Antony Waste Handling IPO review (May apply)

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Review By Dilip Davda on February 28, 2020

•    AWH is one of the top five players in Indian MSW management.
•    The company has emerged as a niche player with the latest technologies.
•    AWH currently has more than 25 projects under its fold.
•    It has posted super FY20 H1 with better margin new long term contracts.
•    IPO size is reduced to around Rs. 206 cr. against the original plan of Rs. 300 cr. plus size.

ABOUT COMPANY:
Antony Waste Handling Cell Ltd. (AWH) is one of the top five players in the Indian MSW (Municipal Solid Waste) management industry with an established track record of 17 years. It is providing a full spectrum of MSE services that includes solid waste collection, transportation, processing and disposal services across the country, primarily catering to Indian Municipalities. The company is among the key players in landfill construction and management sectors with in-house expertise for landfill construction along with its management and is among the select few pioneers in such activities.

AW primarily undertakes: (i) MSW C&T projects which involve door to door collection of MSW from households, slums, commercial establishments and other bulk-waste generators (community bins) from a designated area through primary collection vehicles like compactors, dumper placers and tippers and transportation of these materials, to the processing facility, transfer station or a landfill disposal site.; (ii) MSW processing projects which involve sorting and segregating the waste received from MSW C&T, followed by composting, recycling, shredding and compressing into RDF, as required; and (iii) mechanized sweeping projects which involve deploying of power sweeping machines, manpower, comprehensive maintenance, consumables, safe disposal of the waste and any other items required for completion of the cleaning operation of the designated areas, through itself and/or its subsidiaries.

Having undertaken more than 25 projects as of January 1, 2020, of which 17 are ongoing, it has demonstrated track-record as a comprehensive service provider equipped with the resources to handle large-scale projects for municipalities as well as private players. AWH's portfolio of 17 ongoing projects as on January 1, 2020, comprised eleven MSW C&T projects, two MSW processing (including WTE) project and four mechanized sweeping projects. All the 17 ongoing projects have started generating revenue. The company is currently undertaking projects for the Municipal Corporation of Greater Mumbai ('MCGM'), the Navi Mumbai Municipal Corporation ('NMMC'), the Thane Municipal Corporation ('TMC'), Pimpri Chinchwad Municipal Corporation ('PCMC'), the North Delhi Municipal Corporation ('NDMC'), the Mangalore Municipal Corporation ('MMC'), New Okhla Industrial Development Authority ('NOIDA'), Nagpur Municipal Corporation ('NMC') and the Greater Noida Industrial Development Authority ('GNIDA').

It is also currently undertaking a project for Jaypee International Sports. In the past, it had also undertaken projects for Municipal Corporation of Delhi ('MCD'), Municipal Corporation, Gurgaon ('MCG'), Ulhasnagar Municipal Corporation ('UMC') Amritsar Municipal Corporation ('AMC'), Kalyan Dombivali Municipal Corporation ('KDMC') and Jaipur Municipal Corporation ('JMC').

As of January 1, 2020, AWH had a fleet of 1,089 vehicles. It procures the components of vehicles mostly from leading international suppliers, such as BUCHER Municipal AG and Compost System GmbH, who have been amongst preferred vendors for over four years. The company believes that its fleet of modern vehicles provides it with a competitive advantage by ensuring easy availability of vehicles best suited for projects as well as bolstering its project execution capabilities.

FUTURE OF MSW MANAGEMENT SEGMENT:
Urbanization is a critical factor driving the MSW generation in the country. Changing lifestyle patterns, increasing disposable incomes, have paved the way for consumerism and, have also contributed to waste generation in urban India. MSW generation is expected to grow at a CAGR of 5% (Fiscals 2018-23) from 55 Million TPA in Fiscal 2018 to reach 70 Million TPA by Fiscal 2023. The MSW Management market is estimated at INR 30,000 Million for Fiscal 2018 and is expected to reach 62,000 Million by Fiscal 2023 at a CAGR of 15.6%. Increasing participation of professional players in collection and transportation services and development of scientific recycling and disposal methods for management of MSW is expected to be the key driver for the market. (Source: Frost & Sullivan Report). AWH has emerged as a niche player for fulfilling Government of India's 'Swachcha India' and 'Smart Cities' initiatives.

