Post-Snapshot: Due to poor market condition and factors beyond the control of the company, Antony Waste Handling Cell has revised certain issue terms. Whereas the bid closing date has been extended from March 6, to March 16, 2020, the lower price-band of the offer has been reduced from Rs 295 to Rs 294.

Financials show there is a lot of wealth creation out of waste, if Municipal Corporations blink!

OFFER AT A GLANCE
Name	Antony Waste Handling Cell Ltd
Public Offer	Fresh Issue of Rs 35 cr (between 11,66,667 and 11,86,441 shares) and Offer for Sale of 57,00,000 shares
Post-IPO Promoter Stake	48.9%
Offer Price	Rs 295-300 (FV 5)
Offer Amount	Rs 203.15 cr to Rs 206 cr
Application Quantity	50 & Multiples of 50
Bid/Offer Opens	March 4, 2020
Bid/Offer Closes	March 6, 2020
Share Allotment	March 12, 2020
Refund Process	March 13, 2020
Demat Credit	March 16, 2020
Share Trading	March 17,2020
Listing at	BSE &NSE
IPO Rating	Nil
Book Running Lead Manager	Equirus Capital
Registrars	Link Intime

 

The Offer

The present issue has two parts. There is a fresh issue of Rs 35 cr from the company and an offer for sale of 57 lakh shares from four Mauritius-based private equity investors who had invested in the company about 10 years ago via preference shares. The offer is being made through the book building route with a price band of Rs 295 – Rs 300 for Rs 5 paid-up share. The quantum of offer works out to 68.66 lakh to 68.86 lakh shares amounting to Rs 203.15 cr to 206 cr.

 

Issue Object

The fresh issue from the company being just 17% of the offer size, the main object of the IPO seems to be facilitating an exit route for the private equity investors who invested in the company more than a decade ago. Of the net proceeds of the fresh issue, the company intends to lend Rs 30 cr to its subsidiary – AG Enviro Infra Projects Private Ltd at an interest rate of 13.15% p.a. The balance amount is earmarked for general corporate purpose. Interestingly, the subsidiary is going to reduce its low-cost external borrowings by a high-cost debt from the parent company!

 

Background

Antony Waste Handling Cell Ltd (AWH) was promoted by Jose Jacob Kallarakal, Shiju Jacob Kallarakal and Shiju Antony Kallarakkal in the year 2001. Same year, the company was awarded MSW C&T (municipal solid waste collection and transportation) project in Greater Noida. AWH reportedly raised private equity funding in 2008. The company incorporated Antony Lara Enviro Solutions Private Ltd in 2009 to expand the integrated MSW facility at Kanjurmarg, Mumbai. In 2012 AWH was awarded two C&T projects by the Thane Municipal Corporation and Jaypee International Sports (for the events at Buddh International Circuit, Formula 1, Grand Prix of India).The company reportedly began operations at Kanjumarg in 2014 and was awarded a new C&T project by the Navi Mumbai Municipal Corporation in 2015. In 2018 AWH diversified into the Waste to Energy segment by entering into a concession agreement with the Pimpri Chinchwad Municipal Corporation and the company began operations at Pimpri Chinchwad in 2019. Same year, it was also awarded a new C&T project by the Nagpur Municipal Corporation.

AWH is said to be one of the top five players in the MSW management industry, providing full spectrum of MSW services which includes solid waste collection, transportation, processing and disposal services across the country, primarily catering to Indian Municipalities. The company primarily undertakes MSW collection and transportation projects, MSW processing projects and mechanized sweeping projects directly or through its subsidiaries.

The company claims to have undertaken more than 25 projects as of January 1, 2020, of which 17 are ongoing. Urbanization is a critical factor driving the MSW generation in the country. Changing lifestyle patterns, increasing disposable incomes, have paved way for consumerism and, have also contributed to waste generation in urban India. MSW generation is expected to grow at a CAGR of 5% (FY 2018-23) from 55 Million TPA in FY 2018 to reach 70 Million TPA by FY2023. The MSW Management market was estimated at Rs 3000 cr for FY2018 and is expected to reach Rs 6200 cr by FY 2023 at a CAGR of 15.6%.

 

Financial Highlights

On a consolidated basis, AWH’s top line remained almost stagnant at less than Rs 300 cr in last three years and its bottom line declined from Rs 41 cr in FY17 to Rs 34.42 cr in FY19. Having entered into two new contracts in 2019, the company has posted impressive financials for the six month-period ended September 2019. As compared to the full year revenue and profit of Rs 299 cr and Rs 34 cr respectively, the company has reported a revenue of Rs 226 cr and netted a profit of 38 cr for only first six months of the current fiscal. Should the second half be as good as the first one, the earnings will look attractive as compared to the post-IPO equity capital of Rs13.38 cr.

 

(Rs in Cr)	Sep-19	Mar-19	Mar-18	Mar-17
Months	6	12	12	12
Revenue	225.62	298.52	290.78	291.21
EBITDA	73.47	91.00	84.39	80.25
OPM %	30.40	26.85	25.26	23.50
Interest	13.92	24.99	22.89	25.29
Depreciation	10.58	18.33	12.71	11.14
Net Profit	37.84	34.42	39.88	41.04
Equity	7.15	7.15	1.31	1.31
Note: Equity increased to Rs 12.79 cr in Feb 2020 on account of conversion of preference shares. This will increase to Rs 13.38 cr post-IPO.

 

Valuation 

AWH netted a profit of Rs 34 cr for the fiscal 2019 which yields an EPS of Rs 12.86 on the post-IPO capital of Rs 13.38 cr. The price band discounts the full year earnings about 23 times. If one considers the current year’s earnings, then the P/E multiple works to only 10, thus making the offer attractive.

 

Period Ended	Mar-19	Sep-19
Months	12	6
Net Profit (Cr)	34.42	37.84
EPS Rs	12.86	28.29
Price Band-High	300	300
P/E	23.3	10.6
Price Band-Low	295	295
P/E	22.9	10.4

 

Concern

Working capital management has been a critical issue in the management of urban waste. As the rotation of money with municipalities is reportedly in the cycle of more than three months, receivables risk from municipalities can lead to financial instability of a private company. This could also restrict further investment in asset deployment.

 

Lead Manager’s Track 

The IPO of AWH is solely managed by Equirus Capital which has associated with just two public issues in last five years. Of these, MSTC which went public in March 2019 has fetched a return of 18% in one year. However, Shankara Building Products which tapped the market in March 2017 is currently languishing 4% below offer price.

 

EQUIRUS CAPITAL MANAGED IPOs

ISSUER NAME	IPO DATE	IPO VALUE	CUR VALUE	GAIN (Rs Cr)	%
MSTC	13-Mar-19	212	249.86	37.81	17.8
Shankara Building	22-Mar-17	345	330.26	-14.74	-4.3