A2Z files DHRP with Sebi for Rs 750-cr IPO

Engineering, procurement and construction firm A2Z Group today said it is awaiting market regulator's Sebi nod to launch a Rs 750 crore initial public offer (IPO) to fund its expansion plans in the renewable energy sector, as well as municipal waste management projects.

"We filed the draft red herring prospects with the market regulator Sebi on July 29 for a Rs 750 crore IPO and as soon the approval comes in, which we expect by October, we will hit the capital market," the Managing Director and Founder of the Rs 1,220 crore group, Amit Mittal, told PTI in an interview here.

As to how the company will spend the IPO money, Mittal said, "We will use the IPO money to fund our power plants in the renewable energy sector. We are planning to increase our generation capacity to 237 Mw in the next two years. Our current under construction now installed capacity is 60 Mw."

Mittal clarified that the company will only generate electricity from renewable energy sources, and that too, primarily from bio-mass and agri waste like paddy husks and sugarcane waste.

The New Delhi-based group has big ticket PE players like Rakesh Jhunjhunwala and Beacon India Investor and India Equity Partners as stakeholders. While Jhunjhunwala holds a 21 per cent stake, Beacon has 12 per cent and India Equity Partners 8 per cent equity holding in the group, Mittal informed.

On whether the IPO fund would be sufficient to meet the expansion plans, Group Chief Executive Amit Sardhana said the company will also raise around Rs 500 crore debt to finance its expansion plans. But he said that even after that, the debt-equity ratio of the company will be under 0.5 per cent.

The group began operations in 2004 with a facility management business, which it still runs, and claims to be the largest organised player in the field in the country today, posting a revenue of Rs 106 crore for the last fiscal. Its biggest client is the Railways and the Delhi Metro.

The group entered the field of setting up low-tension (up to 33 KW) transmission lines for BSES Delhi and New Delhi Power of Tata Power in 2004 and today, this is its biggest revenue earner. The group's EPC (engineering, procurement and construction) business reported a Rs 1,118 crore revenue last fiscal, Mittal said, adding that the company has since then entered the high tension area, bagging orders for up to 765-Mw transmission lines.

Today, the group's EPC arm services power majors like PowerGrid and NTPC and the Maharashtra, Rajasthan, Orissa, Andhra, J&K, Jharkhand and Bihar electricity boards, the Centre's Rajiv Gandhi Rural Electrification Mission, (being executed by PowerGrid and NTPC) and the Delhi Metro, among others, taking the value of its order book to above Rs 12,000 crore, Sardhana said.

The company's third area of operations is municipal waste management. It has bagged contracts from a number of city corporations in Uttar Pradesh, such as Kanpur, Muradabad, Aligarh, Bareilly and Varanasi, among others.

It runs a waste treatment plant in Kanpur which can process 15,000 tonnes of solid waste per day, while contracts for other cities are under implementation. It converts the waste into three components -- compost, which it sells to fertiliser firms; RFD, or refuse derived fuel, or bio-mass, which it uses to fuel its power plants; and recyclable waste, like plastic, paper and cloth, Mittal said.

He further informed that company's first power plant using bio-mass generated from the Kanpur waste processing plant will be commissioned shortly and will generate 17 Mw of power. He further said the company has signed a power purchase agreement with the UP Power Corporation to sell this power and will do so for other cities too.

Sardhana claimed that the A2Z Group is the single largest municipal waste management company in the country and this has been acknowledged by industry bodies. Last year, CII recognised it with the best municipal waste management company award, while Ernst & Young gave company founder Mittal its best entrepreneur of the year award in 2008.

Since the group is awaiting Sebi's nod for a public float, Mittal refused to offer any forward looking statement.