Ladies and gentlemen, good day, and welcome to Antony Waste Handling Cell Limited Q4 and FY 2022 earnings conference call. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the 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, Antony Waste Handling Cell Limited. Thank you, and over to you, Mr. Jacob.
Good afternoon, and a very warm welcome to everyone present on the call. Along with me, I have Mr. Subramanian, Group CFO, and SGA, our Investor Relations Advisor. I hope every one of you and your family continue to be in good health and safe. Our investor presentation is now available on the stock exchange and the company website. Let me now go over the business highlight of the period. We ended this fiscal year on a positive note, reporting record high revenue of INR 667 crore, helped by strong professional performance from all our sites, which reflected in improving the tonnage and in the inbuilt price escalation also kicking in. During the year, increased activity from our new contracts in Varanasi, Jhansi, and Noida also contributed to our growth parameters.
On to business-wise performance MSW C&T projects, Municipal Solid Waste Collection and Transportation project. We have 14 ongoing projects in this service after adding two new contracts during the year from Jhansi Smart City Limited and the NDMC, Sadar Paharganj and City Zone. Jhansi is fully operational, and NDMC new contract has contributed to only 15 days of revenue from the last year. Our MSW collection and transportation business volume increased by 7.4% year-on-year in Q4 FY 2022, and by around 20% year-on-year in FY 2022. This volume includes excludes waste transported, where our billing is either on shift basis or on account of households or on acreage basis. Coming to municipal solid waste processing projects. We processed approximately 2.3 million metric tons of waste in our MSW processing project, which includes Kanjurmarg and Pimpri-Chinchwad.
For the fiscal year ending March 2022, an increase of approximately 12% year-on-year. We booked revenue from the Greater Noida biomining activity for the first time in Q4 FY 2022, a mere 10% of the total project value there. We expect to book a larger chunk of Greater Noida biomining in the current fiscal year. Tonnage handled per day increased to 5,900 tons during the quarter, and we expect this momentum to continue. The biomining of our first cell in Kanjurmarg is going well, and we are pleased with the quality of compost and RDF produced. After this first cell is finished, we will begin the biomining in our second cell. We stand on our target to start operation in Pimpri-Chinchwad Waste-to-Energy project by March 2023.
Also, during the year, the board of director of Antony Lara, our material subsidiary, has increased the controlling interest of Antony Waste Handling Cell in Antony Lara from 63.04% to 73%. We continue to focus on contracts in newer municipal areas while continuing our cluster-based approach. We are seeing various municipalities coming up with tenders in both waste processing and municipal solid waste collection and transportation segment, which will act as a good growth opportunity for us. In our aim to be recognized as a company which provides a sustainable living environment to the citizens, we have signed an EPR agreement for PET bottle disposal certificate with a large beverage company. During the course of engagement, the company aims to process and safely dispose 1,500 tons of PET bottles.
We are pleased to inform you we just won a contract of collection and transportation of Nashik Municipal Corporation. The contract, it is an annual revenue, will be around INR 20 crore-INR 25 crore, and it's a 5-year contract. This is from my side. I now hand over the conference to Mr. Subramanian, Group CFO.
Good afternoon, everyone, and thank you for joining us for our fourth quarter 2022 earnings conference call. I will share the highlights of our financial performance. During Q4 2022, the company reported operating revenue of INR 146 crore as against INR 120 crore last year, which is up by 22% year-on-year. The increase in core revenue was driven by an increase in tonnage because of the addition of three new contracts in C&T and processing, as well as improved activities in both commercial and residential areas where we operate. Operating revenue for the fiscal year ending March 2022 has increased by 32% to INR 568 crore as compared to INR 429 crore last year. While total revenue is up by 39% at INR 667 crore, which includes project revenue.
Consolidated EBITDA has registered a healthy growth of 35% to INR 46 crore in Q4, compared to INR 34 crore the same period last year, with an EBITDA margin at 24%. The EBITDA margin was weighed by higher project expense to the tune of around 43 crore as work on Pimpri-Chinchwad WTE began, which is reflected in the contract and other section. For the fiscal year ending March 2022, adjusted EBITDA stood at INR 173 crore, recording a 33% growth compared to 121, with a 26% margin. Profit before taxes for the quarter stood at INR 34 crore, which reflects a 77% growth year-on-year and for FY 2022, pre-tax income stood at 113 crore, an increase of 16%.
Profit after taxes for the quarter was INR 26 crore and for the full year it's at INR 90.4 crore, both being up by 63% and 41% year-on-year respectively. Coming to business-wise performance, as Jose mentioned, our collection and transportation revenues is up by 31% at INR 108 crore compared to INR 83 crore in Q4 2021 and is up by 40% in FY 2022 at INR 417 crore compared to INR 297 crore in FY 2021. The growth was on account of an increase in total MSW or C&T volume by 7.4% in Q4 as compared to Q4 of FY 2021, and a growth of 20% for the full year of 2022. We handled a total of 1.53 million tons in FY 2022 in the C&T section.
In the MSW processing, the revenue has remained flat on a sequential basis at INR 38 crore and is up by 14% in FY 2022, and this is also reflective of the 11.9% increase in the total tonnage processed for the entire year, which stood at 2.3 million tons. Coming to our balance sheet, our net debt-to-equity as of 31st March was maintained at 0.2x. The total debt as of 31st March stood at INR 170 crore as compared to INR 150 crore last year. Net debt is at INR 77.5 crore.
The company's overall credit profile has improved, resulting in a 460 basis points reduction in our average consolidated borrowing costs, which stood at 12.7% March 2021, it declined to 8.11% in as of March 2022. Our receivable period has also been steady. It's total receivables as of March 31, 2022 on a DSO basis was 70. It is a critical metrics for us, and we keep a strong lookout on the same. The capital return metric remains strong with a return on capital employed of 19% and a return on equity of 17% as of March 31, 2022. The last quarter of FY 2022's performance has set the tone for the new fiscal year.
