Ladies and gentlemen, good day and welcome to the Antony Waste Handling Cell Limited Q2 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 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 from Antony Waste Handling Cell Limited. Thank you and over to you, sir.
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 family. Our investor presentation is now available on the stock exchanges and the company website. I'm pleased to report that we have achieved another record-breaking quarter in terms of revenue, EBITDA and net profit, surpassing previous quarter high due to improved operational efficiency, price escalation benefits in our tipping fee and also increased tonnage. We saw an increase in waste generation as the authority eased localized lockdowns resulting in restart of commercial activities in the region where we operate. Strong execution, building prices increases to address inflationary pressures and tonnage growth in the future will help us improve our revenue and profitability.
Now moving on to business-wise performances. MSW-CT projects. Now Municipal Solid Waste Collection and Transportation projects. In these services we have 14 ongoing projects and all the region in which Antony has operations are showing sign of growth. Our Municipal Solid Waste Collection and Transportation business registered a volume growth of 20% in Q2 FY 2022 as compared to Q2 FY 2021. On a sequential basis it registered a growth of 12%. Various municipal corporations have started moving forward with their tendering processes for Municipal Solid Waste Collection and Transportation, and we continue to be hopeful to report on the development of the same by the end of the current FY . Municipal Solid Waste Processing projects, that is the second one. To reiterate from our earlier call, we have three large ongoing projects.
One is at Kanjurmarg, Mumbai, which has a concession period agreement till 2036. Second is at Pimpri-Chinchwad, Pune and has a concession agreement till 2040. We have also one biomining project at Greater Noida. The volume of our processing business grew by 12% in Q2 FY 2022 as compared to Q2 FY 2021. However, on a sequential basis it grew by 4%. Both our projects at Kanjur and PCMC, which is Pimpri-Chinchwad Municipal Corporation, continue to perform well. The groundwork and pre-operating activities at our Greater Noida biomining project has started and is also progressing well. We expect Greater Noida operation to start contributing to revenue from current quarter. Our Pimpri-Chinchwad Waste to Energy project is moving along nicely and the civil work is progressing as per schedule. This plant should be operational by March 2023.
I'd like to provide an update on recent changes in the director of our company. Mr. Karthikeyan Muthuswamy, who was appointed as non-executive director, nominee director on behalf of the private equity investor, Elliott Management, on the board of the company in 2017. Consequent to the sale of the entire shareholding in the company by the private equity investor, Mr. Karthikeyan Muthuswamy, in consultation with the PE firm, has resigned from the board of the company with effect from October 30th, 2021. On behalf of Board of Directors and Promoter family, I would like to take this opportunity to express my gratitude and place on record appreciation for the valuable inputs provided by Mr. Karthikeyan Muthuswamy during his association for more than 15 years with the company.
I would like to take this opportunity to inform you that the board has approved the appointment of Mr. Shiju Antony Kallarakal as Additional Director on the board of the company with effect from 12th November 2021. Mr. Shiju Antony Kallarakal brings in a decade-long experience in waste processing and has been a key factor in developing Kanjur operation to what it is today, and is playing a pivotal role in the PCMC Waste to Energy project as well. This is from my side. I now hand over the conference to Mr. Subramaniam, Group CFO.
Good afternoon to all participants. I hope you and your loved ones are safe and well. I'll go over the high points of our financial performance. For the Q2 and the H1 year ending September 2021, the company reported an operating revenue of around INR 143 crores in Q2 FY 2022, up from INR 131 crores in Q1 FY 2022, a 9% sequential increase in revenue. The growth in core revenues being driven by tonnage increase and the inbuilt escalation clauses, as Jose mentioned. Operating revenues increased by 43% to INR 273 crores in the H1 of the current financial year, as compared to INR 192 crores in the similar period last year. Just to reiterate, the company considers operating revenue to include collection and transportation revenue and processing revenues.
The total revenue, which includes contract and other revenues, has increased 6% sequentially to INR 158 crores in Q2 of FY 2022, up from INR 150 crores in the previous quarter. Revenue for the H1 is standing at around INR 308 crores, up from INR 215 crores in the H1 of FY 2021, and this represents a 43% increase year-on-year. Business-wise, the collection and transportation revenue is up by 11% to INR 105 crores in Q2 , as compared to INR 95 crores in June quarter. The growth being reflective of the C&T volumes increase of 12% as compared to the June quarter. The processing revenue is up by 4% at INR 38 crores compared to INR 36 crores in June quarter. The improvement is purely reflecting the volumes increase that has been processed.
