Ladies and gentlemen, good day, and welcome to Antony Waste Handling Cell Limited Q3 and nine months 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 touch-tone 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. Subramaniam, Group CFO, and SGA, our Investor Relations Advisors. I hope and pray for your continued safety, health, and security as well as that of your families. Our investor presentation is now available on the stock exchanges and the company website. I'm happy to report that we have another record-breaking quarter in terms of revenue, exceeding previous quarter high due to growth in tonnage from both commercial and residential areas in which we operate. We believe the impact of the third wave of the COVID-19, namely the Omicron variant, is not very severe, and economic activity has started to normalize sooner than expected. In the future, apart from the normalization of economic activities, new contracts will enable volume growth for our company. Now moving on to business-wise performance.
Municipal Solid Waste Collection & T ransportation project. In this service, we have 13 ongoing projects, and all the regions in which Antony has operations are showing sign of positive growth. Our Municipal Solid Waste Collection & Transport business registered a year-on-year volume growth of 13% in Q3 FY 2022, and on a sequential basis, it registered a growth of 3%. I'm pleased to report that during quarter, our wholly-owned subsidiary, AG Enviro Infra Projects Private Limited, was awarded a 10-year Municipal Solid Waste Collection and Transport Contract to disposal site and operation and maintenance of equipment, machinery from the City Zone and Sadar Paharganj of North Delhi Municipal Corporation. This contract is for the collection and transportation of approximately 1,000 tons per day. This contract has a dual revenue.
Not only we'll be getting paid on tonnage handled, there is also a user fee collection model. The user fee collection will be split in an 85 is to 15 split between NDMC and AG Enviro. Waste generator will be charged fee by the operator for the door-to-door collection and transportation of solid waste from households, commercial shop, establishment, and bulk waste generators under the user fee collection revenue model. NDMC will fund a portion of the CapEx, while AG Enviro will fund the remainder. We expect the contract to start operation by May or June of the current year, but few wards can see some operation as early as end of February itself. It depends on the ability of the corporation to provide us the requisite equipment. Coming to Municipal Solid Waste Processing Projects.
For the nine-month period ending 2021, we have processed approximately 10.61 million metric tons of waste in our Municipal Solid Waste Processing Projects, which include both Kanjurmarg and Pimpri-Chinchwad. The Greater Noida bio-mining activity billing will commence in the current quarter of Q4 2022. The volume at our waste processing business grew on a year-on-year basis by 6% in Q3 FY 2022, and on sequential basis, it has improved by 4%. In Kanjurmarg, we have commenced bio-mining our first cells in order to convert waste into compost and RDF for further sale. The activity was slightly delayed due to the late exit of monsoon in this part. Our Pimpri-Chinchwad waste-to-energy project is on track, and plant is scheduled to be fully operational by March 2023.
During the quarter, the Board of Directors of Antony Lara, our material subsidiary, has approved the conversion of INR 3.5 lakh convertible preferred shares into fully paid-up equity shares at a one is to one ratio. As a result of this corporate activity, the controlling interest of Antony Waste Handling Cell Limited in Antony Lara has increased from 63.04% to 73%. Also during the quarter, Antony Lara has been recognized by the CII with the prestigious Merit for Excellence in Managing Municipal Solid Waste Award for effort in managing municipal solid waste in India.
This award recognizes our entire team's dedication to all of our plants as well as all of our support functions. This award is dedicated to all our employees who have always done their job even in the face of adversity such as the COVID-19 pandemic. Additionally, during the quarter, the result of the Swachh Bharat survey was disclosed, and I'm happy to inform that a few of the cities in which our company operates is Noida, NDMC and MCGM, among the others, have scored high ranks. It is our continuous endeavor to provide quality service to our clients and help them in the path of sustainability and proffering a better quality of living to its residents. This is from my side. I now hand over the conference to Mr. Subramaniam, our Group CFO.
Thank you, Jose . Good afternoon, everyone, and thank you for joining us for our third quarter 2022 earnings conference call. The year 2021 has been an eventful year at Antony Waste. We have completed our first year of being a listed entity, and during the calendar year, that is the 12- months ending December 2021, we have processed approximately 1.9 million tons at our Kanjur facility. This is the highest tonnage being processed at our site to date. The year has also seen the company build on its organic growth and also bag and build on three new contracts, namely the Greater Noida bio-mining, Jhansi and the recent NDMC C&T contract.
During the third quarter ending December 2021, the company reported operating revenue of INR 148 crore, up 26% year-on-year, and a total revenue of around INR 165.8 crore, which is up by 30% on a year-on-year basis. Sequentially, these are up by 4% and 5% respectively. The growth in core revenue was driven by a tonnage increase in both commercial and residential areas in which we operate. Operating revenues increased by 36% to INR 422 crore for the nine-month period ending December 2021, compared to INR 309 crore in the same period last year, while total revenue for the nine-month period is up 38% at INR 474 crore.
