Ladies and gentlemen, good day, and welcome to Antony Waste Handling Cell Limited, Q4 FY 2023 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions, and expectations of the company as on the date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Jose Jacob, Chairman and Managing Director of Antony Waste Handling Cell Limited. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen. Thank you all for attending this fourth quarter earnings call. I'm joined on this call by Mahendra, our Group President, Operations and New Business Development, and Subramanian NG, our Group Chief Finance Officer. We stand before you today to celebrate the remarkable achievement of Antony Waste Handling Cell over the past year. It has been a significant growth, solidifying our position as a leader in waste management and environmental solutions. We have not only achieved a strong, sustainable core profitability trend, but have also set our sight on a future that holds immense promise for our company.
Despite certain challenges, such as the absence of elected members in few corporations, resulting in delayed routine matters and temporarily affecting our margins, we have remained resilient. We understand that these are transition hurdles and do not overshadow the tremendous progress we have made.
One area that deserves special mention in the strong demand we have witnessed is for RDF, Refuse Derived Fuel. This demonstrates the trust and confidence our client has in our ability to effectively handle waste, and provide innovative solutions that contribute to a cleaner and more sustainable environment. Our commitment to operational excellence has allowed us to expand our coverage in more cities this year. By doing so, we have established a robust operational platform that positions us for future growth and success. We believe that a strong foundation is the key to unlocking new opportunities and driving positive change in our industry. Looking ahead, our outlook remains incredibly positive. As elected members are reinstated, our routine matters resume their regular course, we anticipate a return to our strong margins.
We are fully aware that these margin softness are temporary and will not hinder our progress in long term. We are thrilled to be part of an industry that is growing and evolving rapidly. The need for effective waste management solution has never been greater, and Antony Waste Handling Cell is poised to play a pivotal role in shaping the future of this sector. With our unwavering dedication to sustainability, innovation, and operational excellence, we are confident in our ability to navigate any challenges that may come our way. To talk bit more about our current operations and business outlook, I hand over the call to our Group President, Operations and Business Development, Mahendra, over to you.
Thank you, Joe. Good afternoon, everyone. I'm pleased to share with you an update on the operational performance of Antony Waste Handling Cell. Our unwavering commitment to excellence and sustainability has allowed us to achieve significant milestones and solidify our position as a leader in waste management. On a daily basis, we cater to a staggering INR 43 lakh households and establishments, handling over 13,000 tons of municipal waste and cleaning more than 500 km of roads. These impressive figures are a testament to our operational efficiency and dedication to providing top-notch services to our clients. In the C&T business for quarter four, we successfully managed around 0.41 million tons of waste, demonstrating a 6% year-on-year increase. Our waste processing business handled approximately 0.63 million tons of waste, reflecting a remarkable 10% year-on-year growth.
During the financial year 23, the C&T business and waste processing business witnessed annualized growth of 7% and 10%, respectively. Thanks to our continuous efforts to introduce technology, our core C&T operations have been performing in line with our expectations. During this quarter, we strengthened our IT systems to enable live tracking of regular fleet at cities' Integrated Command and Control Center, that is ICCC, and deployed fuel sensors in all our vehicles to reduce spillage. We also focused on increasing user charges collection in Noida, Varanasi, and Jhansi, where it's part of our scope, to partially mitigate payment risk. In the waste processing segment, the first phase of processing has followed historical trends, and we have seen significant improvement in the disposal of processed waste, such as compost and RDF.
Even though these byproducts have lower margins compared to our core operations, they are an essential part of our business. We are confident of commissioning our waste-to-energy plant in Pimpri-Chinchwad by the end of June 2023, which incidentally happens to be Maharashtra's first waste-to-energy plant. We also have hired a leading carbon credit consultant to register this waste-to-energy project with Verified Carbon Standard, to monetize the carbon credit potential of this project. Additionally, we anticipate commencing operations for our construction and demolition waste project in Mumbai by the fourth quarter of fiscal year 2024.
All these milestones will further strengthen our position as an integrated waste management player. With a robust employee base of over 9,000 professionals, Antony Waste stands stronger today than ever before. We continue to work on new initiatives and new bids, are making conscious efforts on enhancing our non-municipal revenue source. We will keep our stakeholders informed as and when we have more information on the same. On to the financial aspects, NG will take over from here.
Yeah. Thank you, Mahendra. Good afternoon, ladies and gentlemen. I would like to bring your attention to some significant changes in our financial numbers that have occurred over the past financial year. While we have seen positive growth in revenue, there has been a certain factors that have impacted our EBITDA margin and pre-tax profits. Our revenue growth has been impressive, with a 31% increase, driven partly by core revenue growth of 15% and the remaining contribution coming from CapEx-related revenue recognition. However, it is important to note that though our reported EBITDA has remained flat at INR 168 crores, the reported EBITDA margin has decreased by approximately six percentage points. The main contributing factor to the decline in EBITDA margin is the absence of elected members in few corporations, resulting in delay in routine matters.