The group's consolidated EBITDA has increased 2% sequentially to INR 42.4 crores in the quarter ending September compared to INR 41.7 crores in June quarter, with an EBITDA margin being maintained at 27%. The price escalation clause partly helped the company in maintaining the EBITDA margin in the face of rising fuel costs, and part of the credit goes to the operational efficiencies initiated at the site by our supervisors. Fuel cost today constitutes approximately 18% of our total operating expenditure as compared to a 15% level in the year-ago period. For the H1 ending September 2021, EBITDA stood at INR 84 crores, up from INR 60 crores in the previous year, a 41% increase. Profit before taxes has remained steady at INR 28 crores on a sequential basis, and this translates to a profit before tax margin of 18%.
Profit after taxes stood at INR 24 crores for the September quarter, as against INR 22 crores in the June quarter, with a PAT margin at 14.9% and compared against a year ago PAT of INR 18 crores. For H1 2022, consolidated PAT stood at INR 46.5 crores versus INR 29 crores for the H1 of 2021, and this compares against a full year consolidated PAT of INR 64 crores. Profit post minority shareholders' interest for the September quarter stood at INR 18 crores and compares against INR 16.8 crores in the June quarter and against INR 9.8 crores in the year ago period, suggesting an increase of 84%. For the six-month period ending September, profit post minority interest stood at INR 34.8 crores and compares against a full year's 2021 number of INR 45 crores.
On the balance sheet front, our net debt to equity as of 30th September 2021 stood at 0.2x. Total debt as of September is INR 140 crores versus INR 150 crores as of March 2021, and our net worth has improved to INR 488 crores from INR 443 crores as of March 2021. During the quarter, CRISIL has assigned BBB+ with a stable outlook and an A2 to the long-term and short-term bank facilities of Antony Lara Enviro Solutions, a material subsidiary of the company.
The improvement in our overall credit profile of the company has resulted in lowering our consolidated average cost of borrowing by approximately 170 basis points from 12.4% as of March 2021 to 10.71% as of 30th September 2021. Our receivable days as of 30th September stood at 68 days, and this is a critical metric that we would like to monitor closely. Our prudent capital management and operational efficiency has enabled us to increase our return on capital employed to 20% and our return on equity to 16.6% as of September 2021. Similarly, our net cash from operations activities stands at INR 47.7 crores for the H1 of the current financial year.
I would like to give an update on the recent search conducted by the Income Tax Department at the premises of our company and our subsidiary companies. The search process was completed on October fifteenth, and the department's search was aimed at verifying the claims of our vendors who provide subcontracting activities to our daily operations and was aimed at quantifying and confirming the same. Just to delve into this, the company, through its subsidiary, is providing collection and transportation operations to the North Delhi Municipal Corporation, and this contract was a 10-year contract which was bagged in 2005.
Post the project's expiration date, which was in 2015, the tender maintains that the operator must continue providing the services to the client till the time the new contract is tendered out and an operator is assigned for the same, given the fact that these are the essential services that the company provides. For lack of any firm extension by the corporation, the company has had no option but to find recourse to hiring new and few vehicles to provide services, and these vendors have claimed GST credit, but purported to have not filed their income tax returns. The company has provided all possible assistance to the officials and furnished all explanations, information, and clarification as desired by them in this matter.
I would like to inform that all the payments to the vendors have been made through RTGS, NEFT, and through check payments, and after deducting appropriate TDS and the same being deposited with the appropriate departments. Additional information as sought by the Income Tax Department are being collated from our end and that at our vendors end, and the same will be submitted. The department may conclude the proceedings within 60 days after a thorough examination and verification of these expenses. Following that, the assessment unit will take up the proceedings, and the assessing officer, after scrutinizing the case, will conclude the proceedings by passing the assessment order. Since proceedings are at a preliminary stage and in the absence of any notice or demand from the income tax authority at present, no evaluation or assessment of any impact of the aforesaid inquiry can be carried out at this point.