Consolidated adjusted EBITDA registered a marginal growth of 1% to INR 43 crore in Q3 FY 2022, compared to INR 42.4 crore in Q2 FY 2022, with an EBITDA margin of 26%. The EBITDA was impacted by provisions made on account of our conservative approach towards delay in the recalculation of billings in the user collection fee model projects. The provision under these are to the tune of around INR 6.8 crore. Let me put some color on this. Based on the new billing model of the user collection charges, our revenue recognition is from the household and commercial units, especially in the projects of Varanasi and Jhansi and also in Noida.
In collaboration with our clients and as per our tender conditions, we have implemented a more transparent technology to aid in the processing of error-free billing by adopting GPS-enabled geo-fence and an RFID-based billing processes and have moved away from manual entry. The reports and bills generated from our systems need to tally with the property card records and property descriptions of the corporation. We have noticed some discrepancies with respect to the same. The company has decided that till the time the corporation systems are not updated and reflecting the ground picture, to go with the corporation's records for billing purposes. Though this doesn't entail any additional operating costs for the company, what this means is a conscious deferment of revenue to the tune of approximately 3%-5% of that particular site or approximately around INR 5 crore per annum.
We are confident that the same will be addressed in the forthcoming quarters. Please note that there is a potential increase in revenue as and when the scope of our work in Varanasi is increased. Currently, we are providing services in 90-odd wards, and there are 30-odd wards where our services can be started, but this is pending facilities being provided by the Corporation. Furthermore, in the case of the user fee collection model, we have adopted a policy to fully provide for bad debt reserve in cases where bills remain unpaid for more than 180 days. As a result of these, we have taken a provision of approximately INR 6.8 crore at the consolidated level for the quarter ending December 2021.
We are collaborating closely with our clients to help smoothen and speed up the billing processes as well as improve accuracy and ease of verification. Additionally, during the quarter, our employee costs have risen by 9.2% sequentially. Part of the increase is on account of the revision in minimum wage rate and the change in categorization of our employees, and the same will be reimbursed to the company in the subsequent quarters by the respective municipal corporations. Also, the increase in employee cost is due to the increase in headcount due to our scaling up of our operations in Jhansi. For the nine-month period ending December 2021, the adjusted EBITDA stood at INR 127 crore with 27% margin.
Profit before taxes was INR 23 crore for Q3 2022 or 14% of total revenue, and for nine months, it was INR 79 crore or 17% of total revenue. Profit after taxes stood at INR 19 crore for the quarter ending December 2021, and for the nine-month period, it is INR 65 crore. Please note that the year-over quarter had lower tax provision due to losses incurred amid pandemic situations. Coming to business-wise performance, our MSW C&T revenues are up by 4% to INR 109 crore during the quarter as compared to INR 105 crore in the last quarter. The growth was on account of increase in total MSW C&T volumes by 3% sequentially. Processing revenues are up by 5% at INR 39 crore versus INR 36.5 crore in Q2, reflecting a 4% increase in [my] tonnages being processed on a sequential basis.
On the balance sheet front, our net debt to EBITDA as on 31st December 2021 was maintained at 0.2x. The total debt as of 31st December 2021 stood at INR 143 crore compared to INR 150 crore in 31st December 2021. Net debt is as of December 2021 is at INR 79.4 crore. Net worth has improved to INR 507 crore as of December 2021 versus INR 443 crore in March 2021. The improvement in our overall credit profile of the company has resulted in lowering of average cost of borrowing at a consolidated level of approximately 380 basis. Our receivable days as of 31st December stood at 74 days, and this is a critical metric that we would like to watch out for.
Our capital driven metric remains strong with a return on capital employed of 19% and our return on equity at around 16% as of December 2021. Now on an update on the search conducted by the income tax department officials at our company's and subsidiaries premises, there is no additional request or inquiries from the tax authorities, and we are still waiting for the response on this matter. We'll keep you guys informed and the stock exchanges updated. We would like to reiterate that the proceedings have no effect on the company's operational performance. That's it from our side, and we can open the floor for Q&A.
Thank you very much. We will 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. The first question is from the line of Hardik Jain from ISJ Securities Private Limited. Please go ahead.
Yeah. Thanks for the opportunity. Sir, our major cost is like fuel and so most of our contract, do they have escalation clause in them because fuel cost has increased a lot over the past one year or something?
Good evening, Hardik. Yes, all our projects have escalation clauses. Approximately 45% of my projects have fixed escalation and the balance 55% have variable escalations. The escalations do capture the changes in fuel, labor costs and also miscellaneous items. The contracts are normally having an annual escalation. Sometimes over the last three, four years, what we have noticed is newer contracts have an escalation half-yearly and sometimes even monthly or quarterly. To answer your question, we have escalation across all our contracts that we have today.
Okay. Now most of our projects like, say MSW, C&T project of Thane, which actually expired in 2020, that is under extension. Likewise, Navi Mumbai is about to expire in 2022, Mangaluru again in 2022. Some of the projects are like Noida, zone one, zone two, and all of these projects have expired, but they are under extension. What kind of clarity do we have that whether these contracts will be extended for next five, seven years, 10 years? Or, how should we see these contracts which are actually expired but under extension?