The company delivered a strong volumes growth, higher execution in areas of service, which reflected in our double-digit growth of revenue, operating EBITDA and operating profit before working capital changes. Our quarter's performance was best ever performance since inception, and we'd like to build on the same. That's all from our end. Now we are opening the floor for the Q&A.
Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question.
There are more than 20 parties in the conference.
The first question is from the line of Nikhil Chaudhary from Kirus Portfolio Management Services. Please go ahead. Nikhil, may I request you to unmute your line from your side and go ahead with the question, please. The line for the participant dropped. Nikhil, can you hear us? Nikhil, can you hear us?
Hello.
Yes, go ahead.
Yeah. Hi, sir. Good afternoon and congratulations on a great set of numbers. I wanted to understand note number six. You have an extra line, probably you are explaining some INR 29 crore of receivables that have come up new in this quarter. Can you explain this in depth? What is it?
The new receivables that has come in, from these are, receivables from our line of activity because of new scope of operations that we have enhanced in. All our new contract revenue is coming in basically from Jhansi and Varanasi and to some extent in Noida new zones and from NDMC. This is what has been the incremental revenue that's been built.
Okay, we are explaining that it is in regards to some dispute, like it is a disputed amount that is yet to be received or because we may have recognized it in this quarter or.
This is a historical amount that is also being clubbed in. This is an ongoing as per the new Ind AS accounting norm and the standards of clarification. This is a new norm that has come in. That is why we need to incorporate in our announcement.
Okay. Okay, understood. Any pending receivables like that is probably yet to be recognized?
No, no. These are all recognized. This is a new disclosure norms as per the new accounting standards. That is why you are seeing it for the first time.
Yes. Understood. Thank you so much, sir. That's it, and congratulations once again.
Thank you. The next question is from the line of Manav Vijay from Deep Financial Consultants. Please go ahead.
Yes. Thank you very much, sir, for the opportunity. My first question is regarding your PCMC project in Pune. Last time we shared that the costing of that project has moved up from INR 240 crore to INR 264 crore. Now, we have seen in last few months the way commodity prices have moved up. Is there any further escalation in that project cost or that INR 264 crore remain true as of now?
Good afternoon, Manav. The CapEx cost has been fixed and firmed with the vendors, so we signed an agreement to that extent. The vendors have also gone ahead and hedged their position, so the cost for the company is capped at that amount.
This will be helpful. Second thing is that in your opening remarks you mentioned that this NDMC project is now fully operational. It was a INR 1,000 crore project for 10 years. Would we safely assume that we will have roughly INR 100 crore per annum and INR 25 crore per quarter? Would that be a safe assumption to make for that project?
Manav, what Jose had mentioned is there were two new contracts, JRC and NDMC. When he was talking about fully operational, he was talking about JRC contract.
Correct.
NDMC, we have just started the operation in one of the zones, so we expect the total procurement of assets by the corporation to be completed by June' July. It's only after maybe the start or end of Q2 or beginning of Q3 that 100% scale-up of operation by NDMC will happen.
In terms of revenue, it was a INR 1,000 crore project for 10 years. Can we assume INR 100 crore per annum in terms of revenue from that project?
Yes. That is a safe assumption based on the tonnage that we are putting in. Starting from the period, you will have a running run rate annualized revenue of around INR 95 crore-INR 110 crore.
Thank you. Manav, I'll request you to come back in the question queue for a follow-up question. I request all the participants, please restrict to two questions per participant. The next question is from the line of Akash Mehta from CAPS Investment. Please go ahead.
Hi, good afternoon, sir. I have a couple of questions. Firstly, are you open to bidding for a new processing contract as of now? If yes, then what is the kind of investment that you are comfortable with?
Yes, we are definitely open for bidding for new processing contracts. Over the last couple of years, what we have seen is there's a decent amount of capital grant that's been provided either by the state, central, or by the municipal corporations themselves. The capital requirement depends upon the technology, the space, and the subsidies that is being provided by the clients. Normally, we have seen a fixed asset term of around 0.4-0.6 for annualized size. It depends upon the need of the client and the technology that they want. It will be very difficult to give a very generic statement there. Definitely, yes, we are looking for more processing contracts.
Okay. All good. Secondly, with the fuel prices, like, reaching such unprecedented levels, are you able to pass on the same or is there any pending unabsorbed portion?
48% of our total revenue has a variable escalation, which is either quarterly, half yearly, or monthly. 62% of our total operating cost, excluding contract cost, is labor and fuel. We are pretty much hedged in that aspect. This is a factor which is a pass-on for us. There's always a timing lag because we incur it today and we get it reimbursed later. There is always a timing mismatch that happens. We are able to pass on a decent amount of the headwinds that we have faced down to the client.
Okay. Any pending unabsorbed portion as such, that you can.
No, no. That is, we extend all our expenditures out and the reimbursements are all come in lieu of escalation clauses as mentioned in the tender.
Okay. Agreed. That's it from me. Thank you.
Thank you, Akash.
Thank you. The next question is from the line of Jigar Mistry from Buoyant Capital. Please go ahead.
Yes. Good afternoon, everyone. Two questions, sir. First, you know, can you throw some light on, you know, how fast can you go ahead with the 5,000 tons per day to the limit of 7.5? I'm sure Mumbai is producing a lot more, you know, waste in terms of, you know, the overall daily production. So what really is the constraint? Second question is with regards to the compost. I think this is arguably the first quarter where we are starting to, you know, mine compost and RDF, and how has been the experience in terms of pricing or the overall production? If you can split out the revenue, that would be great too. Last question is, you know, any incremental disclosures with regards to the CapEx that you would like to make? That's also my friend.
Yeah. Hi, Jigar. Point one, the current tonnage that we are processing around 5,300 tons, it's not a static amount like last month, in the month of April, it was all the way up to 5,800 tons per day. It's not a very static amount. It keeps on swinging on the upside. As for the tender norm, there is a step up in the tonnage that will flow to our processing site. There's a gradual increase. Will I reach 7,500 tons in 2 years time, 3 years time? That's something we would not like to step out there right now, but we definitely have seen an increased intake or an inflow of waste into our system.
