Antony Waste Handling Cell IPO opens today. Is it worth your money?

The company will offer fresh shares worth Rs 35 crore and will offer 57 lakh equity shares under Offer For Sale (OFS) category for reduction of the aggregate consolidated outstanding borrowings.

The Mumbai-based Antony Waste Handling Cell's initial public offer (IPO) opens today, which will stay live till March 6. The company, which is among India's top five municipal solid waste management players, plans to raise Rs 206 crore via the offer.

The company will offer fresh shares worth Rs 35 crore with 57 lakh equity shares under Offer For Sale (OFS) category for reduction of the aggregate consolidated outstanding borrowings of the company, and for general corporate purposes.

The price band has been fixed between Rs 295 - Rs 300, and bids can be made for a minimum lot of 50 equity shares and in multiples of thereof. As per the draft red herring prospectus issued by the company, 50 per cent of the issue is reserved for Qualified Institutional Buyers (QIBs), 15 per cent is reserved for Non-institutional Investors (NIIs), and 35 per cent for retail investors. 

Leeds (Mauritius) will sell up to 13,90,322 equity shares, Tonbridge (Mauritius) 20,85,502 shares, Cambridge (Mauritius) 7,69,917 shares and Guildford (Mauritius) 14,54,259 shares through offer for sale.

The shares of the company will get listed on the NSE and BSE on March 17, 2020. 

About the company

Broadly engaged in Municipal Solid Waste (MSW) Management services, Antony Waste Handling provides solid waste collection, transportation, processing and disposal services to Indian municipalities. The company is a part of Antony group and mainly takes MSW processing projects, MSW C&T projects, and mechanized sweeping projects.

Jose Jacob Kallarakal, Shiju Jacob Kallarakal and Shiju Antony Kallarakkal are the promoters of the company, who hold 20.41 per cent stake, 5.82 per cent and 0.14 per cent respectively as per the draft prospectus.

Other promoters are Antony Garages Private Limited and Antony Motors Private Limited which hold 7.82 per cent stake each, while Tito Varghese Kallarakkal has 5.65 per cent shareholding.

Financials

For the financial year ending March 31, 2019, the net profit stood at Rs 344.23 crore, down from Rs 398,84 crore. As of September 2019 (6MFY20), the profit was Rs 378.43 crore. 

Meanwhile, net revenue for the financial year 2018-19 was Rs 2,837 crore, up from Rs 2,761 crore reported in FY18. For 6mFY20, the revenue was Rs 2,186 crore. 

Earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 9.2 per cent to Rs 76.18 crore in FY19 and 7.6 per cent to Rs 69.75 crore in FY18 with margin rising 160 bps in FY19 and 176 bps in FY18.

Should you invest? Here is what brokerages say:

Prabhudas Lilladher

Given factors like low revenue (~7.7 per cent CAGR) and PAT (16.5 per cent CAGR) growth over FY16-19, highly competitive local markets, national and international players, large dependency on projects from State government authorities primarily Municipal Corporations (unstable allocation of MSW management) and rich valuation (23.3x FY19 relative to Infra coverage universe has an average of ~19x), investors should avoid the stock. 

Decline in the budgetary allocation towards MSW projects, dependency on a limited number of customers, high working capital requirements, and competition from national and global players as key risks to the business.

Geojit Financial Services

Government Schemes like Swachh Bharat Mission and Smart City Mission coupled with government subsidies for projects such as Waste-to-Energy (WTE), environmental and social awareness about effective waste management among municipal corporations and households, revised government regulations in 2016 for each type of waste defines every stakeholder’s role and accountability in implementing directives for effective waste management augurs well for the company. 

At the upper price band of Rs 300, AWHCL is available at P/E of 10x FY20 (annualised). Valuation looks justified, considering the expected growth in earnings over the next few years. Given the positive industry outlook and an uptick in revenues from FY20, we recommend ‘SUBSCRIBE’ to the issue with a long-term perspective.