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Antony Waste Handling IPO: All The Details You Need To Know Before Subscribing

A waste manager that collects garbage for India’s biggest municipal corporations will launch its IPO on Wednesday.



A bulldozer moves garbage in a landfill cell at the Melbourne Regional Landfill site,  in Ravenhall, Victoria, Australia. (Photographer: Carla Gottgens/Bloomberg)
A bulldozer moves garbage in a landfill cell at the Melbourne Regional Landfill site, in Ravenhall, Victoria, Australia. (Photographer: Carla Gottgens/Bloomberg)

A waste manager that collects garbage for some of the nation’s biggest municipal corporations will launch its initial public offering on Wednesday as investors sell stake expecting last year’s strong gains to continue.

Antony Waste Handling Cell Ltd. plans to raise Rs 206 crore by selling 57 lakh shares at Rs 295-300 apiece in the three-day IPO, according to its red herring prospectus. That comprises a fresh issue of shares worth Rs 35 crore and a stake sale worth Rs 171 crore by existing investors, including three Mauritius-based entities. At the upper end of the price band, according to BloombergQuint’s calculations, the company will have a market valuation of more than Rs 800 crore.

At Rs 300 a share, existing investors plan to sell:

  • Leeds (Mauritius) Ltd.: 13.9 lakh shares
  • Tonbridge (Mauritius) Ltd.: 20.85 lakh shares
  • Cambridge (Mauritius) Ltd.: 7.69 lakh shares
  • Guildford (Mauritius) Ltd.: 14.54 lakh shares

Antony Waste Handling Cell's IPO papers do not offer any other details about these four private equity investors.

Opinion
Antony Waste Handling Cell Raises Rs 60.94 Crore From Anchor Investors

Here’s a review of Antony Waste Handling Cell before its IPO:

The solid waste management firm, which provides services to civic bodies of Mumbai, Navi Mumbai and Gurugram among others, is the first such firm to go public and the second to launch an IPO this year after SBI Cards and Payments Services Ltd.

That comes after IPOs returned average gains of 50 percent in 2019. The BSE gauge measuring the two-year returns after listing rose 36 percent compared with a 13 percent gain in the benchmark S&P BSE Sensex, driven by select heavyweights.

Antony Waste Handling Cell—controlled by Jose Jacob Kallarakal, Shiju Jacob Kallarakal and Shiju Antony Kallarakkal—said the funds raised from the IPO would be used to reduce overall outstanding borrowing on a consolidated basis, and for general corporate purposes. The issue is also to achieve the benefits of listing equity shares, including enhancing visibility and liquidity to existing shareholders, it said.

Equirus Capital Pvt. Ltd. is the book running lead manager to the issue.

Business

Established 17 years ago, Antony Waste Handling Cell collects, transports, processes and disposes solid wastes across the country. It primarily caters to Indian municipalities.

The company is also one of the key players in landfill construction. As on Jan. 1, 2020, it had undertaken 25 municipal solid waste projects, of which 17 are ongoing, according to the red herring prospectus.

The municipal solid waste management market, the company said, is estimated at Rs 3,000 crore for FY18 and is expected to reach Rs 6,200 crore by FY23 at a compounded annual growth rate of 15.6 percent.

Some of the other private municipal solid waste management companies are Jindal ITF Ltd., Ramky Enviro Engineers Ltd., UPL Environmental Engineers Ltd., Essel Infrastructure Ltd. and IL&FS Environment Infrastructure & Service Ltd.

Financials

The company had a net worth of Rs 177 crore with gross debt at Rs 149 crore as of September 2019, the red herring prospectus said. Its cash and cash equivalents, and other bank balances together stood at Rs 22.4 crore during the period.

Valuations

Antony Waste Handling Cell doesn’t have any listed peers. The company’s pre-listing diluted earnings per share stood at Rs 11.3 per share as of September 2019. Assuming an annualised diluted earnings per share of Rs 22.6 and at the higher end of the price band, the company is valued at a price-to-earnings multiple of 13.3.

Prabhudas Liladher said the stock was expensive and recommended ‘avoid’. The company’s revenue has grown 7.7 percent on an annualised basis between FY16 and FY19 and profit CAGR of 16.5 percent in the same period, the brokerage said. Given the company operates in highly competitive local markets and has a large dependency on government authorities and municipal corporations, the trailing FY19 price-to-earnings of 23.3 times is rich and does not fully factor in all risks, it said.

Key Risks

Client Concentration

  • Its dependence on municipal authorities for substantial proportion of business and revenues.
  • Municipal solid waste contracts are typically awarded following competitive bidding and satisfaction of technical and financial criteria. There is also significant cost incurred in preparation and submission of bids.
  • The company depends on a limited number of customers for revenue. The loss of any of major customers due to an adverse development may affect its prospects.
  • Some of the company’s major clients include Municipal Corporation of Greater Mumbai, Navi Mumbai Municipal Corporation, Thane Municipal Corporation, New Okhla Industrial Development Authority, Nagpur Municipal Corporation and Pimpri Chinchwad Municipal Corporation.

Operations

  • The company operates on high working capital requirements. Its inability to meet these requirements can delay or stall projects and have a material impact in business.
  • The company’s operations include activities that may be hazardous to employees, exposing the company to material liabilities and increased expenses.

(The risks have been compiled from the company’s red herring prospectus.)