We presume in the next 3 years or 4 years time, we will be reaching that number safely. Sale of compost from the BioMine materials, including the sale of RDF, we don't see a significant quality differential. Actually, the quality is significantly better because of our technology where we recirculate the leachate into the system. There is a decent amount of bacterial action that helps the quality of compost being sustainably well. Realization is at par with the compost that we generate from fresh waste. There is no disparity just because it's coming from a BioMine materials. Third point that you asked about the income tax inquiry, I mean, we have not heard anything over and above what we have already informed the first two quarters after the incident happened in October 2021.
We have yet to receive any further input or reply or inquiry or questions from the income tax authority.
Thank you, Subramanian. Just one follow-up on this. Combined compost and RDF, are we good to look at something like, say, INR 80 crore-INR 100 crore in the coming year in terms of revenue?
Today, Jigar, it would be not wise on the company's part to venture out and give you a number, but definitely maybe three quarters on when the traction happens and we are able to supply the stock to our clients, we will be in a position to venture out and give you a number there.
Okay. Thank you so much.
Sure. Thanks, Jigar.
Thank you. The next question is from the line of Flavio from Favilo Funds. Please go ahead.
Thank you for the opportunity and, congratulations on a very good set of numbers. My question is regarding the margins. I see you all have very good margins. But also in the investor presentation, you all have mentioned that most of the contracts or the revenue is already, you know, it's hedged to the inflation. So going forward, would the margins remain same, or is there any way where, you know, you all can actually there is a scope of increasing the margins? Or in case, say tomorrow, if the, you know, the cost increases, do we have the, you know, headroom to, pass it on to our customers? Please, if you can throw some light on that.
If you look at collection and transportation contracts, approximately 62% of my operating costs are fuel and labor. All the tenders that we signed or all those tenders in the waste collection and transportation business have escalation clause wherein either they are linked to certain parameters of high-speed diesel of the WPI component or the minimum wage of that particular region. As and when these things change, we get the tipping fee. There is a rate per ton that we quote to the client gets recalibrated. It's a pass on benefit to us. There's also a line item for miscellaneous items, which is also captured in the tipping fees. To a great extent, the tipping fee helps insulate us from spikes in costs.
Now, there is always events where the tonnage falls, like for example in COVID. There is a fixed cost of running a shift. Now, if the tonnage drops, you definitely see a fall in margin, and if the tonnage increases, there is a spike in our margins. That is a factor that we work on. Antony believes in having a very optimum route planning wherein we are able to split out our assets in a much better manner. That is the only way we can improve our margins. That is something that the company tirelessly works on. We use artificial intelligence, we use route planning, we use all kind of technology-enabled solutions to improve our systems.
Approximately 90% of our vehicles have GPS, which helps us reroute the vehicles so that the tonnages that they carry can be maximized. That is what we can do on the collection and transportation side of business. Waste processing, these are long-term contracts and depending upon the waste generation and the technology that we select, the margins are normally steady and the escalations are linked either to a WPI or to the different parameters here. Margins are normally steady in these kind of businesses. The scope for improvement lies on your ability to derive a delta on your higher maintenance or better maintenance of the vehicles and having a fewer downtime of your plant and machinery.
Okay, thank you. I'll come in the queue if I have it.
Thank you. The next question is from the line of Akhil from RoboCapital. Please go ahead.
Hello, good afternoon. Am I audible?
Yes, you are.
Regarding just going back to the opening remarks that you had made, the project expenses are high due to the work at Pimpri-Chinchwad currently. I just wanted to know how long will it take for project expenses to remain at this level?
The project expenses will increase, and proportionately the revenue from project income will also increase in the current financial year. We expect the total project cost and maybe a revenue to the tune of INR 120 or expense to be booked in the current financial year. After the construction awards, you will not see a spike or maybe an absence of the same in that particular line item.
Oh, okay. Fine. Contract revenue currently for this quarter because of the Jhansi contract has been high and now going forward, you had mentioned it's gonna be at INR 100 crore per annum.
No. R evenue is basically related to the contract cost. As to the Indian accounting treatment for project costing, wherein you do a DBOT activity, which is what we do for both Kanjur Marg and PCMC Waste to Energy. The capital that we invest has to be routed through the income statement. That is why you see a contract revenue and a contract cost. These will increase as and when I do a CapEx at my waste to energy plant. The revenue from Jhansi and what you refer to the NDMC contract will be part of my tipping fee, MSW C&T revenue.
Oh, okay. Fine. This depends on whenever you do CapEx, this will increase. Because of the CapEx you are doing currently, the contract revenue has increased in Q4.
Yes. Yes. Exactly. We will continue as and when the company bags DBOT basis or we are getting any other new contracts in this nature as in that are transferable to the client, you will see this line item coming in.
Oh, fine. Just regarding the guidance that you've given in Q3, you know, 27% in EBITDA going forward and a 30% increase in the top line. I just want to know, does that guidance still stand, at any rate?
At core level, I mean, when I talk about core, I'm talking about my actual tonnage movement and the contracts and everything. We are very comfortable with this number. The 30% growth that you're talking about also includes my India's project costing revenue. We still hold good by those numbers. On the margins, depending because we saw the fuel price increases effective from March 15 onwards, and the escalation, as I said, kicks in later. We will see some volatility in my margin, but these get reimbursed maybe end of the quarter or end of the reporting period. There will be some maybe under good swing here and there on my EBITDA margin till the time things stabilize globally and in domestic markets.
Okay, fine. I'll get back in the queue for now. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Neerav Dalal from Maybank. Please go ahead.
Thank you for the opportunity. I had three questions. First.
Neerav, sorry to interrupt you. Can I request you to speak through the handset?
Yeah. Now is it clear?
No, sir.
Can you just hold on for a minute?
Sure, sir.
