municipal solid waste (MSW) management industry with an established track record of more than 19 years. The company is tapping the primary market to raise Rs 300 crore via an Initial Public Offer (IPO). The issue is closing today (Dec. 23). The IPO shares are being offered in a price band of Rs 313 to 315. So far i.e. close of Dec. 22 business hours, the IPO has been subscribed 1.77 times, as per NSE data. Read on to know more about the IPO.

IPO details

The IPO issue size is Rs 300 crore for about 95.22 lakh shares. Out of this, the company will get Rs 85 crore (a fresh share issue of 26.98 lakh). The rest will go to an investment fund that is directly selling 68.24 lakh shares.

The market lot for Antony Waste Handling Cell IPO application is 47 shares. This means your minimum investment has to be about Rs 14,800. Each share has a face value of Rs 5.

Post-IPO, AWHC’s promoters, including Jose Jacob and Shiju Jacob, will hold a 46.2% stake. The general public will hold 53.8%.

Listing is likely in the first week of January 2021 in BSE & NSE.

The IPO book running lead manager is Equirus Capital Private Limited, IIFL Securities Limited.

Registrar to issue is Link Intime India Private Limited.

IPO proceeds purpose

The company will use the Rs 85 crore (pre-expenses) to part-finance Pthe impri-Chinchwad Municipal Corporation (PCMC) waste-to-energy project (WTE) through investment in the subsidiaries of the company, AG Enviro and/or ALESPL.

Also, the company will use money to reduce consolidated borrowings by infusing debt in the subsidiary – AG Enviro (for repayment / prepayment of portion of their outstanding indebtedness).

Do remember Antony Waste Handling Cell had tried to do an IPO in March 2020 but the market response was bad amid Covid-19 fears.

Company business

Antony Waste Handling Cell earns two-third revenue from collecting urban municipal waste. The rest comes from sweeping and processing works.

The company primarily undertakes specialised MSW collection & transportation (C&T) projects, MSW processing projects and mechanised sweeping projects for municipalities and private players. It has undertaken more than 25 projects as of November 15, 2020, of which 18 are ongoing. Of the 18 ongoing projects, 17 have been awarded by municipal corporations.

Potential

With increasing energy demand and government initiatives, the waste to energy (WTE) market is anticipated to see more public private partnership (PPP) based projects, says ICICIdirect. AWHC believes that with assured raw material and a power offtake agreement, the business offers limited risks and will help in improving predictability of its cash flows. The company, through its stepdown subsidiary ALREPL, has been awarded a contract for setting up and operating a WTE plant having a capacity of up to 1,000 TPD by Pimpri Chinchwad Municipal Corporation (PCMC).

The Municipal waste management industry in India is pegged at Rs 5,000 crore and is expected to grow at a CAGR of 14.4% till FY25 reaching Rs 9800 crore.

Competitors

Antony Waste Handling Cell competes with various players like Ramky Enviro Engineers, Metro Waste Handling, BVG, A2Z, SPML Infra, Terra Firma etc.

Positives and negatives

According to Angel Broking, the positives are (a) Presence in the fast-growing MSW management industry with end-to-end capabilities, (b) Strong track record of project execution, (c) Long term contracts with municipalities, and (d) Experienced promoters and management team with strong domain expertise

Key risk & concerns are:
1. High dependence on municipal corporations (involves receivables risk)
2. Working capital intensive business (large numbers of workers, deployment of heavy transport vehicles etc.)
3. High customer concentration (top 5 clients contributed 81.8% of the revenue of the FY2020)

Financials

In FY20, the company made net sales of Rs 450 crore and a net profit of Rs 62.1 crore. There was a substantial jump in topline as well as bottom-line compared to FY19 numbers. AWHC reported revenue, EBIDTA & PAT growth CAGR of 27.7%, 34.2% & 27.9%, respectively, in FY18-20. The company has maintained healthy return ratios that were upwards of 20%+ in the last three years. One can expect future growth to be lumpy in some sense.
The company at the end of first half of FY21 had over Rs 160 crore in terms of total loans.

Valuation

If you buy the IPO stock at an upper price band of Rs 315/share, you will be paying Rs 12 for every rupee profit made by the company in FY20 (reported earnings per share is Rs 27.48). We believe AWHC’s pricing has left some scope for upside in the long term and recommend subscribing to the issue, says Nirmal Bang.

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