Construction and maintenance of sanitary landfills is a long-term opportunity in India. Landfills are seen as a vital component in the integrated management of solid waste for cities having a population of more than 1 Million. Kanjurmarg site in Mumbai is a key success story of a scientific landfill in India. It is one of the largest single location waste processing plants in Asia. (Source: Frost & Sullivan Report). AWH was awarded Kanjurmarg landfill project by MCGM in Fiscal 2010. The project involves, inter alia, design, construction, operation and maintenance of integrated waste management facilities on DBOOT basis. It is being undertaken by Antony Lara Enviro Solutions Private Limited ('ALESPL'), which is a joint venture between the Company and Lara Central De Tratamento De Residuos Limited.

As on December 31, 2019, the site has a bio-reactor landfill with a capacity of 4,000 TPD and a sanitary landfill of 250 TPD. Moreover, the site also has a material recovery and compost facility with a capacity of 1,000 TPD. As of December 31, 2019, it had processed approximately 6.17 million metric tons of waste at Kanjurmarg site since Fiscal 2010. Further, as on December 31, 2019, its subsidiary ALESPL has been operating a 0.4 MW landfill gas-to-energy plant at Kanjurmarg facility since the year 2014, which has been upgraded to 1.37 MW with the electricity produced being used for internal consumption.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans of infusing debt as well as repayment/pre-payment of outstanding of subsidiaries (Rs. 30.00 cr.) and general corpus funds (Rs. 3.00 cr.), AWH is coming out with a maiden IPO of approx 6866667 equity shares of Rs. 5 each via book building route with a price band of Rs. 295 - Rs. 300. The company will issue fresh equity (approx. 1166667 shares) to the tune of Rs. 35.00 cr. and also has an offer for sale of 5700000 equity shares. AWH mulls raising Rs. 202.57 cr. - Rs. 206.00 cr. (based on lower and upper price bands) with this combo offer. The issue opens for subscription on 04.03.20 and will close on 06.03.20. Minimum application is to be made for 50 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE.

The issue is solely lead managed by Equirus Capital Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. AWH will be spending approx. 6% of the issue amount for the entire IPO process. Issue constitutes 25.66% of the post issue paid-up capital of the company.

Having issued initial equity at par, AWH issued/converted further equity in the price range of Rs.46.93 to Rs. 866.12 (Rs. 5 paid up) between 08.12.2018 to 26.02.2020. It has also issued bonus shares in the ratio of 4 for 1 in the same month. The average cost of acquisition of shares by the promoters and selling stakeholders is Re. 1, Rs. 85.52, Rs. 86.55 and Rs. 173.22 per share. As per DRHP, AWH filed documents for an IPO of Rs. 300 cr. plus. But now it is coming with reduced size of IPO as it has already done pre-IPO placements.

Post issue, AWH's current paid-up equity capital of Rs. 12.79 cr. will stand enhanced to Rs. 13.38 cr. With this IPO, AWH is looking for a market cap of Rs. 803 cr.  

FINANCIAL PERFORMANCE:
For the last three fiscals, AWH has (on a consolidated basis) posted turnover/net profits of Rs. 291.20 cr. / Rs. 41.04 cr. (FY17), Rs. 290.78 cr. / Rs. 39.88 cr. (FY18) and Rs. 298.52 cr. / Rs. 34.42 cr. (FY19). For the first half of FY20, it has earned a net profit of Rs. 37.84 cr. on a turnover of Rs. 225.63 cr.  AWH has (on a consolidated basis) posted an average EPS of Rs. 13.15 (on a diluted basis) and average RoNW of 23.17% for the last three fiscals. The issue is priced at a P/BV of 2.42 based on its NAV of Rs. 123.74 as on 30.09.19.

If we annualize latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of around 10.6. Thus issue pricing appears reasonable with super FY20 H1 earnings. According to the management, with new long term contracts with better margin augurs well and they are confident of maintaining the tempo of growth.

COMPARISION WITH LISTED PEERS:
As per offer documents, AWH has no listed peers to compare with.

MERCHANT BANKER'S TRACK RECORD:
On merchant banker's performance front, this is the 3rd mandate from its stable in the last three fiscals (including the ongoing one). Out of last 2 listings, 1 opened at discount and 1 with a premium of 20.66% on the day of listing.

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