Hello?
Hello.
Hello.
Yes, we can hear you now.
Yeah, sorry. I had three questions. First is on the C&T revenues. If you see the C&T revenue over the last three quarters, we've done about INR 105 crore- INR 109 crore. In this period, we've also secured two. So the Jhansi started to happen in this quarter, and obviously, we had certain last year's contract come in. Going ahead in terms of FY 2023, how do you see this line item move? That is number one. Number two is on the contract revenues and project expenses. Now, if you see the project expenses as a percentage of contract revenues has actually, you know, been volatile in this year. In the last quarter, it was at 66%.
Before the third quarter, it was at 33%. What should one take as a thumb rule here? Lastly, we've seen a decline in the employee cost, and we've also obviously seen a decline in the employee headcount. What are the reasons for the same? How should one look at this line item going ahead?
Neerav, we normally don't comment on the segment-wise performance, but it would be good to understand that when we talk about collection and transportation, it's completely derived on the tonnages that move in. Normally, Q2 and Q3 are the wet season for India. The tonnages are normally higher. If you take 100% of the total tonnage to be for the full year, I would say 55% of that gets logged in Q2 and Q3. The 45% gets clocked in Q4 and Q1, because the dry season comes in and moisture quantity goes down.
Correct.
That is one parameter. You will not be able to see an apples to apples comparison or a sequential growth kicking in as and when it happens from the same sites that we are talking about.
Got it. Okay.
Jhansi, Varanasi, and even the new project that Jose mentioned about Nashik. Now, these are conditional. Jhansi is, the CapEx is completely borne by the corporation. As and when the corporation provides us with the additional equipment that they should have procured and given it to us, the ramp-up will happen gradually, and that is seen happening in the current quarter onwards. That is fully operational. Same is the case with Varanasi. We will see a traction there. We would be comfortable with, and at the guidance that we gave of approximately 30%-35% growth on the top line, including processing and C&T per se.
Okay.
Your second point was on the rationalization on the labor cost.
Yes.
The labor cost is down, purely because in Q3 we took an excess of expenses that was passed on because of a minimum wage revision. We took a cumulative impact for 5 months, and we booked in around INR 6.8 crore in lieu of the same. That is why you are seeing a spike in Q3. Q4 onwards, it's rationalized because of the absence of such increase. The same gets passed on to the operator, that is us, by way of escalations that is inbuilt in the tender.
Okay. Just one follow-up on this. We've also seen a decline in the employee headcount. Is it that how does then this work?
The employee headcount is more of a rationalization process that keeps on happening, because during the first two quarters and Q3, there is always a larger demand for manpower to be laid down, and that kind of keeps swinging. This is more of a rationalization effort that the company has initiated in certain zones that we work in. Based on that, we have fine-tuned the route planning and everything that helps us in having a higher operational performance.
Got that. Got that. My last question on the contract revenues and contract project costs.
That will be difficult. It's not a linear thing. Because last year until November, we had monsoons in certain parts of Pimpri-Chinchwad. Civil work could not be done in the time-bound manner, so that got scaled up later. It's like more of a first season kind of a thing. We try to crash the project so that we are able to complete the project by March 2023.
Mm-hmm.
It will not be possible for us today to give you a guidance like if the balance of 130 or so is to be spent. It's not going to be spent 40% now, 30% in the second quarter and the balance in Q3. Depends upon the ability of the vendor to also get those assets delivered, installed, and verified by the independent engineer, and that's how the work gets done. It would be safe to assume that the entire amount has to be spent and will be spent in the next 11 months.
Sorry. Just one more small clarification here, because I was of the impression that the contract revenues, so the project expenses, you add a cost plus and you book the project revenue. In that sense, I was expecting that both the line items would move.
It would move in parallel.
In the current quarter, if you see, project expenses as a percentage of contract revenues is like 66%. In the previous quarter, it was like 33%. That was the.
Certain expenses needs to be confirmed with the independent engineer, that takes a time lag because they have to provide us the certificates to verify the same. Based on the CapEx that we spend, we book it in our system, and we also have to recognize it as per the waste that comes into my Kanjur Marg project. There is a delimitation that happens on the amortization on the fixed financial assets that gets booked into the contract revenue line item.
I was of the impression it was just the also.
No, no. This is also Kanjur. Both of them come into it. Right.
Got it. No problems. Thank you.
Thank you. Next question is from the line of Pavan from RatnaTraya Capital. Please go ahead.
Sir, when I'm looking at your note, numbers five and six regarding the receivables, I just wanted to understand if there are cost escalation provisions and wage hikes already built into the contract, how come these particular receivables are still outstanding? In the sense, you have said that there are claims and legal issues going on. I just wanted to understand how these contracts are framed, and when do these contracts actually get into this kind of, what should I say, disputes?
Normally the litigations, the arbitrations kick in when the interpretation of the tender are not very clear. The amount that you're referring to, about INR 26 crore, all fall into contracts that were signed and executed pre-2016, where the terminologies were vague and they were not crisp and open for deliberation from both the sides of the entities. For example, if we are allowed to carry waste and then suddenly the law comes to effect saying that you need to carry segregated waste, the tender which is smooth or done point gets deliberated upon, and it goes for dispute. These were the line items that gets disputed when the terms of the contract is not clear.
Since 2016, 2017, most of the tenders that the company has signed has showed that the tenders are the tender documentation, the clauses are clear on these aspects. The redressal mechanism is smoother. There are clauses wherein the arbitration process is defined and escalation, which is where a lot of gray areas were mentioned, is also thrashed out during the pre-bid meetings. These are all old contracts signed, executed pre 2015 that is in the arbitration or in dispute lines. Happy to inform you that certain disputes have been redressed, like the ones that we have with BMC, the ones that we have with Navi Mumbai Municipal Corporation, they have all been cleared, and the company would be reporting positive numbers post the settlement, and the money gets transferred to the coffers.
Like the note number five, where there are INR 45+ crore around INR 9.83 crore, that is INR 55 crore, pertains to receivables before 2016, is it?