As a result of this, approximately INR 19 crore could not be recognized in the financial year 2023. Adjusted for this and an easier provisioning during the year, our reported EBITDA margin would actually have been 21.9%, which compares against the reported EBITDA margin of 19.2%. To summarize, our reported EBITDA margin for Q3 2023 and Q4 2023 stood at 18.7% and 15% respectively, and if you were to add the revenue that we have not recognized due to the absence of reimbursements and escalations getting delayed, our reported EBITDA would have actually stood at 22.4% and 21.8% respectively. Additionally, our EBITDA has been affected by the higher wage bill, reflecting the increase in headcount with the addition of Nashik operations during the year.
Higher transportation bills related to RDF sales has also impacted the margins by INR 130 lakhs. To reiterate a point from what Mahendra said, compost and RDF are byproducts from our waste processing activity, and given the high transportation costs, weigh on our reported margins. The pre-tax profits for the fiscal year ending March 2023 stood at INR 102 crores, a decrease of 9%. This decline can be attributed to the lower reported EBITDA margins, as mentioned earlier, as well as higher depreciation and finance costs. If you were to include reimbursement revenue and routine escalations, which are pending approval from the authority, the adjusted EBITDA for FY 2023 would have been approximately INR 188.7 crores, with an adjusted CAD of approximately INR 102.8 crores.
Our total debt has increased to INR 350 crore compared to INR 170 crore last year. The rise being mainly due to higher drawdown at the PCMC waste-to-energy plant of INR 126 crore, along with the remaining balance being due to CapEx at our new C&T operation. As of March 2023, our net debt stood at INR 298.6 crore, resulting in a net debt to equity ratio of 0.48, based on our total net worth of INR 617 crore. It is worth mentioning that our financial liquidity has improved during the subsequent period. As of March 31, our DSOs increased to 90. Since then, we have realized approximately INR 59 crore, returning to us to our historical trend of 65 DSOs.
As we assess our financial performance, it is crucial to understand the various factors that have influenced our numbers. We remain committed to drive a sustainable growth and improving our operational efficiency and revenue recognition to overcome challenges and capitalize on the opportunities. With this, I will open up the floor for Q&A.
Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. Anyone wishing to ask a question may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to mute answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take the first question from the line of Kaushal Kedia from Wallfort PMS. Please go ahead.
Hi, can you just elaborate as to what this escalation clause and the other. Why was there a delayed recognition of those INR 21 crore? Can you just throw some light on that?
Yeah, Kaushal. As part of the routine tender, there are certain expenses that is reimbursed to the company. This is a tender clause. Any increase in salary, any change in minimum wages, and change in fuel costs gets reimbursed automatically. For that, we elected standing committee of the various municipal corporations. Since elections in the different corporations like Thane, Nagpur, MCGM, Mumbai has not happened, the elected members are not present. Some of the election related issues like passing the escalation amount is pending their approval. That is one of the key reasons why we have not been able to recognize this amount of INR 19 crores for the full year. If I were to add this INR 19 crores, my EBITDA would have been higher than what is being reported.
We expect these escalations to be passed as and when the elected members are being appointed and the businesses return to business.
If this amount would have been added, your EBITDA would have been close to INR 188 crores, right? INR 188 crores.
INR 188 crores, yeah.
PAT would have been INR 102. Okay. You have taken this, basically, you have basically accounted for in quarter four?
There are two ways to look at it. Either the company would have adopted an approach, they would have booked it, and waited for to happen, and then realize this month. Revenue and in future periods. In order to how the business of when can the election.
May I interrupt, sir? Mr. Kedia, there's a lot of background disturbance.
Sorry. Yeah, sorry.
Maybe the questioner would you mute your line when you're not speaking?
Yeah, yeah.
Thank you.
Yeah. Just to summarize, but I lost my train of thought.
No, you were saying as and when these elections happen.
As and when the election numbers come in, the routine matters come in forward. These things will be put up, and the approach will come in shortly. Just to put things into perspective, a similar thing happened in one of the large corporations where we provide services. The receivable is pretty high, but post January 2023, till date, we have realized around INR 59 crores from that entire amount. It's just a routine process, that they need to pass those bills. And since there are no elected members, this is being kept in abeyance.
Okay, fair enough. Tell me one thing, as of today, what is the amount that is disputed or that is stuck in courts or stuck in some sort of a regulatory issue? What is the total amount, if you can give that?
I would say that is less than INR 4.5 crores.
Less than INR 4.5 crore. Why has the auditor given an observation to an amount, which is more than that?
They have qualified the receivable around INR 10.9 crores, because part of this dispute resolution council has already passed the judgment, and the payment is yet to come. That is one part of the provisioning or the qualification that I'm referring to. The other referring point that they have issued is the emphasis of matter pertaining to one corporation, where the state government has already instructed the corporation to make the payment, and the letter has been issued by the corporation to the company, saying that they will make this payment correct in the next 12 months time. This matter of the state government instructing the corporation and the corporation making the payment, it's a slightly delayed process.