These contracts have expired and it is under extension. One reason was because of COVID. They had to call for a fresh tender, but they couldn't because of the pandemic problem issue. Now they will be drafting the tender. I think we may get an extension of maximum another year. When the tender comes out, bid comes out, we'll definitely bid and try our best to win back.
Normally, Hardik, our ability to renew like the ones in Navi Mumbai, NDMC, they have been. Even in MCGM areas, we have a very high track record of renewing the contracts. The latest one that we renewed was in NDMC, where we were doing a part of the zone. We were doing a Safdarjung area. Now when the tender was brought in, we managed to bag the entire zone at a higher tipping rate and also an increase in scope of activity.
My next question is, sir, we have around INR 12 lakh compulsory convertible preferential, I think, still outstanding. By when this can get converted?
Hardik, these are outstanding as of 31st December 2021. After that, consequently in the first week, once the demat accounts and everything was opened, we got those shares converted. As of today there are zero convertible preferential [of all shares will be share mixed]-
Okay.
... In Antony Lara, that entire thing has been converted.
Okay. My last question is, sir, we have one in Pimpri-Chinchwad, how much amount we will invest over next one year? What kind of revenues, you know, we can expect over the long term from Pimpri-Chinchwad project?
We have an incremental CapEx to the tune of INR 84 crore, which would be spent over the next 12-15 months. That is what we estimate to be the range. Normally we don't comment on the size of the site-wise revenue generation model, but it's very simple to look at it on the tonnage, on the rate per unit that we have managed at. At Pimpri-Chinchwad, the revenue source is dual. One is from the tipping fee, which is at around INR 504 per ton, and we are managing and handling around 1,000 tons per day. The plant at its peak would be generating around 14 MW of total power and the net metering would be around 11.5 MW. These units will be sold to the corporation at INR 5 per unit fixed for the entire tenure of 21 years.
Okay. Thanks. Thank you, sir. I'll get back in with you.
Sure. Thank you.
Thank you. The next question is from the line of Anupam Gupta from IIFL Capital. Please go ahead.
Good evening, sir. Just a couple of questions. Firstly, on the PCMC CapEx. We haven't seen any uptick in the last few quarters there at all. Given that we have a commissioning deadline of March 2023, what is the status as of now? How much is invested, how much will you invest and how will you ramp it up over the next few quarters?
Good evening, Anupam. We have invested approximately around INR 7.5 crore-INR 8 crore in the last quarter. The reason for the delay was the recovery of monsoon in the western side of the country was slow, and the civil activity could not get started at the pace that we would like it. As we informed that mid of November onwards, the pace has increased and we are still holding good to the timelines that have been given to us by our contractors. We expect the project to not have any additional time overrun in this aspect. We are actually looking at options to crash the project, save us more time, and also we try to incentivize the contractors if they are able to bring the entire project to fruition in the timelines that have been given to us by the corporation.
What is the total CapEx that has happened till date, including last quarter?
Around INR 36 crore.
Okay. You have a total of INR 240 to invest, right?
Right. That is the total CapEx, including the interest capitalization and everything. We are very much in line with the speed and activity.
Okay. As of now, we should not build in any delay there.
We are not building any delay over here.
Okay. Secondly, if I look at your overall escalation. Let's say as on December, what proportion of cost would be left to be passed on to customers and through escalations?
I would normally bulk of our revenue escalation kicks in from February, March onwards. Based on what has actually been passed and given to the company by in lieu of escalation, I would say about 60% of my revenue escalation has been given to the company. The balance 40% revenue will be given escalation from February onwards.
Let's say if I were to take, in terms of margins, if the entire thing would have happened in third quarter, the margins would have been higher by what proportion? What percentage points roughly?
See, bulk of it is collection and transportation. We would be slightly better off in the range of around at least 80 basis-120 basis.
Okay, basically fourth quarter margins then should look much better than third quarter given that escalation will come through in 7 March.
Yes. The margin in Q4 should be slightly better than Q3 margins for us.
Okay. Just one last question on the sort of provisions which you've detailed here. Obviously a part of these would have you would have known that these will happen even before you ended up accounting for these in the end of the quarter. What would help is a slightly better idea or better contract this thing, so that we have clarity on what sort of margin trajectory can happen. Because this upfront guiding of these things would actually help. Just-
Definitely. Anupam, what has happened is we have not only actually had a physical count along with our own team and the technology platform, but we have also involved the health officers of the particular ward and the corporation, and they have physically verified it. There is still a discrepancy with the accounting norms of how property cards are issued and designed and deciphered as compared to the physical count. This is in lieu of the delay in the census numbers and the counts which get ratified over a period of time. What we have done is we have logged our billing based on actual numbers, but we are going ahead with billing with receipts based on what the corporations have in their report as of today.
If there is any reconciliation that happens in future, you get a retrospective effect for the same. It's too early for us to say by when will this activity be commenced successfully.
Right. Okay. That's all from my side. Thank you.
Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Jigar Shah from Maybank. Please go ahead.