No. Some of them are pertaining to the current year also. These are pertaining to the minimum wage revision that has happened in the particular state. Now, the contract says that revision in salary will be reimbursed, but change in minimum wages will not be reimbursed, is their interpretation. There is a High Court of Bombay ruling which says that change in minimum wage also means change in wages. We have got an escalation, which we already won in one of the municipal corporation. This amount which you are referring to, it's also been accepted by the corporation saying that this is payable by the corporation to the client, which is us. The payment has been accepted. The dues have been accepted that this is payable by the client to the company.
The timing, since the amount is more than 180 days over, so we need to bring it to the notice of the investors and to the regulators.
Okay. On the Pimpri-Chinchwad project, what kind of contract revenues are you expected to book in 2023 and 2024?
We expect all our contract revenue to be booked in FY 2023. The project we are expecting it to be completed by March 2023. We expect another additional INR 110-odd crore or INR 120-odd crore of contract revenue to be booked there. We don't expect similar line item in FY 2024 because, just based on timelines that we are working with our vendors and the client, we are targeting March 2023 to be the time when the construction of the waste-to-energy plant will be completed.
Just wanted to clarify my understanding. INR 140 crore of contract revenues from Pimpri-Chinchwad has been booked in 2022, and the rest will be booked in 2023. Is it?
Yes.
Is my understanding right?
That is right.
Okay. Jhansi, how would that split be?
Jhansi is a collection and transportation contract where the CapEx is funded entirely by the corporation. There is no contract income or contract expenses in Jhansi at all.
One small clarification, sir. When we are doing this contract, booking these contract revenues, so we are executing that particular project, and so we will be keeping some margin in terms of profitability with us. That is given, right?
Contract cost and contract revenue pertains to only those contracts which are on DBOT basis, which are predominantly, in our case, being processing contracts at Pimpri-Chinchwad and at Kanjur. As and when I do the capital expenditure, yes, we would be recognizing a preset project IRR rate as my revenue line item and expensing out the cost as the project cost. The same sits in my balance sheet either as financial assets or as intangibles.
Project cost would be expense for the entire duration of the project.
For the CapEx that we have done, yes.
Okay. Okay, sir. I'll get back in the queue. Thank you.
Thank you. Next question is from the line of Faisal Hawa from H.G. Hawa & Company. Please go ahead.
Broadly in 3-5 years, do you think that we could ever get a similar contract like Kanjur Marg with any of the large metros, which could really, you know, be the big game changer for our company, let's say in Bangalore or Delhi or even Ahmedabad? Given that, you know, now so many, you know, lessons and experiences have been learned by us over the last 25-30 years, it's probably no other company would be having.
What I have noticed is, like MCGM, Mumbai Corporation, the area jurisdictions is very big, and so I don't see any municipality having 6,000 or 7,000 tons per day. What I have noticed is there are many smaller municipalities who's producing around 1,000 tons of waste per day. Antony is targeting enough, so we can go for 5 to 10 municipality, which will be equivalent to 8,000 to 10,000 tons per day. We are exploring with many municipal corporations. Last 2 years was because of COVID, they the municipality were more focusing how to tackle COVID. Now they have come up with new tenders wherein they are willing even to fund, you know, in year funding up to 30%-40% on the capital.
We are exploring many corporations and all have come out, and they have been asking us to give presentations. They want to know what is the right solution for the waste for them, and we are doing it.
Sir, what are our efforts in you know really increasing our you know dry waste content which can be sold again? Because that contribution to revenue remains low all throughout. One more thing is that are we looking at you know carbon credits on different new exchanges that are now coming up which are you know trading much more actively on this and you know blockchain-based solutions to really you know earn more revenue out of what we are already doing?
We are now presently focusing on two things, that the RDF we are converting that into pellets, and there's a market for the pellets. One more thing is the coal price has shot up everywhere.
The RDF demand has been increasing from various cement companies, so that is one good news for us. Extended producer responsibility for all large bottling company, FMCG companies. They have to comply with EPR thing based on the Pollution Control Board, and for which they need company like us who can support them and help them in achieving those targets. Because if they do not comply, there's a huge penalty from the Pollution Control Board on recycling of their bottles. As far as carbon credit is concerned, it is opening up. We are exploring once we get it right because few years back it has gone down very badly.
Now we are exploring if it is coming up in the right way, then I can discuss with the client how we can make some revenue on that.
What are the discussions in the board meetings and strategy like? You know, I mean, how do you want to take this company forward? Because I mean, the whole game I feel is that you know, the sector is coming of age and it's so much necessary. You know, we are at the forefront of having done this for almost so many decades. What are the discussions like on how to take the company forward?
Faisal, the discussions are around multiple prongs. One is increasing focus from our existing clients so that we de-derisk our revenue model so that we are not relying on a few set of clients, one. Second is increasing our non-municipality revenue, which is basically meaning not just focusing on compost and RDF, which is coming from our recycling process, but also targeting the procurement and processing of, and directly getting into the recycling segment, wherein the dry waste can be tackled because we have an end reach to the bulk generators or even generators on that side. More importantly, we are also working on certain areas about getting into vehicle scrapping. We are looking at getting into certain areas wherein waste management as an entire circular resource extraction works on.
We are trying to work as one of my partner talks about doing the reverse Amazon way. The Amazon you just buy and take the product into your house. In this manner, we are going to go to the houses, pick up the recyclable waste and source it out, segregate it, give it to the recyclers. The waste that enters the landfill is fewer than what it is today. These are the areas that we are definitely working on, and that is the near-term focus. The long-term focus would be to go into a zone where not only MSW, which is what constitutes bulk of our revenue today, will be a part of the revenue. We will get into maybe hazardous waste, bio waste, and more importantly, e-waste. We are looking at medical equipment scrapping policy.
We are looking at vehicle scrapping policies. Those are the growth areas that the company, which has never explored in the past, will start exploring them. We are having the right strategy and right people to take the company forward in those lines.