It's not something that can be achieved or acted upon within 12 months time. That is why the auditors are kind of highlighting these points. There are already one couple of arbitrations, which are in favor for the company, and those are significantly higher than the amount that we carry in our book of accounts.
Okay. Any new order wins for any new cities or any visibility on that front?
There are a couple of projects that we have already submitted bid. We cannot disclose, but there is a very large C&T contract in northern part of India, where the annual contract value is upwards of INR 100 crores. Then there is also a very large processing plant in Western Zone, which is an EPC contract plus O&M for 15 years. These are two bids, which we have already submitted, and we have a very good feeling of, you know, having a good chance of winning them.
In addition to that, there are several projects which are in the pipeline that will be bidding in the next few months.
Okay. All right. Thank you. Best wishes to you. Thank you.
Thank you.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is on the line of Ambar from Geomatrix. Please go ahead.
Yes, hi. I recently started looking at this company. I actually have one question and one suggestion. My question is, can you talk a little bit about the auditor's observations? What you just said, that is the amount stuck in the with the municipalities or in litigation, seems to be more than the number that you gave. My second question is: Why does this company not pay a dividend, even a token dividend? It would come on so many buyers list. There are so many funds, especially outside India, who are looking for themes like this, but will refuse to buy a non-dividend paying stock. Seems to me there is enough capacity to institute a small dividend. I appreciate your thoughts.
Yeah. To answer to your second question, this has been already discussed internally, and the matter has been given to our board. We will be coming back to you on this before the AGM. That is something that we will definitely take it from the board's direction on that aspect. That should help you with that. The first question is on the qualification. This amount of qualification of INR 8.05 crores has been pending for the last four years, so it's a continuing matter. It's not a fresh set of qualifications that is getting flagged up. The auditors are of the opinion that if you have, either there are two options, either you provide for the entire amount or you get the money out of the system.
We were already getting this money out by 2021 when the company went for public for the IPO, but then COVID hit, and the courts went into hibernation, and we are not able to get any traction there. Post that, they already received a dispute resolution settlement with one of the corporations for an amount which is more than five times the amount we mentioned in our books. I mean, we are very confident of realizing this money. If you look at the last time amount and the current amount, which is being qualified, there is a small dip of around INR 60 lakhs, because that money has come in. These are very small amounts that we're talking about, around INR 8.05 crores in totality, and that translates to just 1% of our total annual revenue.
We are very confident because most of this money are under arbitration, where the arbitrator has given an order in favor of the company. It's just a matter of time of realizing this money, and that is taking time, and hence, the company has not made provisions for this. I mean, that's how it is. The amounts are not significant. It is with corporations which are sound. Work is going on with most of these corporations. We have helped these corporations get very good ranking in the Swachh Bharat Survey, and they are still very good clients with us. We don't want to kind of mark off these issues, because they are very much bankable.
Okay, I think there should be some kind of clarity here if you know, kind of want to attract a new set of buyers, because obviously, this is also a small-cap stock. You know, many people were excluded because of liquidity concerns. I think, you know, having an investor presentation and an earnings release is a good idea. I don't know if there is a settlement mechanism or something with municipalities, but maybe some management comments around that, if there is an easier way to kind of, you know, get this stuck money out so that the audit report can be cleaner, it would help. Anyway, I understand that you're trying. Well, good luck, and no more questions from my side.
Thank you.
Thank you. The next question is from the line of Richard D'Souza from SBI Mutual Fund. Please go ahead.
Yeah, good afternoon, Joe, Subramanian NG. Hello.
Hi, hi, good afternoon.
Yeah. Just a couple of questions from my side. One is, in the other expenses, do we have any extraordinary items which are there? Year on year, the other expenses have gone up quite a bit.
Two factors which have led to the increase here, Richard. One is the transportation expense related to RDF. That has, because in the last year, we transported just around 8,000 tons of RDF. This year, we transported around 48,000 tons of RDF, there has been a significant spike in the transportation bill. That has reflected into the spike in your other expenses. The other small components are hiring costs of vehicles, because these are normally higher now. Post-COVID, the rates have increased for us. These are the two reasons why you are seeing an increase in other expenses. There is no extraordinary provisioning that we have to book in this PA.
Okay. That means we don't have any pricing power on RDF, is it? While we have been saying that it is of, use to the, clients, they save a lot of money and the fuel cost, but when we ask them to bear transportation expenses, they're not able to bear it.
You know, so there had been the trend in the past, but, over the last one year, we have seen a very good response because we have actually directly addressed the concerns of the cement companies. Cement companies are very particular about the soil and the moisture content of the RDF that they want.
Mm.
We have accordingly adjusted our operations, and we are supplying that. As we speak now, we have several clients who have given us orders with a positive contribution, excluding the transportation cost. We are making some money, excluding the transportation.
Richard, this RDF in the past was dirty RDF, so cement factories were not happy with this type of RDF. What we did is, our team of engineers, we realized the quality of RDF they require in their team. They require certain size and certain moisture control, for which we bought additional machineries and improved the quality. Thereafter, of course, we are getting good orders, and even we are making pellets, RDF pellets also, which also there's a market, good value for it. We have generated a market where cement factories can totally shift from coal to RDF based to run their plant.