Hi, good evening. Thanks for the opportunity. My first question is regarding your carbon footprint. You employ a lot of vehicles for the carrying of the waste for transportation. Also, I think the waste processing generates a certain amount of emissions. Can you give some idea about the emission profile of the company and what's the strategy to tackle that?
Good evening. Yes, we are very aware of the kind of impact that we're having on the environment. If you look at our business, we can tease it into two parts. On the collection and transportation business, what the company has adopted is all the primary collection, which are basically smaller-sized vehicles. Those have now been migrating out of the diesel fuel-based injection into a CNG or an electronic vehicle. The company is planning to increase its EV footprint on the smaller-sized components of that. Unfortunately, the large-size compactors and my forklifts and specialized equipment still will be using diesel as a fuel mechanism. Unless until I get support from the automobile industry to replace the large engines out, I would still be relying on them.
The smaller, sub one-ton machines will be shifting to a CNG footprint on an aggressive mode. The company has just gone ahead and purchased 40 more EV vehicles for us to be used across its sites, across the country. On the waste processing in Kanjurmarg, for example, we have a waste-to-energy component wherein 0.97 MW of the power is generated from the landfill gas that gets captured and tapped internally. That entire thing is completely consumed. To a great extent, the methane emission is controlled. In the waste-to-energy section at Pimpri-Chinchwad, which is under construction, the entire waste will be controlled, converted into green energy and will be pumped back to the grid through the corporation. These are steps that we have taken.
We will be shortly publishing our ESG report, which will quantify these numbers and will be open for scrutiny from any other third party that wants to look at the same.
One more quick question. What are the practices of other waste management companies or their models which you would have seen outside India, which you admire, and what over a period of time can be incorporated over here?
What we actually like abroad, and I sincerely hope the same gets implemented in India, is a level of segregation. In India, what we collect is a very highly mixed form of waste, both wet and dry waste gets mixed and handed out to the waste operator. Globally, the dry waste, the wet waste, the recycled waste are given so separately, so that it's easy for the end consumer, like an end operator, like an Antony Waste or a Waste Management, Incorporated, kind of entities, to extract resources in a more efficient manner and reduce the impact on the environment. The waste that ends up in the landfill is significantly of an inert nature than what happens in a developing economy, especially as countries like India, where segregation is still to be caught on a serious topic.
That is one thing that we are watching for. Maybe the government will crack down hard on segregation, the need, to segregate it into various formats. We have facilities to collect waste in segregated format, but when the inflow of waste itself is mixed, there's very little that an operator can do over here.
Thank you very much, and all the best.
We have also implemented RFID tags on our bins, so we can read the locations, like, you know, in collection and transportation, which is being implemented vastly in Europe. We know how many bins are lifted every day. Our company is always looking forward for new technologies and ideas. Even our waste processing that is composting unit, our material recovery facility is one of the best in the country because we adopted a similar facility which we've seen in San Francisco. Our composting system, which is also controlled totally by SCADA with zero human intervention, due to which the quality of compost is very good and all the fertilizer company is appreciating and they're buying and there's huge demand for it.
Basically, at Antony Waste, we always look outside what are the best technology being implemented and cost-effective. Cost also plays a very sensible role in our market. That's what we are adhering at present.
Thank you, and wish you all the best.
Thank you.
Thank you. Participant, you may press star and one to ask a question. The next question is from the line of Nikhil Chowdhary from KRIIS Portfolio Private Limited. Please go ahead.
Yeah. Hi, sir. Good evening, and-
Sorry to interrupt you. May I request you to speak louder, please?
Is it better now?
Yes.
Yeah. Thank you for the opportunity. Sir, I wanted to understand more based on the user collection model. Apologies, if it is a repeat because I joined a bit late. Can you explain it like if this model continues, the risk of receivables, can this be something that probably continues going forward? Or, is it just a one-off thing and probably going forward, I heard something that integration is pending with the corporation on your system. Is this a one-off thing or this is a risk in this model?
This is something, user collection model globally in many developed countries is already going on. In India, it has just been recently implemented in many municipalities. In Noida, where we are doing presently collection transportation, we have a user fee model. Going forward, this will reduce the stress on company like us, you know, for receivables and being totally dependent on the corporation. Part of our risk will be reduced and we will get paid from the commercials, housings and all that. As years goes by, I think user fee may increase and it can reach to a level where the company just may not be dependent on corporation's risk payment. This is a start, and this is a good start for our industry.
Just to build on that, these are creeping problems, so when you To do an actual survey of a zone or a ward, and if you were to actually do a count of the households, that normally has a lag effect when you look at the property rate cards in different cities. We have learned it, where when we need to take the corporation together and verify the counts so that we avoid such kind of overstatement and then provisioning kind of an issue. This is something that we have learned. We don't foresee similar activity to happen in the future because we have got the consensus along with the corporation, department heads that these are the counts and this is what is going to be. Till the time they verify it, there won't be any significant swings in the revenue recognition pattern.
Understood. Just a bit of clarification. In the user fee collection model, do you collect, or like, the user pays it to the corporation and then they share it with us?
Sorry, we couldn't get that question clearly.