We will keep the stock exchanges informed on developments in this front. We wish to inform that the proceedings have absolutely no impact on the operational performance of the company. That's all from our end, and we are opening the floor for the 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. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Akash Mehta from Kapaz Investments. Please go ahead.
Hello. Prashant, sir, thank you for taking my question. The first question I had was on the increase in the tipping fees during the quarter. You had mentioned that this was due to the price escalation. Just wanted to know if this escalation was across which contracts?
Good morning. Good afternoon. The contracts are either annual escalation or a quarterly escalation. The escalations are different for different contracts and depending upon the tendering time. Bulk of our contracts normally get escalations in the month of February and May. Part of the escalations that was due in the month of June of the last year got passed on right now, and that is how we are able to get some of the benefits accrued to it. Approximately 53% of my revenue have a variable escalation, and the balance 47% have a fixed escalation. Of the 53, I would say around 60% of them have an annual escalation, which is linked to the WPI. 30% would be on a monthly half-yearly escalation, and the balance is on a quarterly escalation.
Okay. Just as a continuation, the new contracts, what is the period of this escalation?
The new contracts have an escalation which is normally of the ones that we have bagged recently in Jhansi and Varanasi. They have an annual escalation, and that has yet to kick in. The escalations that we are benefiting are from our old contracts like the one in Nagpur, Navi Mumbai, Pimpri-Chinchwad and MCGM.
Okay. Thank you, sir. I think I'll get back in the queue.
Thank you. The next question is from the line of Kalpit Narvekar from Allianz Global Investors. Please go ahead.
Hello. Hi, sir. Thanks. Thanks for taking my question and congratulations on your quarter. My first question was on the income tax search, right. Could you share-
Sorry to interrupt you, sir. The audio is low from your line. I would request you to please increase the volume of your device.
Is this better?
Thank you. Yes.
Hello? Yeah. Is this better?
Yeah. This is audible.
Yeah. On the income tax search, I just wanted to understand what exactly is the issue from our end. In terms of, is that the Income Tax Department is unable to match the invoices from our end and from the vendors end, or have the vendors sort of underreported or over-reported the fees or something? What exactly is the issue on the income tax search?
Yeah. Mr. Narwekar, the problem is, as you rightly said, it's partly because of the vendors' inability to confirm and apply the compliances in their income tax returns. All the payments that we have made to these subcontracting vendors are through RTGS and bank transfers after deducting the TDS. Now, we don't get any GST credit in our business because all our clients are urban local bodies, so there is no GST credit that we can off-take from here, the clients. Now, the clients, the vendors, have been taking GST credit, and they have not been filing their income tax returns. That is something that we understand from our conversations with the tax authorities. There has been an underreporting of income at the vendors' end, and that is something that is being scrutinized by the tax authority.
From the perspective of our company, it's you are totally compliant with the GST and the TDS requirements. Okay.
Yes. All the TDS that is deducted gets paid by the company upfront, so there is no non-compliance on that end. We don't take any GST credit, so there is no non-compliance on that part as well.
Okay. Sir, one question is, say, in the future, then how do you sort of plan to, you know, change your vendors selection process or something to avoid issues like this?
What we will do, and that is something that we already initiated our team, is to have a strict vendor profiling division which, like any bank, you need the vendors to provide us with that ITR acknowledgment number. We don't need ITR copies per se, but we need the acknowledgment that they're filing their returns on time. As a company, our selection of vendors will be the only way that we can safeguard ourselves from this kind of actions.
Great, sir. Thanks. One question from my side. The question was on the order visibility. Could you share some thoughts on in terms of what bids you've put in or any pipeline or any sort of visibility on orders coming in the next one year or so?
Yeah. Hi there. So there is a few bids coming up, and we are working on it, few down south as well as in the north. We are under process to, you know, bid and win few contracts. And now we have already executing projects in Varanasi, Jhansi, everything which we won last time. It's under process, and now we are looking for a few more contracts to add to our order book.
Sir, any specific targets on that, number of bids or anything?