Mm-hmm. Sorry to say bluntly, but why can't they bear the transportation cost?
There are some cement factories, they are paying upfront, and they are bearing their transportation cost. Of late, it has just come.
That's the point that we're trying to make, is that, let's say the gross value is, they are paying is INR 3,000 per ton. The transportation cost is INR 2,500. We make a INR 500 margin net of transportation. In a way, they have started paying that now. I'm just giving an example.
Initially, Richard, when we started off, we were giving RDF almost free of cost in the marketing way, and we started interacting with the cement companies.
... what type of quality they want, because in, you know, about 75% of the coal is replaced by alternate fuel, which is RDF. In India, it is only 3%. One of the reasons was cement factories were saying they were getting dirty RDF. Now of late, after giving this quality RDF, as per their requirement, things have changed, and they are willing to also consider much more upside amount. It is not one or two cement factories. We are working with around clear on five to six of them. Yeah.
One last question on this is, what is the calorific value of the RDF that we supply?
In terms of the GCV, the gross calorific value is about 2,500. The net calorific value is close to 2,200 kilocalories.
Okay. Okay. second question is on your employee cost. I mean, on a YOY basis, compared to fourth quarter last year, you're hitting an annual run rate of about INR 240 crores. or let's say, put in simpler terms, your employee cost has gone up from 24% of sales to about 30% of sales. I mean, can you give any color on this? Is it expected to stabilize here? your revenues haven't grown that much, but your employee cost is growing faster.
Richard, one is, last year, we didn't have Nashik operations there, so that has kind of added around 800 headcounts to the base. That is one of the reasons. Second most important is that-
800 on 9,000 is not too much, isn't it?
Those costs are higher than the minimum wage on certain geographies. The wages that we pay in Nashik is more than the minimum wage in that particular region. That has led to one set of increase. A lot of geographies, I think there has been increase in average pay bill. The average salaries have been increased to compensate for the rise in inflation and the standard of living coefficient.
Do we expect this to stabilize here or we expect it to go up?
Spikes happen once in two years. I mean, if you look at the last couple of years, wage bill, that has almost been in line with the revenue lines. The spike comes, and then it kind of stabilizes over the next two years, and then another spike comes later. We expect this to stabilize over the next 18-24 months, at least.
Okay. Okay. Okay, thank you. Maybe I'll come back later.
Richard, just to clarify, the escalation has not come in, so you're seeing a softer revenue. The percentage of wage bill to revenue is also higher because of that.
The escalation is about INR 20 crores, isn't it?
INR 21 crores, yes.
INR 21 crores. Okay. Okay, thank you.
Thank you. The next question is from the line of Manish Dhariwal from Fiducia Capital Advisors Private Limited. Please go ahead.
Good afternoon, thank you for this opportunity. This problem of recovery from the municipalities is a continuing problem. The auditors have also, you know, after waiting it out, they have finally kind of reached a conclusion that the recoverability or the timing of this is uncertain. Assuming that the municipalities will continue to behave the way they will, and your manpower costs are also rising, and, so what is basis this, what is the expected EBITDA percentage that the company can continue with?
Yeah, good afternoon. Looking at the way the trends have been, I mean, if you look at last DSOs of Antony Waste's consolidated level, I mean, our DSOs have always averaged around 60 to 70 DSOs. For the month of March, those numbers look spike, it stands around 90. Post that, we have collected close to INR 59 crore of these amounts. Of course, March it was within 45 days of the year-end closing. My DSOs are now tracking 60, 65, which is my historical, comfort zone. I mean, the receivable is sticky, but it's not problematic because I the way the business works is on a monthly billing system. There is always a 45-day to 60-day kind of a cycle wherein we get the payment realized out.
Escalations do help us now because this was the first time in the last two decades that we ever seen various corporations without elected members running the show. This has never been foreseen, such kind of an event, where large corporations like the BMC or Nashik or PCMC have not had elected members. Otherwise, we have never had this kind of a stringent, kind of a cash flow, kind of a mismatch between the escalation and wage bill rising. On a steady state of affairs, as the C&D operation and the waste processing, the kind of revenue mix that we have, we should be comfortable with a 22%-24% EBITDA on a steady state of affairs. Part of the reason why the EBITDA is also softer is because of higher contribution of the project revenue, which is coming in.
That is a low-margin business. That's contributing to just 10% of the margin. Going forward with the CapEx at PCMC, getting out of the shape and commercial operations kicking in, our EBITDA margins will be comfortably upwards of 20%.
Okay, okay. See, the point is that, see, it is the nature of the business. Like, you know, that, your customers are these, municipalities, et cetera, and, getting the approvals for, escalations, and then that is going to, continuously, that is going to be an issue. Either your pricing basically manages that element or, you basically. See, because currently, the EBITDA margins are significantly lower than the ones that you are mentioning at the steady state level. Now it is getting difficult for us to actually, you know, kind of, value as to how we should, look at this critical element of the business.