No, I was just trying to understand the user fee collection model. Like, we don't probably, like, collect it from the commercials or the commercial shops and the end user payment. Like, the corporation collects it and then it is distributed, it is shared with us, right?
We collect it. As a company, the collection scope is given to us, so we have our team to do the collection.
Okay, understood. Understood.
The collection is given a scope, whether you collect it and keep it with yourself, or you collect it on behalf of the corporation and hand it to the corporation. Scopes are determined in the tender itself.
Okay. Because I was just trying to think aloud, like if it is a one party collection, like if we have to collect it for the corporation, we just have to deal with one party. Here we have to deal with several users in this model. I was just trying to think, like, how probably going forward will it not be a more challenging task for us or, like, what is the way forward that we intend to work?
Normally, in user collection model, as in other areas, we have a ABC kind of a structure, where 80% of the revenue will be co-contributed by 20% of the generators, which would be commercials and other large generators. The units for the residential units will be smaller. They will be definitely numerous, but the impact on the revenue will not be as significant. This is like your Mahanagar Gas or any of the utility bills. It's something which is happening for the first time in the country, so till the time there is a very easy and a smooth process, there will be some hiccups only.
What we have noticed is that the user in user fee, people are willing to pay. That's nobody going on, like, say you have to just pay a fee of INR 50 per month, so it's not a big money, yeah, which is in. When you go to society, we get paid from the society. We don't go to each and every house.
Yeah, I understand.
Yeah.
Okay. Okay, understood. That's it from my side. Thank you and wish you all the best.
Thank you.
Thank you. Next question is from the line of Manav Vijay from Deep Financial Consultants. Please go ahead.
Yes, thank you very much, sir. Am I audible?
Yes.
Okay. Thank you. Sir, my first question is regarding the NDMC project that we won last quarter. It's a INR 1,000 crore project, 10 years. Would it be safe to assume that it would be INR 100 crore per annum?
It is a fair assumption to have.
Okay. Second question regarding that. We were already involved, I would say in the NDMC region, and we were already doing some. Would it be possible for you to quantify as to what would be the incremental revenue or we should assume INR 100 crore per annum as the new revenue from this contract?
I think it is a fair assumption because that would. We don't normally get into site-wide details, but we are okay with that statement of an incremental annual revenue once the project starts at full throttle to generate an annualized revenue in the tune of around INR 100 crore.
Okay. Would it be also possible for you to detail out the CapEx involved in this project?
Yeah. In this project, we estimate the total CapEx to be in the range of around INR 101 crore-INR 107 crore. It's just getting it finalized in the last final bits, because of the price escalation that's likely to happen from 1st of March or 1st of June as the case may be. Approximately around INR 30-odd crore will be funded by the corporation. The balance, the company would need to fund the same.
Okay. Approximately INR 70 crore is what you will spend between quarter four and quarter one put together.
Depends as and when the corporation provides it, but yes, we would like to get the entire thing done before the monsoon starts.
Sure. Okay. Sir, in terms of, let's say, step up function like the way we have in Kanjurmarg, there is no step up function over here. When you say you will have to collect 1,000 tons per day from these areas, this starts from day one. There is no step up.
Normally, the scale-up of operations starts zone-wise or ward-wise. It's not that from the press of a button the 1,000 tons start kicking into your system. It's a gradual process. You slowly roll out your machinery, you garner more and more equipment, you put them on the ground, you start taking over the controls from those wards. It takes normally thee-six months for the entire mobilization to happen. We expect the start of work by somewhere end of February onwards. The 100% scale up to be done before May end or even June. If things go as per schedule and everything happens. By June end, we should be 100% on the ground.
That means from quarter two, we will have full revenues on this contract.
If everything goes as per plan, we are able to mobilize the assets, there are no hiccups on the delivery of equipment, yes.
Perfect. Okay. My second question is, sir, in regard to some of the one-off that you have made in this quarter. For the INR 6.8 crore provision that you have made, this is a one time and going, that means in quarter four or further, all the further quarters, we will not get to see this kind of a year provision, and you will get a refund of this amount. Maybe time, I mean, timelines are difficult to estimate. Is that a fair assumption?
That is a very fair assumption. Of the INR 6.8 crore, we are very positive up to INR 1.2 crore-INR 1.4 crore to be reversed by the end of the current quarter or maybe the first quarter itself, because that work has already been started and that is getting verified. The pace is something that we would not like to comment and build it at this stage.
What I was basically asking is that this is INR 6.8 crore, a one-time provision? Quarter four or quarter one, we will not have similar kind of a hit?
Yes. It's a one-time provision for the cumulative work that we have done in these sites. It's a one-time provision that we have taken.
Okay. Now, is it possible for you to also quantify the increase in employee expenses because of the minimum wages and duty transition, everything? Would that be possible for you to call out that number?
Increase in minimum wage and the categorization that had an impact in Q3 is to the tune of around INR 2.28 crore. The entire amount will be reimbursed in Q4 by the corporations.
You will get this money back in Q4 only.
Yes.