I'm like extremely happy to hear what the board is discussing, and it is really heartening to know, you know, that we are actually, you know, taking on all this in your board meetings. Thanks a lot. One last question, if I may be allowed. This INR 10 drop in diesel and petrol prices, what kind of an effect would it have on the EBITDA going in this quarter and the next one, as a potential?
Assuming there is a timing lag that comes in for every 5-rupee increase in diesel prices. I mean, let me give you the other way around. Approximately 16% of my total operating cost is fuel. If there is a 10-rupee increase in fuel price of diesel, which basically means an 8% increase, my margins will be softer by around 80 basis points, maximum.
Okay.
This gets reimbursed to me maybe quarterly or half-yearly, so it gets set off in the forthcoming quarter. On a quarterly basis, you'll see some volatility as I mentioned, anywhere between 80-120 basis points, maximum only. I mean, these are including looking at DA fluctuations and everything.
Thank you very much for answering all my questions so well.
Yeah.
Thank you. My next question is from the line of Akshay Kothari from Envision Capital. Please go ahead.
Yeah, thanks for the opportunity. Sir, I wanted to know, there has been an increasing awareness regarding solid, the segregation of solid and liquid waste from the source itself, like from the households itself. How does this positively or, you know, impact us?
It has a positive impact for us because it helps in segregation. If you're a collection and transportation business, it doesn't really have an impact because the total tonnage gets picked up and we move and then we are getting paid on a tonnage basis. If you are looking from a processing point of view, then the work is easier for the garbage processing entity because the organic waste gets processed faster. There is no segregation required. So it's a pure organic matter which comes in, so your organic compost is of a significantly higher quality than if mixed waste had been there. Fewer CapEx to be involved and fewer manpower to be deployed. So it's a positive thing if things gets done and gets deployed and accepted and rolled out effectively.
Okay, that's great. Just on the collection and transportation. If liquid waste is getting segregated, and what I understand is, from the 50/30/50, when there is a wet waste, our tonnage gets more and also increase in revenue. That won't have a negative effect on us?
We actually when we talk about green waste, I mean, we don't have any such thing called liquid waste. I mean, the septic tanks and everything is still not in our purview that we cater to. The green waste is bulkier. It's a tonnage waste, so we don't have an issue there because the tonnage. Despite segregation, there are very few cities which have end-to-end segregation made mandatory and getting disposed at buildings themselves. That percentage of waste is not a significant sum today, and we don't foresee this number to be large going forward also.
Okay. That's great. That's it from my side, and all the best.
Thank you.
Thank you. The next question is from the line of Gaurav Gandhi from Glorytail Capital Management. Please go ahead.
Hi. Thanks for the opportunity. I just wanted to ask that do we face any kind of competition risk, and if yes, will it put any kind of impact on our margins going ahead?
Antony has been in the waste management business for 20 years, and we always watch on what will be the price at which our equity and our project IRRs are safeguarded. When we bid for a project, we look at the viability of the project operationally, and we of course take into consideration the kind of players who might be bidding with us. That doesn't, that is not the deciding factor for our quoting a price.
Another thing is these contracts are long-term contracts, you know. Any bidder who's coming, he has to give services for next 5-10 years, whether it's collection and transportation, and if it is waste processing, it is 25 years. The pricing has to be quoted, you know, yeah, with proper IRR and all that. I have not seen aggressive bidding because if they quote a wrong price and then they're stuck and their company will go for a toss. If anybody wants to underquote, okay, that's their problem. We want to be super careful, and we bid right way with proper IRR.
One more question I have. Have we received any kind of subsidy from the government for our WTE project at PCMC?
We have a INR 50 crore capital subsidy from the corporation. As per the tender condition, this was stated upfront that there will be a capital subsidy to the tune of INR 50 crore and power purchase at the fixed price of INR 5 per unit for the tenure of the project. This is what has been mentioned in the tender. It's from the corporation, not from the government per se.
Okay. Are we going to account it in our financial, I mean, at rate somewhere or the other that the promoter is taking that subsidy? That's why I'm asking this.
No, no. It's not taken by the promoter. It is sitting in the company's books as a financial asset as and when it gets drawn down, and the capital account will be adjusted to that effect. Of the money that comes in, the repayment will be in the debt-to-equity ratio. We will be using the capital grant to repay the debt for the project. The equity that comes in will be used either for repaying the debt again or for the future growth opportunities that might come along. This is not going to the promoter. Let me.
I just wanted to understand.
Fair enough.
Thank you, and congratulations on the H2 set of numbers. Thank you.
Thanks.
Thank you. The next question is from the line of Rohit Ohri from Progressive Shares. Please go ahead.
Hi, sir. Two questions. For this Nashik project for Panchavati Satpur, the revenue of INR 25 odd crore, by when do you think that this will start hitting the P&L?
We got the offer today, yesterday late night, today morning, I would say.
Mm-hmm.
From what we understand, it will take us anywhere between 3-4 months to get the assets in place and then maybe mid-month. I would say post-monsoon is when we would start working on that site. It normally takes 3-4 months for the asset mobilization and the team to be mobilized because there are 2 zones which has been awarded. We would need at least 3-4 months for entire fleets to be mobilized, the manpower to be teamed up, and the route planning to be perfected again so that we can do it at go. Maybe by October onwards we will be starting to see some revenue from this project.
Okay. We plan to sell some surplus electricity at around INR 3 or so to the BMC in future, of course. What sort of requirements would be there to be connected to the grid? If you can just take us through that how feasible or how possible is this, and who will be paying for the cost or the funding of these connections and equipment required?
We don't foresee a situation where the excess power will be available, honestly speaking, because we are now ramping up our biomining equipment. Currently the 0.97 MW that we're generating, we're using it captively for powering our MRF and the site requirement. With the biomining equipments being placed and our shredders and trommels running, I foresee or from what I understand from our project team, that anything excess will be consumed internally, and we are actually doubling our power generation capacity. Over the next 3-4 years, we don't see a surplus power situation that we expect. If it's there, then we will be selling it to the grid, but the joining and everything is at the MCGM's end. The payment for the power will be paid by MCGM and not by the DISCOM.