See, if I were to add the escalation and the reimbursement minimum wages, which is part and parcel of the tender, adjust on the time factor, my EBITDA margins versus what is being reported would be up by around 400 basis points. That is something that as a company, we are adopting a policy to recognize the reimbursement and escalation on a cash basis instead of an accrual basis. Once things stabilize, we will see this cash flow coming into the system, and the prospective cost is already been incurred, so there won't be any cost associated with these activities. Going forward, your point is taken. There is this issue of working with corporations, but that is now being addressed with user collections being an additional source of revenue for companies in waste management.
In cities like Noida, Nagpur, Indore, I mean, you name it, the corporations don't just pay tipping fee, but allowing the operators to charge directly to the waste generators. In the city of Noida, I mean, a monthly cash collection ranges anywhere between INR 80-1.2 crores per month. That is one way of hedging your receivable risk from municipalities. Similarly, we are seeing a large number of corporations opting for this basis, there could be Jhansi, Varanasi, where user collection is an additional source of revenue, which not only helps the corporation de-risk their model given the way the financials are, but also gives an operator an equal footing to de-risk his revenue from the receivable risk that you rightly mentioned.
Just to add to that.
That is there, I understand that. The point is that, see, instead of collecting from one party, now for each municipality, you will be collecting money from, say, 100,000 people, and that basically will add to the cost profile of the organization. That also will need to be kind of baked in. So if you have the experience of, you're doing these collections from Noida and the other municipality that you gave an example of, so how does it work there? Meaning, how is the collection process happening from the individual waste generators?
It's just like what happens in the power and the water utility business. Even in waste management, some of these cities, specifically Delhi, Noida, and then some cities in Uttar Pradesh, they have allowed, by law, collection of user charges. That's very much integral part of our scope. When the client bid out the project, it was known to us that this is part of our scope. We actually now look forward to it because this is the classical thing of hedging your payment risk. You know, do you want to have one customer versus 100,000 customers? Just like utility business, we see this as an opportunity to maximize our revenue and reduce the payment risk.
Just to give you an example, I mean, in, in one of the cities that we are operating in, Noida, where we are operating in Noida, our user charges collection is almost one-third of the tipping fees that we get from the client, right? There is another 10-15% of additional scope that we probably can increase. There's a potential to increase it by another 10-15%. That's the kind of thing that we are talking about. It's actually, we see this as an important part of our business, where we are continuously in the process of improving our skills.
Okay, thank you.
On the issue of receivables and DSOs, what I would say is that, I think, let's see, most of the clients, most of the tenders, municipal tenders, not just for us, but in this business, that contractually, the clients are supposed to pay in 60 days time, right? Which matches very well with our DSO of 50-65 days. Which basically means that most of our payments are reasonably updated. It is only the escalation issue, which actually requires some kind of approval from the standing committee, which is taking a bit of time in some of the places because the party is not in place, the standing committee is not in place. When rectified, we are confident of actually, you know, improving our EBITDA margin.
Okay, thank you, and all the best. Thank you.
Thank you. The next question is from the line of Gaurav Gandhi from White Oak Capital Management. Please go ahead.
Yes. Hi, sir. Just one question. Can you quantify the major items in our other expenses for whole year?
The main, major items would be power and fuel, hiring charges, and your transportation costs. These are the three main items which contributes to close to 80% of the other operating expenses.
Okay, all of this comes to 80%, right? Okay. Sir, the fourth note to our consolidated account says that the escalation claims of INR 50 crore and INR 6.57 crore are confirmed by municipalities.
Yes.
are this I mean, if you are saying that there are no elected members to the municipalities, whether the, who has, you know, confirmed these amounts?
The commissioner, the state government's urban ministry confirms that this amount is payable. That has been confirmed by the state government themselves. They have further instructed, based on the ledger balances, which has been confirmed and tallied with our books, that this is payable by those particular municipal corporation. The municipal commissioner of that party, with whom we work, has also issued us a letter under his office, that this amount is confirmed and will be paid to the company in installments.
All right, sir. In the case, when the members get elected in the municipality, can they raise a dispute regarding this amount? I'm seeing another note where there is INR 15 crore, which have been cleared by standing committee, but the municipality has disputed that in High Court, which have won. Can it be the case that elected members, you know, may raise a dispute against this INR 50 crore also?
No, this has been already been approved by the standing committee of the municipal corporation. Since this is a grant that needs to come from the state government, the corporation has written to the state government. The state government has, in turn, directed the municipal corporation to use their good officers to make the payment. The approval to make the payment out of the budgetary allocation has been granted by the Urban Ministry to the Commission. The Municipal Commission now has the rights to do it. Change in government has nothing to do with it. This is the bureaucracy, the bureaucratic arm, which kind of does the paperwork.
Okay, okay. Understood. Understood, sir.