Okay, fair enough. My second question is, sir, so I would say in quarter one and in quarter two call, you mentioned that roughly 65% of your contracts got renewed in terms of price escalation. Then in quarter four, I would say H2, we should have a revision on the remaining contracts. Now, what you mentioned in one of the earlier participant question is that February is when we should have the price revision for the remaining 35%. Now, going forward, we should be. That is how we should be building in as to, let's say, maybe by March or sorry, May or June, we will have 65%, and then by February, we should have 100% revision.
Assuming that I don't bag any new contracts and there is no significant change in my revenue contribution from these projects, then this assumption of yours will stand good. What we foresee is what NDMC and Varanasi kicks in, and even Jhansi kicks in a bigger way. The escalation metrics will slightly change. We will definitely update the team as and when these things happen.
Sure. Okay. Sir, my next question is regarding these three projects that you mentioned. Varanasi, Jhansi and Greater Noida mining project. My understanding was that these projects are supposed to add close to INR 9 crore-INR 10 crore per quarter to your top line. I was expecting that we should have this number in this quarter three that has went by. Now, the quarter-over-quarter jump in revenue is just only, I believe, INR 4 crore. Now in quarter four, we should have all these three projects in full operation and the consequent revenue to that.
We expect, yes. Greater Noida to be 100% on for Q4. Similarly, Jhansi, we have rolled out all the machines that have been given to us by the corporation. If you remember, Jhansi is a project where the CapEx has been funded completely by the corporation. They have not handed over the entire CapEx till date. Whatever CapEx that they have given, we have been utilizing, but it's still not serving our purpose. We expect additional assets to be handed over by the Jhansi Corporation shortly. As and when those assets are deployed, you will see a spike in our revenue. In Varanasi, yes, what we have been seeing is almost 85% of our peak revenue. We want to just get it confirmed once again with those corporation agencies and the departments before we jump the full throttle here.
Sure. Okay. My last question would be, so, between, let's say, quarter two and quarter three, one of the major item that has changed in your P&L is the decrease in the diesel prices, of close to 8%-9% because of reduction in taxes. Now that happened closer to end of quarter three. In quarter four, we should get to see the full value benefit of that because fuel is approximately 19%-20% of your total cost.
Except for Nagpur and PCMC, which have a monthly escalation, all my other projects have mostly a half yearly or annual escalation. The escalation which has kicked in today, I will be able to enjoy it for some time. The benefit of lower fuel costs is also offset partly by higher wear and tear of the machines because age of the machine also catches up. The benefit from the lower fuel price in the interim or any small benefit that we might get, I'm just saying I'll be very cautious and conservative here, might get slightly offset by slightly higher repairs and maintenance costs as we go towards the middle of the life of these projects.
Sure. Thank you. All the best.
Thank you very much. Participants, you may press star and one to ask a question. I request to all the participants, please restrict to two questions per participant. If time permits, please come back in the question queue for a follow question. The next question is from the line of Depesh from Equirus Capital. Please go ahead.
Yeah. Hi, sir. Thanks for taking my question. Sir, on PCMC CapEx, you highlighted that only INR 36 crore is the CapEx done till now, and nearly INR 200 crore CapEx is pending, right? Wanted to check what kind of CapEx you can do in fourth quarter itself and given the timelines, do you think you'll be able to commercialize the contract by March 2023, given that during the monsoon period you'll not be able to do any major CapEx?
This is Shiju. Bulk of the civil work is got completed now and before the monsoon. After that, the erection of the plant started off. We already completed the erection on 27th of January. We started with the erection on that day. We don't foresee a significant delay or any change in the timelines because of the monsoon. We hope that, as per the schedule and the plan that we have internally along with our contractor, which is Hitachi and ISGEC, we should be able to complete bulk of the work before the calendar year or maybe the fourth quarter of the current financial year itself. Over to you.
Depesh, what is happening in this WTE project? The civil work, the construction work, that is completed, which is usually which gets affected by monsoon. The remaining part, which is the sheet metal work, like the boiler, everything, is built in the plant of ISGEC or any other company. They have to just supply and assemble and erect it in our site. Like now the boiler will come maybe 1.5 month and half, two months deal. They will come and erect it and there'll be a testing. Erection work will be going on more rather than civil work.
Understood, sir. Majority of the INR 200 crore will be for this machinery which will be installed in a particular time, right? Maybe like fourth quarter FY 2023, you can see that entire CapEx is like coming in one go. Is that the right way to look at it?
It will spread over two or three quarters, but yes, bulk of it will happen in the calendar year itself.
Got it. Understood. Jose, sir, now that the COVID situation like seems to be improving, are you seeing or expecting any improvement, any acceleration in the new tenders that are coming? If you can talk about the pipeline that you have.
The new bids are being in process. Tenders are being prepared. Except for one or two states where there's code of conduct going on for the next 1.5 months, everything is kept on hold. Once those states open up, they'll also the bids are coming out. We foresee a lot of opportunities in coming months for new contracts.
Understood. Sir, just a follow-up on the previous question. Will there be any penalty clause if you delay the WTE commissioning? If it doesn't happen on March, will there be any penalty for that?