See, we will not be able to give you a number of bids. We look at the viability of the client and our ability to maintain our financial returns and the profile of our company. It is just not the number that we target. Operationally, we can take an incremental business around 2,000 t per day kind of a business, both collection and transportation and waste processing. The company's business development team and the ops team are pretty geared to take up new projects. The ones that we already bagged in are under execution and mobilization phase. We are definitely talking about new clients, newer projects, and currently we are seeing a few bids coming up where the company is definitely partaking interest.
It will be too premature to name those clients, and it's in our interest to keep working on the same.
Sure, sir. That's really helpful. Thank you so much. I'll come back in the queue. Thanks.
Yeah.
Thank you. The next question is from the line of Anupam Gupta from IIFL. Please go ahead.
Good afternoon, sir. Firstly, if you can talk a bit about the ramp-up which is happening in the Varanasi, Jhansi and the Greater Noida contract. You can just talk that through how that will come through or how Varanasi is ramping up and how the other two will increase in the H2 .
Good afternoon, Anupam. On Jhansi, we already started to work in certain sectors of the city. By January 26th, we plan to be rolling out bulk of our operations. We should be 100% by January 26th. That's an internal target that we have set. Maybe the Q4 we'll see full quarter's revenue from Jhansi. Varanasi, we have rolled out on 80% of the scope. Again, by the end of the current calendar year, we should be 100% rolled out in Varanasi. Greater Noida, we have completed our mobilization work in the end of October, and November onwards, we have already started activity of Biomining the zone.
Maybe one month of revenue will be sitting in the month of in the Q3 of this current year and full quarters revenue of Greater Noida biomining in the Q4 .
Okay. In terms of tenders, recently there was a re-announcement of the Swachh Bharat, slightly more details and more emphasis which was given there. What sort of opportunities, if you can talk a bit more detail, let's say, is it more of C&T or are you seeing more of biomining coming in incrementally? Slightly more details there if you can share. Not the name, but at least the trends in what sort of contracts are coming up.
There are a few contracts of waste processing also pan-India level and, as well as collection transportation. Biomining, this is this. What we do is we do proper due diligence of the municipality, whether they have the funds available and then we go for bidding. There are a few tenders in the north as well as the south. I'm being told not to express what the municipalities and all that are, but we are under bidding process, and we have submitted also some bids, and we are waiting for the results. Anupam, the kind of contracts that's coming up, it's not purely collection and transportation or waste processing. It's a combination of both and also biomining that is happening in the established cities.
Okay. Understand. In terms of the margin which came in slightly lower in this quarter because of the escalation which are delayed. You said May and Feb are the main times when it happens. Let's say from here till Feb or Q3, the margins will again be subdued and only in the Q4 will you see a slight jump, assuming raw material or this thing remain or fuel remains where it is?
Yes. So for example, fuel today constitutes around 18% of my total operating expense, Anupam. This has risen by 64%, partly because of increase in the cost per liter and also due to the increased trips to handle the increase in tonnage.
Oh.
Part of the increase also come from the start of the Varanasi operations. We are seeing an increase in fuel coming in. What today is 18% of my total OpEx was just around 16% in the year ago period. This increase is, A, partly because of volume consumption and also because of the pricing that is coming and hitting my number. Escalation, yes, it's an annual or a quarterly as the project spreads out. We would be getting some benefits in the beginning of the next calendar year.
Okay. I understand. That's all. I'll come back with you if I have more questions. Thank you.
Thank you.
Thank you. The next question is from the line of Manav Vijay from Deep Financial. Please go ahead.
Yes. Thank you very much, sir. Sir, I have a couple of questions. First of all, on the Kanjurmarg project, if you can inform us regarding the increased stake from 63% to 73%, what is the progress on that front, sir?
Sorry, can you just come back 63 to 73. Can you just uh-
Sir, you had mentioned in last con call that by the end of quarter two, which was September, your, the entire paperwork of increasing the stake from 63% to 73% will happen.
Right. That was the Brazilian team actually had to come down to India to fulfill certain paperwork. The team is already here. We have submitted the documents afresh to our bank. That process is on, and we expect the same to be completed by the current calendar year. The documents have been changed multiple times by the banking institutions. Finally, they had to actually come down to India to do it physically because copies and the translated version gets dated very fast. You need to have it within 21 days. Certain norms and certain procedural delays kind of didn't help us do it. The team is here from Brazil. They have fulfilled the documentation work now. We expect the same to be completed by the 31st of December.