If the orders come from the state government to the municipality, then they can use, pay us from any of the budgets. Usually, they need sanction from the state government for that.
Oh, okay. Okay. Thank you. Thank you, sir. Thank you.
Thank you. The next question is on the line of [Swaranjit] Chatterjee from Girik Capital. Please go ahead.
Hi, sir. Good morning. Am I audible? Hello?
Yeah, you are.
Yes, please proceed.
Yeah. sir, my first question is, the INR 19 crore accelerated revenue is even recognized. That should be recognized by H1 of next year, right? That should improve our margin in H1.
Sorry, your voice is not clear. Can you repeat the question, please?
one second. Hello?
Yeah.
I'm saying the INR 19 crore revenue, which we couldn't recognize in FY 2023, that should be recognized by next year, H1, right? That should push the margin in H1.
Yes. If things go up, if the elected members are in place, the escalation gets passed through, or even if you get an intimation that this is an approved and accepted, this will come as part of revenue and, flow through my data.
Okay, sir. This year, our contract revenue was INR 232 crore versus INR 98 crore last year. Now, this is entirely for Kanjurmarg and Pimpri Chinchwad waste to energy project, or there are some sweep project that, those are also part of that?
No, this is entirely related to the Pimpri-Chinchwad waste to energy and the Kanjur project only.
Okay. The next year, this amount should be very less, right?
In the first quarter, there won't be any such significant number in the balance part of the year.
Okay. Okay, sir, thank you. I have one request to you. There is one slide in the presentation where you provide which are the contracts going on. Is it possible to share the number of projects or identify the projects which are going to expire in one year? For example, you have one P&D project in Bangalore, which was probably extended up to January 2023.
18% of my P&D revenues are up for renewal, and the project has been extended, that the tenders have not yet been floated. These contracts, which has already expired, I have a visibility of at least 12 months from now. That's around 18% of our P&D contracts, that is like 18% of my 45% of my revenue, which is around 11% of my net gross revenue, gross core revenue.
Okay, sir. From when should we see the revenue kicking in from the P&D project, which we got for Mumbai site?
That will be quarter one of FY 2024, that is, around April 2024 is when we will start commercial operations.
April 24, that is FY 2025, right? Okay, sir. Thank you. Thank you.
Yeah.
Thank you, sir. That was my question.
Thank you. The next question is on the line of Harshil from HSBC. Please go ahead.
Yeah, hi. Hi. Hello. Hi, hi. Am I audible?
Yeah, please.
Yeah. My question is on two things. First question is on that we have significant, you know, investment happening in working capital. When I say working capital, is, you know, excluding cash and bank balances.
... because as we are growing and we have to make investment into working capital, I understand. Because of increase, you know, data, credit period, it is adversely impacting the margin, right? Overall margin. Are we going to charge any interest on this receivable for which there is a significant delay in collection?
Normally, the tender allows us to charge interest on the delay in payment from municipal corporation, but it's an industry practice or it's a normal practice as such, interest is stopped only in legal terms, and it's never been used in the actual operational manner.
Because especially we are having a case, because when the state government municipal communist authorities have also approved the claim, right, and they also admitted the amount, but they are not paying it on time, right? We have a significant case, you know, why can't we let forgo our interest claim, especially when there is a delay from their side?
You are right. I mean, you know, we also hope that, you know, these government clients should actually pay the penal interest for delays. Unfortunately, that's how the industry has evolved. Not just our industry, but all government contracts, I mean, they don't give interest.
I understand how the business works. I understand the business aspect of it. Because we are at INR 210 crore of receivable stuck in, you know, total INR 210 crore receivable. Out of that, INR 70-80 crore, INR 80 odd crore, for which there is some attention in the audit report as well, attention in audit reports. At least 1/3 of my receivable is stuck for this overdue.
This point was raised in our audit committee, and it was decided that we will raise the bill, but in the books of account, the same will be reversed. In the books of accounts, that interest charge of chargeable to our clients, the amount stands at zero. It was noted that the audit committee, that this is something that the company should work on. We have informally informed our clients that this is the tender clause, so you need to look at this aspect. The books of accounts don't carry this as noted.
These overdue receivables that we have, out of this, we have provided some amount. The provision that we have made in this quarter as well as in earlier quarters, whether those provisions cover these overdue amounts or it is a wholesale, bucketing approach or portfolio approach that we have adopted?
Only in specific client cases where we have got a balance confirmation and a credit note or a adverse recommendation from the client, have we made absolute provision. Otherwise, it's a portfolio provision that we have taken and kept it. Based on the last two decades of experience of working in this industry, we always have an easier kind of provision to kind of tide us over such kind of eventualities.
Okay. Okay. There is significant increase in borrowing. Is this borrowing is for these projects, which is going on?
Yes. Well, main increase for the for the debt is primarily due to the waste to energy project that is being constructed at Pimpri. That has taken away the incremental INR 126 crores for that project. The balance is due to the new project that we executed in the North Delhi and in Nashik, CHP operations.
Okay. In terms of waste to energy, how much revenue that we expected to generate in next year, and how much would be the margin in that case?