If you see the share of MSW processing as a percentage of the total turnover, it is kind of reducing and it's like kind of stuck in the range of 23%-24% odd from the earlier 29%, 26% the highs which we have seen. Would you like to share something on this? Do you feel that going forward, this 23%-24% kind of of MSW processing would sustain or do you see it coming down more because more projects are coming in C&T?
MSW processing will inch up gradually once the Waste-to-Energy project is stabilized. We will see higher contribution coming from MSW processing. That is what will change the turnover now. We are also looking at higher contribution coming from a Greater Noida biomining project, which is absent in FY 2022. That contribution will also inch up our numbers. Having said that, this might be offset with the increased revenue from NDMC and the newly bagged Jhansi contract. Maybe in the next 2 years' time we will see this inch up to 32%-33%. In the near to medium term, we see this range to be consistent.
Okay. The last question is related to these new contracts which you are bidding. If you can just take us through whether these contracts are related to C&T processing, biomining or others, and which geographies you are looking at, and what could be the approximate size of these projects.
We are looking at a mix of both C&T and waste processing contracts. We as of now have bid for five more contracts and, three of them are collection transportation and two are waste processing. The timelines are very weird. I mean, in the sense they will take anywhere between 6-12 months to know the status and the workflow of the same. These would be of sizes, collection transportation of each contract will be in the tune of around 300-500 tons per day. Waste processing would be in the range of around 700-1,000 tons per day. These are predominantly in the western part of the country as of now.
The newer contracts has been coming up are either in northern part of the country, but they are still in design phase. They are yet to come up with the LOI to that effect.
These MCD that is merging, that should have some more advantage for us, right? Because we are in talks to merge the three parts of Delhi into one consolidated kind of corporation. That anything from that end or no?
That is a positive news for all the operators because that will also open up a decent amount of work to be done because if you read the newspapers about the Ghazipur, there's a large amount of work that needs to be done in that part of the country. Merging all the three municipal corporations is definitely a positive news. It also means more infrastructure to be done. This is something that we feel will take at least a year or two for things to settle down and formulate a policy driven note on that.
Okay, sir. Thank you for answering the question. Thanks a lot.
Thank you. The next question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking. Please go ahead.
Yeah. Sir, I just wanted the gross block figure before accumulated depreciation.
Gross block at the group level you are mentioning, right?
Yeah, at the group level.
That should be around INR 600 crore. Let me just give you the right thing for you. Just give me a minute. Did you want, including financial assets and everything? It's around INR 600 crore.
If we remove the financial assets then?
Financial assets are basically capital that we have deployed in our bioreactor. It actually should be forming a part of my structure.
Overall gross. Okay. Suppose if we remove the financial assets, then what would be the figure we earn?
INR 380 crore.
INR 380 crore. Okay. Sir, I just wanted a broad overview with respect to, say, maybe we have visibility for 2-3, next 2-3 years. Post that, what is our long run roadmap? Maybe a 5-6 years roadmap because then, how do we plan to take it forward post 2-3 years?
Uh.
See, our revenue standpoint, you know, because how are we going to expand our revenue stream? Because overall the market still looks very small in terms of value.
The market is completely underserved and under-researched in that sense because waste is something that has been there since your Indus Valley Civilization. I mean, it's been there. Somebody has to take care of it. Population now is growing all over the place, so we are seeing waste management as a solution to be more prevalent and more taken up by municipalities in a more aggressive term. Maybe the budget allocation will be more higher. We feel the size of municipal solid waste itself is going to grow at around 30% year-on-year because of the need of new infrastructure, machinery, technology to be deployed. That is just on MSW part. Now we are talking about vehicle scrapping policy. We are talking about biomedical waste disposal post the COVID impact.
We are looking at, medical equipment being scrapped in a very scientific manner. Those are the areas that will definitely take this industry to the next level. I mean, we're talking about wastewater treatment, which has been a requirement for urban areas, but it's also a requirement for the rural areas now because of, groundwater level depleting. There's a definite need for water treatment, maybe not for potable use, but at least for irrigation purposes to be in a recycled manner.
Sir, in 3 years we'll be able to still grow at maybe an exponential rate, maybe around 25% sort of on a broad level, not exact figures, but at least.
25% CAGR growth is something that, for this industry in this country, is something should be on the cards.
Right. There won't be more competition which will kick in the long run because of the long-term agreements or sort of?
I mean, it's an industry which we've underserved, so there will always be competition from technology service providers. We are seeing the carts, like each truck has some three or four laborers. Now because of better technologically equipped vehicles, we are seeing each vehicle being manned by two laborers. It's becoming less labor-centric, but more technology-centric. It's going to be driven by companies who are able to efficiently sort out their assets and have more capable machinery. Certain countries and certain players definitely have an edge. In India, the working conditions are different, the road widths are different. You don't have a single road of 16 feet wide.
Right.
Even in Mumbai. Each city, each state, even zones of a city are very different. It's going to be very difficult for somebody to come and start becoming, like even for Antony. I mean, the city of Mumbai and the city of Navi Mumbai and the city of Varanasi, though they are cities within the same country, they're all different. The characterizations of each city is different, and even parts of the cities are different.
Right. Right.
It is difficult for competition from abroad to come in and strike roots in our country in the current scenario. The local players need to be groomed up. They need to scale up to their expectation. That is a demanding task.
Right. Sir, on the long term and on the debt front, right now we have a gross debt of INR 170 odd crore and net debt of roughly INR 100 crore. What is our plans to, you know, get debt-free or?
It will not be debt-free today. The reason is, once the PCMC plant is completely co-functional, we will be incurring another additional INR 170-odd crore. That will take our debt to 0.5x or 0.6x my equity. The day I stop growing, the day I stop bagging new contracts, the day I say I don't want to bag any new contracts, from that time onwards, within four years, I'll be completely debt-free. After taking this INR 170 crore of debt, that is.