Sir, in that case, the profit of this additional 10% equivalent will come only in quarter four, or that will come even in quarter three?
No, no. As of the date of the opening of the Demat account, I mean, we would like to time it in a period which can easily be identifiable from accounting perspective. From that point onwards, it will be prospective, it's not retrospective.
Okay. Fair enough. My second question would be, sir, regarding this Kanjurmarg project that you have. Last year, we processed roughly 1.7t million in that project, averaging to close to 4,700 t per day. If you can explain what was the number in H1?
For H1, we were averaging around 5,205.
Sir, in your Q2 PPT on page 4, you mentioned that till date you have processed close to 10.01t million . Then again in Q1 PPT, you had mentioned that up till FY 2021, you had done 9.69. That converts into close to 3 lakh and 20,000 t for actually 20 days. Which converts into 1,800 t per day. Is there a typo that you have in the PPT?
I don't think so because we are averaging around 5,200 t at Kanjurmarg and 800 at our Pimpri-Chinchwad waste to energy project. Maybe it's a cumulative of both the sites. Let me have a recheck on these numbers, and maybe we'll give a split between the Kanjur operations and the PCMC waste to energy operation for future reference.
That will help him, sir. Thank you. My next question, sir, the CapEx that you're supposed to do in your PCMC project, so I think as far as H1 is concerned, you have already spent close to INR 35 crore or INR 36 crore. Are you on track to do INR 100 crore-INR 120 crore CapEx in that project in this year?
Part of the H1 of the year is because it's been monsoon in this part of the country, so part of the CapEx gets slightly delayed. H2 should be significantly more. We already started work on that. The numbers can vary based on the initiation of the work orders and everything. We are targeting a CapEx to the tune of at least INR 90 crore-INR 110 crore in the current fiscal year.
Fair enough. My next question would be, sir. Last call you had mentioned that of all the projects that you are running, you had got escalation in close to 65% of the projects, and in rest 35% of the projects, escalation will come in H2. Now in quarter two, again, fuel prices have moved up. I believe that you would be again going back to the municipal corporations and asking for a further rise because the price hikes were actually much beyond all the contracts that you had. Have you submitted claims even for this abnormal hike to the municipal corporations?
We have requested our clients to look at these swings in the pricing as a force majeure event and have asked the good officers to consider the same. The tender clearly says that the escalation is on a time bound fashion, which is like a P1 divided by P0, and P1 being the plus 12-month time of the horizon. That is, by tender, what you are entitled for. Now the sudden increase in size and will you get an interim price hike or a compensation, it depends upon the corporation's officers and the standing committee to agree to the same. We have put in a request, but whether we will get it or not, it depends upon the client's approval.
Sure. Okay. My last question would be to you, sir. Is there any update that you can provide us on the dividend policy? Because last call you'd mentioned that you guys are working on a dividend policy and in due course it will be informed.
Yeah. On the dividend, the status remains the same, because we already discussed this in our last board meeting before the AGM, where the dividend policy of the company was adopted. The company definitely plans to have a dividend once things stabilize, either on the COVID front or on the CapEx rollout. Once business has stabilized, the company will definitely have a stated policy which can be put up for further deliberation at the board level and for discussion.
Sure. I wish all the best to you guys. Thank you very much, sir.
Thank you, boss.
Thank you. The next question is from the line of Deepesh from Equirus. Please go ahead.
Yeah. Good afternoon, Jose and N.G., sir. Thanks for taking my questions. Sir, I just want an update. Is there any clarity on the closure of any contract in the next six months to one year? The contracts which are already expired, is there any clarity from the municipalities?
Actually, as it is, the contracts have been extended by one year according to the media reports. That is for the next. The Bangalore project which was expiring in February 2022, it's been reported in the media that it's been extended by another year. The other contracts have all been extended by six to twelve months.
Got it. Any particular contract or place that you can highlight where the volumes are still below the pre-COVID levels?