Normally, we don't give any specific guidance in terms of project-specific numbers, but based on our very conservative approach, I think we are looking at an annual revenue of around INR 60 crore-INR 65 crore on full scale of operations. I mean, next year is going to be only for six-nine months of operations. That's what a staggered year is. An INR 60 crore-INR 65 crore annual revenue is something that we look at. Since it's waste processing in nature, these have a higher EBITDA than the control numbers that we have.
Okay. Okay, and actually, I have made a request last night, sir. Can we have this breakup of, you know, major expenses, you know, major part of expenses, which is power and fuel, and expected credit loss?
We'll coordinate with our investor relations team and have that thing sent out or have that as an annexure in our reports going forward.
Yeah, you just by way, present it by way of note into the result itself. That would be better, because we don't want you to, you know, ask a very basic question, which we can, you know, get it from the result itself.
Point taken.
Okay, okay. Thank you. Do we have any plan to issue any bonus shares? Because we are significantly capitalized in terms of... I would say we are good capitalized company. Do we have any plan to issue any bonus shares?
Currently, we are looking at, I mean, this is something on the capital structure. We never apply any thought. We will definitely reach out to the board whether they have any such ideas in this aspect.
Because why I am saying this, because when we give a dividend, the cash goes out of the company, right? We have significant borrowing outstanding. Instead of, you know, giving a cash, at least, you know, reward the shareholders by way of issue of bonus shares.
All right.
Okay. Thank you.
Thank you. The next question is on the line of Harish Swaminathan, an investor. Please go ahead.
Thank you very much. I've been carefully listening to all these questions and wonderfully addressed by all of you. The core concern seems to be the relationship with the municipalities. My question is: how do we bring back little more assertiveness and a certain rhythm back to ensure our rights as a vendor with the municipalities? Of course, we are bound by the tender, but on the other hand, we are an essential service provider, and our service is very much in demand. How do we ensure our right? Because somebody has to pay you, but then he is not on the elected status as on date, so we'll have to wait. How do we do it?
Do we do it by way of withholding service, which is not very practical, or do we escalate to the Chief Minister of the state, or we escalate to the Prime Minister's office? As a vendor, it is our right to get back our money, let alone interest. We are providing a sacred service. Now, how do we ensure our right? Is it only the tender document by which you ensure our right? Then you have limitations. I mean, my question is, I mean, this addresses most of the concerns of the investor questions till now, including the question asked by Richard about our inability or the timidity to co-collect that INR 500 transport cost from a cement company who can very well afford to pay it.
My question is more philosophical around, bringing back a little more assertiveness into something which, the customer is, very much mandated to pay. We are not doing a charity to him. Thank you very much for, all the work that you have been doing. Thank you.
I think it's an excellent question, sir. What I would say is that there are two parts to it. One part is the contractual part, you know, that we must, where we must exercise our rights. What we have done is that we have strengthened our central contract management team, so that at least we are meeting all the obligations contractually that we are supposed to deliver, so that the client doesn't find faults in our works tomorrow as an excuse not to pay us. That's one. Secondly, second part of the answer is philosophical, as you said, is that, you know, ultimately, this is an essential service. This is essential business, okay?
There's no two way about it, that we actually cannot hold them to ransom or blackmail them by saying that: "Okay, we'll not service, not give you service today or for next couple of days." Okay, because that actually leads to bigger problems, because after when we come back, because even operationally, if we stop our service for two days and come back after two days, it's again a mess, right? We have to do, we have the restarting operations actually take more efforts and energy and time. The best way and only way which we have found it works very well is to actually have a close dialogue, very close communication with the stakeholders.
I mean, no less than the commissioner or the health officer, who typically are the two important stakeholders in a city, are the people that we actually, you know, communicate with or talk to them regularly about the kind of problems that we are facing in terms of cash flow constraints, if they don't pay on time. Invariably, we have found clients actually being, you know, supportive for that. Yes, as you said, we have not gone to the Prime Minister of India, but we actually have reached out to the state government, the urban development department. For example, there's even the example of one of the cities that we're talking about, which has got a huge outstanding, and the municipality was not in a position to pay. We went to the state government to...
They issued the order. We have to try all options that are available to us, which is talk to the local stakeholders, talk to the political stakeholders, talk to the RWAs and the resident welfare associations, talk to the state bureaucracy and even the Chief Minister's office and so on. All these things actually sometimes help you in, you know, meeting the objective that we want to have and solving our day-to-day crises. I hope that addressed your question.
Thank you. Thank you very much, and all the best.
Thank you. The next question is from the line of Kaushal Kedia from Wallfort PMS. Please go ahead.
Yeah, hi. What I wanted to understand is, the escalation clause in the wage increase, bills that you've not recognized for this year, will it be a recurring issue? What is exactly the escalation for the fuel increase, and what is it? I want to understand the technicalities.