Okay. Sir, what would be our target ROCE level? Maybe, if you can give the rough numbers.
We are very comfortable with the rates that we are, and we like to hold on to it.
Okay.
20% sort of levels, right?
Yes. Okay. Thank you so much, sir. Thank you so much.
Thank you. The next question is from the line of Ankit Shah from JSB Securities. Please go ahead.
Hello? Am I audible?
Yeah. Hello?
Thank you for taking up my question. I just have one question. Many contracts in collection and transportation are funded by municipalities. Any ROCE guidance for the next 2 years, sir?
Sorry. What will be the question, please?
Yeah. Many contracts in collection and transportation are funded by municipalities. Any ROCE guidance for the next 2 years?
About.
What would be the operating margin that can be achieved from those contracts?
I'm still not able to get your question. When you say about ROCE, return on capital you are talking about or?
See the return on capital employed.
ROIC. Yes, the contracts are normally always granted by municipal corporations. The CapEx is always upfront for collection and transportation and/or waste processing contracts. As and when we bag a contract, you'll see a significant spike of, as required, being required for that particular project. You'll see a spike coming in, but that also in case of collection and transportation, the revenue also gets start kicking within the same quarter or maybe the beginning of the next quarter onwards. It's only in case of waste processing where the mobilization and the construction time is anywhere between 18-24 months, where you set up an entire plant. It's a green plant, a greenfield plant. That take around 2 years, and the CapEx is also gradual over the 2 years time.
ROIC currently the way it is, it will be slightly softer going forward in FY 2023 because of my Waste-to-Energy plant being commissioned. That gets slightly offset by increased revenue from a NDMC and Jhansi kind of a revenue-generating points. Normally it will not be swinging very badly because understanding I bag five or six processing contracts. I will be having a higher capital employed in that sense, but the revenue will then kick in after 2-3 years only. The mix is always going to be a judicious mix of collection and transportation and waste processing.
Okay. Thank you. Thank you from my side.
Thank you. Next question is from the line of from Individual Investor. Please go ahead.
Hi, am I audible?
Yes, sir.
Yes. Regarding the PCMC project, I wanted to know what will be the plant load factor when we start the project, and what will be the peak PLF that we intend to achieve, and what will be the timeframe that the plant has to reach that peak capacity?
At the PCMC Waste-to-Energy, initially we will start with a PLF around 60-65, and within 4 months we will be ramped up to around 80%-85%. This is what has been committed by our vendors, and this is what the contractual deal has been signed between the company and the Hitachi Zosen Inova in this case. The current calorific value of the waste that is being collected is very high. It's in the range of around 2,800-3,300 kcal, and our plant is designed to take in anywhere between 1,200-1,800 kcal waste.
We feel that we will be able to ramp up our plant load factor to 80%-85% within a period of 4-5 months after the project gets inaugurated, if not earlier.
This means by Q2 of the next financial year, we should hit 80-85% PLF.
We should be targeting that because Q2 of FY 2024 is when we should be seeing any teething problems or anything to be sorted out by that time.
Right. The other question is on the future growth plans. It was very interesting to hear when you responded to another question that we are looking at adjacent areas like electronic waste, bio waste, hazardous waste, et cetera. You also mentioned that, you know, a 25-year CAGR growth should be on the cards for the players in this industry. I mean, again, to put it simply, it would be fair to assume that even Antony aims to grow at that rate in the next decade also, like 25%+ ?
That is an internal target, that is what we have taken for ourselves, and that is something that we work hard towards to achieve.
Last question, if I may, on regarding the tenders that you have submitted. From all the tenders that you have submitted already, would you be able to tell me that, you know, how many tenders you have already technically qualified and you are waiting for the financial bids to be opened?
As I've mentioned, we have submitted for five tenders. We are qualified in all the five tenders. It will be too early for us to give you the details on the same.
Yeah. Okay, and just a follow-up on this. What will be a typical potential of the revenue of these, you know, the open if you win all of these, what will be the potential revenue that you're looking at?
It's still in design phase because they have asked for letters for technology and everything. Till the time the tender contours are confirmed, it will be very difficult to assign a number to that area. Because they right now wanted to know the list of players who are willing and who have executed similar projects. In that line, we have technically qualified because they have invited us to bid for the same. Once they provide the details of the tender, whether the entire city or part of the city is given, only then we'll be able to give you a truer picture to the question that you're asking.
No, no. What I meant was, what I meant to ask was, for the tenders where, like, you know, we have submitted our firm bids, and, you know, where we have got technically qualified for those bids, and we are awaiting the financial bids to be opened. Because I understand that, once the firm tender documents are released, we will be evaluating the tenders. We'll probably do our due diligence on the city and things like that. We submit our tenders, and then, you know, there is a technical qualification that will happen first. You know, we submit our clarifications. After that they do the shortlisting of the companies who are technically qualified, and they move on to the next stage of opening the financial bids of those technically qualified.
I was asking from that perspective that, you know, wherever firm tenders have been, like, you know, submitted from our end and we've technically qualified, not expressing the letter of intent, intention of participating from our end.
We got that thing. The issue is, the numbers are too large for us to even consume it internally. It's not that we will be going ahead with all the five tenders that we bid for. It's a strike rate that we're looking at. Having said that, each of them would be to the tune of around INR 1,000 crore-INR 1,200 crore over the project life.
Okay. Understood. Thank you so much for answering my questions.
Yeah.
Thank you very much. That was the last question for today. I now hand the conference over to Mr. Jose Jacob for closing comments.
I take the opportunity to thank everyone for joining the call. I hope we have been able to address all your queries. For any further information, kindly contact me or Strategic Growth Advisors, our Investor Relations Advisor.
Thank you very much.
Thanks once again.
Thank you. On behalf of Antony Waste Handling Cell Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.