Certain areas in Pimpri-Chinchwad are slightly softer than what it was in the past and also in Noida. These are the two sites that we have seen. It has significantly improved from the worst of the times, but the commercial activity is yet to be back to pre-COVID levels on a consistent manner. We have seen certain days when it crosses those limits, but it's not sustainable. It's not been sustainable.
Got it, sir. Putting all this together, you have done like INR 75 crore EBITDA in the H1 of this year, and you have an annuity-based model, right? The H2 , you have basically the new contracts coming in of Greater Noida and your Jhansi. Varanasi full ramp-up will be visible. If we think about it, the fuel cost, the worst part of the fuel inflation, I think we have already seen if the fuel doesn't increase further. Any guidance you want to give, sir, for the full year EBITDA number, what you're looking at right now?
See, we would be very happy to maintain an EBITDA margin of around 27% to 27.5%. I mean, if fuel prices don't go up by another INR 10, INR 15, hopefully it should not go back to what it was. We should be able to hold on to these margins. If not, better from it.
Absolute number. Margins can go up and down depending on the contract revenue that you book. The 75 crore absolute EBITDA that you have booked in the H1 , that should be the base, right? You should build over it right in the H2 .
Definitely. It will definitely build on, over it. Just a point, there is always a seasonality in our business because the H1 of the year always has monsoon, which increases the tonnage and moisture level by around a fraction of around 8% to 9%. That benefit may not be available in the H2 , but that gets compensated by increase in new businesses like from Greater Noida and Jhansi, as you rightly mentioned.
Got it, sir. So like 75, okay. So at least INR 150 crore kind of EBITDA we are seeing versus last year of INR 114 crores. Okay, got it. Sir, secondly, any tax rate guidance, because I think your effective tax rate is like kind of lower because of deferred tax benefits that are coming in. So any guidance on the effective tax rate for the full year please?
For the current year and the next year, we will be having the same effective tax rate like what we had enjoyed in the Q1 of the current year. That is going to continue because in the previous years, we had accumulated losses as mentioned as a standalone entity. That's got completely taken care of. Our tax rate will be in the range of around 22.5% to 24%, in that area.
Got it, sir. Lastly, sir, the CapEx, apart from the Pimpri-Chinchwad CapEx that is going to kick in, any other CapEx you're looking at, on the existing contracts or the Greater Noida contract, anything is pending?
Greater Noida's CapEx is done. There is no incremental CapEx at Greater Noida. There will be an incremental CapEx at my Kanjur facility to the tune of around INR 28 crore over the next two years. But for these two, we don't have any other CapExes planned out. As and when we bag any new contracts, that will be a CapEx proportionately to that business enterprise that we'll be doing. The company is also planning to onboard few electronic vehicles, like EVs kind of a thing, because we want to try and test them out in our existing setup. Maybe we will procure some few numbers and roll it out in different sites just to know whether these are functional or not, and how effective they are. That, I mean, that's a very small CapEx amount, not significant.
Great, sir. That's very helpful. Thank you, and all the best, sir.
Thank you. The next question is from the line of Sagar Sangri fro m AT Capital. Please go ahead.
Yeah. Thanks for the opportunity, sir. Couple of questions from my end. Sir, when we look at your business, so last quarter you mentioned you have bid for six projects, three into collection and transportation, and three into processing business. Any progress on that, if you can just?
The company has already provided the technical information to the clients and the corporation, and they're reviewing the same. Based on these things, they will rework on the tendering requirement, and then the bids will be opened up for our processes. It takes anywhere between six to twelve months for a collection and transportation business to get from the intent stage to the L1 stage. The work is in progress in this front. It takes time for me.
Yeah. If we add one or two or three, all the three of it, how much revenue that would contribute in collection and transportation? And also on the processing side, what kind of CapEx is this bid would require what kind of CapEx, or something?
If it's a waste processing contract, the normal gross asset turnover is in the ratio around 0.3x to 0.4x. That gives you a sense. If it's 800t per day or 1,000t per day number, and the CapEx is around maybe around INR 100 crore, the revenue, annualized revenue will be around INR 30 to 45 crore, depending upon the technology that we use and the kind of processes that needs to be involved. These are normally around a 20 to 25 year long tenure with an EBITDA upwards of 50 to 55%. That is on the waste processing side. Collection and transportation, the gross asset turnover would be in the range of around 1x to 1.25x.