There is no financial penalty, but it's in our own interest to get it done at the timelines that we are committed. There are no penalties mentioned in the tender contract or in the agreement that we have signed with the client.
Got it. Lastly, sir, the debtor days have been creeping in the last two quarters. If you can highlight like anything which is like leading to this.
Actually, this is what we had expected and we also highlighted in the past. A lot of the corporations over the last two years, because of COVID, they have not done any other activity in the development space that they were expected to do. There has been a shift in the fund allocation, and this is in line with their developmental plans. This doesn't come as a surprise. The new budgetary allocation, for example, that has been announced by MCGM and even other corporations are very much in line and they are showing a higher outlay in the waste management and in waste water treatment businesses. We expect these numbers to stabilize at these levels today.
Okay. What about the pending receivables that you had, the long-term receivables and the like one or two municipalities where we were having some long days. Are we getting the money on time? What is the thought process there?
Both the clients are paying us on time on the routine expenditures, and there are these special grants that they have asked for from the respective state governments to bail them out because these corporations have also been using their surplus funds for COVID-19-related activity. In order to replenish their coffers and corpuses, they have reached out to the special department grants and those paperwork are in place.
The contract is basically getting over in March 2022, right? I think the South Waste contract. What if we don't continue that? How will the money come? Will that come in one go or like it'll take years and years? Like what's the...
Contract has been extended for another year.
Okay.
Basically for another year. The city is yet to come out with a new tender, and we'll definitely continue that, but till the time the status quo maintains.
Got it, sir. Thank you. All the best.
Thank you.
Thank you.
Thank you very much. The next question is from the line of Jigar Mistry, Buoyant Capital. Please go ahead.
Hi. Thank you for taking my question. Sir, you just mentioned at the start of the opening comments that, you know, the bio-mining at Kanjurmarg has started or the activity was delayed due to the late exit of monsoon. Can you just sort of maybe apprise us on what sort of numbers could we look at on a full year basis once this fully starts?
This bio-mining activity is part of our design, you know, where with bioreactor landfill, we bring in waste and we see to that it is kept for a next five years for decomposition. After five years, we have to empty it out. It is a part of our technology, and we have to do the bio-mining. To vacate that waste so that fresh waste can come in. When we mine, we get soil conditioners like compost material. We can really get plastics which has a recycling value. At the same time, we get RDF where there's a real demand for it in cement factory.
There's a cost also for mining. If the revenue pattern changes from the RDF, now in the past, cement factories used to pay not more than INR 600-INR 700 per ton, but now it costs INR 2,000 per ton. It's the pattern varies as time, you know, pass by.
Yes. It was my estimate that RDF we could be, you know, INR 2,000 and say between INR 300-INR 500 tons per day, we could be looking at something like INR 30 crore or maybe INR 20-odd crore on a per annum basis. Compost then could be mined at, say, between 800-1,000 tons per month. We could probably be looking at much, much higher number, right? 4,000+. Combined, what sort of revenues could this actually report something like I think calculated between INR 65 crore-INR 75 crore per annum?
That is a very safe assumption.
Yeah.
Safe, but it all depends upon our ability to bio-mine the entire cell one, for example, within the non-monsoon period. Now, over the last two years, that has been tricky for us. So that is something that we have not accounted for. But on an annualized basis, you know, what you're saying are achievable numbers.
Right. INR 70- odd crore of EBITDA just from the bio-mining on an annualized basis?
If everything goes well, the prices of coal remains as high as it today, yes.
Thank you so much.
Thank you. The next question is from the line of Anurag Patil from ROHA Asset Managers. Please go ahead.
Thank you for the opportunity. Sir, out of this INR 200 crore remaining CapEx of PCMC and INR 70 crore of Delhi, how much will be funded through debt?
I think out of the INR 200-odd crore of PCMC, I think INR 170 crore would be through debt. That is for the waste processing contract. In case of collection and transportation business, normally around 90%-95% of the total CapEx is debt funded, which comes to us at around 7.75%-8.5% cost of borrowing.
Okay. For New Delhi, INR 70 crore, it will be majority debt. That. Am I clear?
Yes, that's very clear.
Okay. Sir, now next year, New Delhi contract and FY 2024 again PCMC will come into the picture. What sort of revenue growth we can expect next two years?
If everything goes well, we should be able to show at least 30% top- line growth. We are in the process of just putting those pieces on our budgetary spreads. Once we close our current fiscal year, when we are making our Q4 numbers, we will be happy to share our projected target numbers that we have set internally. We will be happy to share with the investor community.
Okay, sir. Thank you very much.
Thank you, sir.
Thank you. The next question is from the line of Rohit Ohri from Progressive Shares. Please go ahead.
Hi, sir. Few questions. First one is a hypothetical one. Considering that X city is having an operator and the operator is not performing the business quite well, the municipal corporation says that the contract is void or it is canceled. Under such circumstances, what would be the approximate time that it will take for the contract to be transferred to another operator, including the tender timing as well as the survey and then the commencement of the project?
Usually, if a operator is not operating and if it is, they have to terminate, which is also very difficult task for the municipality. Because once you terminate, a new operator when he comes, he takes around seven to eight months to bring his own vehicles and trucks, compactors and bins and everything. It becomes a 12-month time, you know. That's roughly 12 months required.
