IPO Analysis: Antony Waste Handling Cell

IPO Rating – Avoid

About the Issue

Antony Waste Handling Cell (Antony), a Mumbai-based company and one of the top five players in the Indian Municipal Solid Waste (MSW) management is entering the primary capital market with its Initial Public Offering (IPO) of equity shares of Rs 5 each.  The price band has been fixed between Rs 295 and Rs 300.

The issue size is of Rs 206 crore including a fresh issue of Rs 35 crore and an offer for sale of Rs 171 crore shares by the existing shareholders. A total of 5,700,000  equity shares is being offered for sale by existing shareholders comprising up to 1,390,322  equity shares by Leeds (Mauritius) Limited; up to 2,085,502  equity shares by Tonbridge (Mauritius) Limited; up to 769,917  equity shares by Cambridge (Mauritius) Limited; and up to 1,454,259  equity shares by Guildford (Mauritius) Limited. The offer opens up for a subscription on March 4 (Wednesday) and closes on March 6, 2020 (Friday).  Bids can be made for a minimum lot of 50 equity shares, in multiples of 50 equity shares thereafter.

The company proposes to utilise the net IPO proceeds towards the reduction of the consolidated borrowings of the company by infusing debt in its subsidiary - AG Enviro Infra Projects Private Limited to the extent of Rs 30 crore.

The equity shares are proposed to be listed on BSE and NSE.

About the company

Antony is a part of Antony group that has diversified business interests, including automotive body-building and ancillary industries. The company is one of the top five players in Indian MSW, 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. It is among the key players in landfill construction and management sector with in-house expertise for landfill construction along with its management. It is also present in the emerging sector of MSW management in India which is Waste to Energy (WTE).

The company primarily undertakes: (i) MSW Collection & Transportation (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 involves sorting and segregating the waste received from MSW C&T, followed by composting, recycling, shredding and compressing into RDF, as required and, (iii) mechanised 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.

As of January 1, 2020, the company is operating 17 projects, which comprise of 11 MSW C&T projects, four mechanised sweeping projects and two MSW processing (including WTE) projects.  Antony is currently undertaking projects for the Municipal Corporation of Greater Mumbai (MCGM), Navi Mumbai Municipal Corporation (NMMC), Thane Municipal Corporation (TMC), Pimpri Chinchwad Municipal Corporation (PCMC), North Delhi Municipal Corporation (NDMC), Mangalore Municipal Corporation (MMC), New Okhla Industrial Development Authority (NOIDA), Nagpur Municipal Corporation (NMC) and Greater Noida Industrial Development Authority (GNIDA). They are also currently undertaking a project for Jaypee International Sports.

As of January 31, 2020, they had a fleet of 1,089 vehicles. They procure the components of its vehicles mostly from leading international suppliers, such as BUCHER Municipal AG and Compost System GmbH.

 Financials

For the financial year ending March 2019, the company’s total turnover stood at Rs 283.69 crore compared to Rs 275.77 crore at the end of FY17, showing a CAGR of a mere 1.4 per cent. However, for the first half of FY20, the company’s total income stood at Rs 218.6 crore. EBITDA in the same period, however, grew at a higher pace of a CAGR of 6.7 per cent to Rs 91.01 crore at the end of FY19. EBITDA for the six-month period ended September 30, 2019 stood at Rs 73.47 crore.  The net profit of the company has declined in the same period from Rs 32.7 crore (FY17) to Rs 27.2 crore (FY19). Nevertheless, for the six-month period ending September 2019, the net profit of the company has surpassed last year’s entire portfolio and stood at Rs 27.8 crore.

Valuation and recommendation

At the higher price band of Rs 300 and on the expanded equity base considering the IPO, the offer is demanding market cap to sales (FY19) of 2.8 times, which looks on the higher side. In terms of PE, at the upper end of the price band, the issue is available at a P/E of 23.3 times. There are no listed comparable, however, other established players available in infra space are available at PE of 20 times. Even EV/EBITDA of 12.4 times makes the issue expensive. Hence, it is better to avoid the issue.