Antony Waste Handling IPO Dec 2020 review (May apply)

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Review By Dilip Davda on December 17, 2020

• AWH is one of the top three players in Indian MSW management.
• AWH currently has more than 25 projects under its fold.
• The company has emerged as a niche player with the latest technologies.
• IPO size is increased to around Rs. 300 cr. against the previous plans of Rs. 206 cr. size.
• The issue appears reasonably priced based on its track records.

PREFACE:

The company entered the primary market in the month of February 2020 with its maiden IPO to mobilize Rs. 206 cr. The issue that opened for subscription on March 04, 2020, and was to close on March 06, 2020, was extended twice for closing on March 16, 2020, but finally stood withdrawn due to poor response. AWH refilled its offer documents and is now entering the capital market with an increased size of Rs. 300 cr. for its revised term maiden IPO. Thus there will be no 'T' tag post listing. This time it has hired two BRLMs to market this issue.

According to primary market operators, while in March 2020 this IPO came, on one hand, it was clashing with SBI Card IPO on the other hand secondary market witnessed slide from 38.7K to 31.4K for BSE Sensex and 11.35K to 9.2K for NSE Nifty and thus it had to face the music. Despite the extension of periods, AWH garnered only around 50 per cent subscription and finally stood withdrawn. This time BSE Sensex and Nifty are at their historic high and is definitely in the favour. Seasoned observers also opine that the last month of fiscal also impacted a bit for subscriptions.

ABOUT COMPANY:

Antony Waste Handling Cell Ltd. (AWH) is one of the top three players in the Indian MSW (Municipal Solid Waste) management industry with an established track record of 19 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.

AWH 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 November 15, 2020, of which 18 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 18 ongoing projects as on November 15, 2020, comprised 12 MSW C&T projects, two MSW processing (including WTE) project and four mechanized sweeping projects. All the 18 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 Mangaluru 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'). The company recently awarded a contract by Varanasi Municipal Corporation for MSW.

As of November 15, 2020, AWH had a fleet of 1147 vehicles and a workforce of 7391 full-time employees. 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. AWH being qualifying as 'Essential Services' provider, it does not face any difficulty in payments from Municipal contracts.

AWH has emerged as a niche player for fulfilling Government of India's 'Swachcha India' and 'Smart Cities' initiatives.

ISSUE DETAILS/CAPITAL HISTORY

To part finance its needs to invest in subsidiary for PCMC WTE (Pimpri Chinchwad Municipal Corporation - Waste to Energy) project (Rs. 40.00 cr.) as well as repayment/pre-payment of outstanding of subsidiaries (Rs. 38.50 cr.) and general corpus funds, AWH is coming out with a maiden IPO of approx 9523345 equity shares of Rs. 5 each via book building route with a price band of Rs. 313 - Rs. 315. The company will issue fresh equity (approx. 2698412 shares) to the tune of Rs. 85.00 cr. and also has an offer for sale of 6824933 equity shares (approx value Rs. 215 cr. at the upper price band). AWH mulls raising Rs. 298 cr. - Rs. 300 cr. (based on lower and upper price bands) with this combo offer. The issue opens for subscription on December 21, 2020, and will close on December 23, 2020. Minimum application is to be made for 47 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE.

AWH has allocated 50% for QIBs, 15% for HNIs and 35% for Retail Investors in this IPO.

This time the issue is jointly lead managed by Equirus Capital Pvt. Ltd. and IIFL Securities Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. Issue constitutes 33.67% 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 December 2018. 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.

Post issue, AWH's current paid-up equity capital of Rs. 12.79 cr. will stand enhanced to Rs. 14.14 cr. With this IPO, AWH is looking for a market cap of Rs. 891 cr.

FINANCIAL PERFORMANCE:

For the last three fiscals, AWH has (on a consolidated basis) posted turnover/net profits of Rs. 290.78 cr. / Rs. 39.88 cr. (FY18) and Rs. 298.52 cr. / Rs. 34.68 cr. (FY19) and Rs. 464.61 cr. / Rs. 62.08 cr. (FY20). For the first half of FY21, it has earned a net profit of Rs. 29.05 cr. on a turnover of Rs. 215.10 cr. AWH has (on a consolidated basis) posted an average EPS of Rs. 20.14 (on a diluted basis) and average RoNW of 20.21% for the last three fiscals.

If we annualize latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of around 15.32. Based on FY20 earnings, asking price is at a P/E of around 14.35 on post-issue equity. Thus prima facie issue pricing appears reasonable. According to the management, with new long term contracts with better margin augurs well and they are confident of maintaining the tempo of growth.

The issue is priced at a P/BV of 3.51 based on its NAV of Rs. 89.87 as on September 30, 2020, and at a P/BV of 2.83 based on post issue NAV of Rs. 111.34 (at the upper price band).

** Till extended date company got around 50% subscription (excluding Anchor)

DIVIDEND POLICY

AWH has not paid any dividend on equity shares for the last three fiscals. However, as per offer documents it paid a dividend of 9% and 14% on two series of Preference Shares for FY18 and FY19. Management will consider the dividend policy depending on its earnings going forward.

COMPARISION WITH LISTED PEERS

As per offer documents, AWH has no listed peers to compare with.

MERCHANT BANKER'S TRACK RECORD

The two Book Running Lead Managers associated with the issue have handled 11 public issues in the past three years out of which 4 closed below the issue price on listing date.

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