Around three to four months for the new tender to be put in, the bids to be put in and scrutinized and awarded, and another three-six months for the new operator to mobilize his assets and load it out.
Okay. Any such contracts or tenders which are there floated in the market as of now?
No, I'm not seeing anything much because, see, once you terminate then, somebody has to lift the waste. Having an alternate arrangement, then they have to lift to open dumpers and all that, which is, sometimes really very difficult.
Okay.
What we have seen over the last 10 years is a lot of the cities that we target, the A and B category cities. They normally have a very set tendering processes wherein we rarely do we see serious malfunction or derailment in the operations of such essential services. Normally there's a very strong feedback mechanism where the operator is pulled up for non-performance and there is feedback given and things are taken up. That information is already there in the market scenario. It normally doesn't come as a surprise to operators in this industry in certain large cities when the new bids are ordered or the existing contractor gets terminated. That's always a process of getting this thing done.
Okay. My second question is related to Mazaya Waste Management in UAE, which is also a joint venture as well as our non-current investment. Can you take us through the rationale for the investments?
Yes. In Mazaya, this was something that the company had explored in early 2014 or even before that, wherein this was pre-Lehman crisis. There was an opportunity where we could get a license to operate waste management solution in the area, and the company had got the license. Now, of course, the Lehman crisis, the entire activity, especially in that GCC area, went for a toss and the company decided to close those operations and scale down their operations completely. That is the background of the story. The company had invested some money to the tune of around INR 3-odd crore, and the entire money was provided for by 2014, 2015 itself. After that, we have had no interaction whatsoever with that entity.
This INR 3 crore is the asset for sale which lies in the balance sheet as well. Is this correct?
No, no. That amount is provided for. It's not asset held for sale. The reason we can't write it off is because we need to provide an audited numbers for those entities to justify the claims of the Central Bank of the UAE. We are not able to reach out to the agencies in the local country because those operations are completely been shut down and there's nothing whatsoever was done. We're finding a redressal mechanism wherein we can approach the Central Bank of the UAE. We already asked Deloitte to help us out in addressing the same issue. We don't foresee any significant issues here. The procedural part is what is stuck, and that is what the company is trying to clamber over.
This INR 3.3 crore asset for sale is related to what then, if you can elaborate?
These are old assets or old projects that the company had in the MCGM area and in NMMC. These were old contracts. Now, the vehicles of these contracts are either used as backups in other vehicles, and they have passed their prime. These are assets held for sale. We have provided for them completely. These are just the scrap rates that we are having based on the recent valuation of the scrap steel prices.
Mm-hmm.
Once we get all clearance certificates from the local RTO, the same scrap value will be exiting from the books .
Okay, sir. Thank you for answering the question. Thank you.
Welcome.
Thank you. The next question is from the line of Ketan Chheda, a Retail Investor. Please go ahead.
Yeah. Hi. Am I audible?
Yes. Yes, sir.
My first question is with respect to the project expenses and the other expenses. If I look at the nine-month numbers for FY 2022 and 2021, there's a significant jump in the current year. I wanted an explanation of, like, you know, what constituted this. This could be maybe a start of a new project or some fuel expense or some kind of expenses. I wanted an explanation on this increase or what is the reason for this increase and what the contributions are to these increases.
Yeah. The contract expenses are related to my waste processing project that we are ongoing, which is the capital part of it, which is mainly my waste-to-energy project in Pimpri-Chinchwad. As and when I incur the CapEx at Pimpri-Chinchwad, the same thing gets reflected in my contract segment, which has seen an increase that you're mentioning about. These are very low-margin business because these are basically book entries as per the Indian accounting norms. You will not see a significant contribution coming from the CapEx that I'm doing, and that is what is getting reflected as my contract revenue in this part.
Okay. These would, whatever spending you are doing would be shown as per either project expenses or other expenses?
Yes.
Okay. Okay, fine. My other question is, would you be able to provide some kind of a guidance for the free cash flow for FY 2022 and 2023? Would that be possible?
Sorry, I missed out on the question. You're looking at what?
Any guidance on the free cash flow for FY 2022 and FY 2023? Would that be possible?
If you were to remove my waste processing part, I would be looking at around INR 70 crore-INR 80-odd crore of free cash flow from my collection and transportation business. If you were to look at the consolidated part, my free cash flow generation would not be positive because of the upcoming INR 170-odd crore of CapEx at Pimpri-Chinchwad and the INR 70-odd crore of CapEx that is being planned at the NDMC contract. I'm talking about annualized numbers over here, so it is going to be in that range. If I don't bag any new contracts, if I don't execute any new projects, I would be a debt-free company in four quarters, in less than four quarters initially.
Okay. Thank you so much. Thank you.
Thank you very much. I now hand the conference over to Jose Jacob for closing comments.
I take this opportunity to thank everyone for joining the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with me or Strategic Growth Advisors, our Investor Relations Advisors. Thank you very much.
Thank you very much. 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.