Antony Waste Handling Cell IPO open now!

About Antony Waste Handling Cell

• Antony waste handling (AWH) is one of the top five players in the Indian MSW (Municipal Solid Waste) industry with an established track record of more than19 years, providing a 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’s portfolio of 18 ongoing projects as on November 15, 2020, comprised 12 MSW C&T(Collection & Transport) projects, two MSW processing (including WTE - Waste to Energy) project and four mechanized sweeping projects. All the 18 ongoing projects have started generating revenue. 

Background

• The company previously attempted an IPO in the month of March to mobilize ₹206 cr. Despite the extension of closing dates, the issue gathered only around 50% subscription and was hence withdrawn.
• The issue clashed with SBI Card IPO and on the other hand NIFTY50 crashed from 11,350 to 9,200 and hence the IPO failed to sail through. The company has refilled its offer documents and has now increased the issue size to ₹300 cr.

Financial Summary 

• Revenues remained stagnant prior to FY20 but have recorded a stupendous growth since with revenue up 60% in FY20 from FY19. Same goes with Net profit which rose from ₹34.6 crore in FY19 to ₹62 crore in FY20.
• Margins have remained strong and have been consistent throughout the years.
• The company’s Return on Net worth fell sharply in H1FY21, ROE has also been falling over the years with 25% in FY18, 18% in FY19 and 16% in FY20.

Key Risks And Red Flags

• Non-current receivables of ₹28 crore from various municipalities are under dispute and are long due. Auditor has raised a qualified report in this regard. A qualified report is a red flag which signals accounting irregularities. However, the management has not provided any provision for the same and is confident to recover these. 
• Concentration risk: The company’s business comes from municipalities across regions and the top 5 of which account for almost 90% of the revenues.
• The company has high working capital requirements. Receivables are large and it is often tough to convert cash from municipalities who themselves have weak revenues.

Issue Details 

• Issue open: 21 Dec - 23 Dec 2020 
• Price band ₹313-₹315
• Issue Size: ₹300 Cr.
• Face value: ₹5
• Reservation for QIB - 50% , Non institutional Investors -15% , Retail -35%
• Bid Size - Multiples of 47 shares

INDmoney Analysis

• The company does not have any listed peers. On the upper price band of ₹315 and FY20 EPS of ₹27.48, the P/E ratio is at 11.4x which seems to be reasonable. 
• The company has been focusing to increase presence in the emerging waste management areas in India like WTE (Waste to Energy) domain which have huge potential but are yet to be proven in India.
• Industry growth is promising and Antony Waste being one of the few top players which have adopted the latest technologies is set to benefit. Moreover, it is amongst the few players that have its presence across different services and segments. 
• Financials are not very impressive and there are several operational challenges that the company faces, depending on municipalities which are themselves dependent on state funding is one of them. 
• Given all these factors, investors who have a high-risk appetite can apply for the issue with a medium to long term perspective. Listing gains if any are likely to be small, however, given the current IPO frenzy and the market condition a lot cannot be said. For the long term, a lot depends on the company’s ability to overcome operational challenges, increase presence in other high-value areas, and capture market share in a market where barriers are.