Kind of clarifies on three buckets. One is pure, salaries and wages and miscellaneous. There are different weightages that are assigned to the rate % that we quote to the corporation. As and when the fuel price or and wage bill increases, the same gets calibrated, and the increase in prices get passed on as escalation in our tipping fee. Now, normally, the tipping fee, as is granted by the corporation, and escalation needs to be approved by the, either the Commissioner General or by the standing committee. In certain contracts, it specifically mentions that escalation, which is annual or quarterly or even monthly, needs to be approved by an elected member.
Till 2021 or even pre-2020, this was not a problem because there were elected members who were there, and as a part of the routine monthly budget and bills, this was getting approved. Since there are no elected members, there is nobody in the office to pass this bill. The tipping fee, which is the standard rate, gets approved.
... The escalation and due to increase in fuel bill or waste bill gets approved later once our member is appointed in the office. That is the difference. Otherwise, it's a routine, matter of, operation for the company.
For your information, majority of the contract, we have escalation, and the escalation money is coming in without any problem. Maybe just one or two contracts where we are waiting for, you know, election to attend, and once that is done, it's not been an issue.
Okay. what I want to understand is, so it basically, again, if the fuel costs increase, which they were, say, high in the first half of this, like, the last financial year. We have this problem again, maybe. If, if there's no standing committee again.
The increase in fuel cost, the money is already spent by the company. The reimbursement is not currently getting booked because there is no authority to approve this reimbursement. The revenue is low because of that amount. The expenditure is actually incurred and spent up. That is what has led to the depression in the margin.
If we can just add to that, you know, the escalation problem is occurred only first time, when we moved from the quoted rate to the escalated rate for the first time. After that, it's almost an automatic cycle, wherein the rates are revised quarterly or annually, as the case may be.
Okay, that is because this year was an anomaly because of the extreme rise in crude oil prices and subsequent rise in the petrol prices. Is that right to assume?
That's the right way of looking at it, because once the approval comes in place, then it is your problem.
One more question that I have is that, so what the earlier gentleman asked, is why, out of INR 210 crores, why did he say INR 80 crores is disputable or is INR 80 crores is under dispute?
The balance are routine payments, because the bills are raised on a monthly basis. The outstanding as of March 31st, the work, the bill is raised only in April. That's why the receivable amount is on a higher side. If you want to understand.
He said, the gentleman said, I also want to understand, I think the gentleman said INR 80 crores is about disputed amount. Is that correct, more than one third?
Around INR 50 crores is the amount which has been disputed, and that is under dispute by the state, and that has been passed on. The entire INR 80 crores is not the issue.
No, passed on means, INR 50 crores is disputed and passed on, you mean?
INR 50 crores is the money of minimum wage reimbursement, which is being approved by the state and the municipal commissioner, to be paid to the company in installments within 12 months. That is the clarification on the note four that the other previous analyst had asked for.
Okay.
The other qualification, which is over and above the INR 50 crores, is the INR 8 crore qualification, which is pending receipt of funds based on arbitration settlements.
Okay. Okay, one last question from my end is there any industry lobby which you all have created with other players in the industry, that can basically put up your issues to the concerned authorities, you know, about the payments and escalation and something like that, on that front? Is there a strong industry lobby?
Waste management has a subject in CII and the FICCI, where these, concerns are raised and flagged. There is not a single industry lobby for waste management, because waste management pre-2020 or even pre-2000, was still run by the government agencies. Even today, there are a handful of, players. We all, we are part of the CII and the FICCI Federation, so we do raise our concerns to these, larger, firms.
Just a suggestion, isn't it, will it be possible to create a lobby and lobby, you know, to maybe the central government, or maybe they can form a sort of a committee under the Swachh Bharat Mission, to expedite payments and sort out these matters on a faster, fast track basis?
We have organizations like FICCI and all, that is more of industry, how policy matters. As far as payment is concerned, every municipality has a different way of paying, you know, like in the case of Mumbai, we get 45-50 days. In some municipality, it takes 70 days. Some place, it takes only 30 days. Every client is different. The organization, the industry organization, like FICCI and all, they we sit together, we discuss this matter, basically this is more on policy matters. Actually, we, you know, often reach out to even the policymakers in Delhi, at Ministry of Housing and Urban Affairs, you know, and Swachh Bharat Abhiyan, those kind of, the mission kind of, people and so on.
However, as Joe mentioned, I mean, they are more policy-driven. I mean, they make policies. Okay, for the payments are always driven at the municipal level. It's always better to go to the state government if we need to, you know, if we need them for any intervention. Otherwise, industry lobby and those associations actually do not help beyond a point.
Okay, thank you so much for answering my questions patiently. Thank you.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. As there are no further questions, I now hand the conference over to Mr. Jose Jacob for his closing comments.
I want to express my gratitude to our dedicated team, who have worked tirelessly to achieve our goals. I also extend my heartfelt appreciation to our clients and stakeholders for their unwavering support. Together, we have built a strong and successful company, and I am confident that our journey towards a cleaner and greener future will continue to be filled with success. Thank you, everybody.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Antony Waste Handling Cell Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.