These are normally around seven to eight year kind of a contract. Depending upon the size or the mix of the contracts that we are talking about, an annualized revenue anywhere in the range of INR 60 crore-INR 80 crore from that particular project when it can be added from the start of operation.
Sir, looking at FY 2024. FY 2023, we understand there will be some contract revenue and expenses, which is 10% margin business for you. How should we look at FY 2024 and onwards? What kind of blended EBITDA margin is the company looking at and especially into your collection transportation and the Waste to Energy projects?
On a steady state of affairs, if I were to split my entire revenue into two components, my core revenue and my contract revenue, the core revenue normally comes at an EBITDA around 28% to 32% through the project life. That's on a very conservative level. The contract revenues, which are nothing but construction related activity for DBOOT projects, that has a lower EBITDA number. As over the next two years, we are seeing a significant increase in construction of my Waste to Energy plant in Pimpri-Chinchwad. That will reflect into a higher top line and a softer EBITDA at a consolidated level. But at my core EBITDA level, that will see an expansion because the last two years my EBITDA was depressed because of lower tonnages due to COVID related activity, where the commercial activity was zero.
On a steady state of affairs, we would be showing a slightly softer EBITDA, but that's purely because of the project revenue kicking in.
Right. Sir, that is your integral part of your business. What I understand is you have bid for already three, more, projects as well. Construction will get over in FY 2023. 2024, 2025, 2026, that continue the contract revenues will continue to kick in and your blended EBITDA margins would still remain at 27% to 28%.
It should be higher than those rates. It should be in the range of around 30% to 32%, because that is what historically we have maintained pre the construction phase.
Okay. Got it, sir. If you can give a split between the margins of the segment, is that possible?
Sorry. We don't provide segment-wise margin because that's pretty sensitive for our line of activity.
Okay. Got it. Okay. Thank you, sir.
Thank you. The next question is from the line of Ashutosh Parashar from GrowthX. Please go ahead.
Yeah, good afternoon, sir. I wanted to know about how the revenue split between C&T and processing segment will shape up in the medium term. What is your outlook on that, and where do you see more opportunities going forward?
In the medium term, we would see with the Waste to Energy project at Pimpri-Chinchwad getting commercially active in March 2023. From that point onward, we'll see it to be around a 50/50 kind of a break. In the long term, we would continue to have that kind of a outlook because A, those capital intensive, the waste processing arm, they're higher EBITDA generation, and there's a stability in the revenue generation forecast also. That gives you a decent amount of visibility. The cash thrown out from the waste processing can go for fueling the growth as a collection and transportation business. In the medium term, the product mix or the revenue mix would be 50/50, so between collection and transportation and waste processing.
Thank you, sir.
Thank you. The next question is from the line of Kaushal Kedia, Individual Investor. Please go ahead.
Yeah. I just wanted to know, in terms of cities, can you say which cities are you targeting or which cities are you know, filling tenders for just to get the visibility on the growth?
There are few tenders like, you know, collection. As you know, solid waste management new rules has come up, and there's a pressure on the municipality to modernize their present collection transportation as well as waste processing. There are a lot of legacy waste for biomining. Because Swachh Bharat Abhiyan is going in full swing, coming up in many states, and we have a very good opportunity to select and choose best place to build, so that in that process we are winning and we have always targeted the growth. If you see our past growth, based on that, we are focusing on the similar fashion to grow annually.
You can see the waste management CAGR growth has been around 8% to 10% pan-India level. Similarly, we are also trying to target growth. I think post IPO, we even won biomining contract, and now we are looking for more biomining contracts in pan-India levels.
Further to add to Joe's point, we normally target cities with at least a 4 lakh population, which generates around 300 t per day kind of a waste. That's a sweet spot that we have. That is when the asset turns and asset turnovers can be most judiciously used, and we are able to maximize our returns on our fixed assets. That really helps us. If you were to look at any source of information, there are at least 70 to 74 cities which are in the country which satisfy this need. Bulk of them are still being worked by municipal corporations or by the state enterprises themselves. We are seeing a decent amount of scope of improvement. We are seeing a large amount of active privatization happening in the eastern and southern part of the country.
That is where the large number of tenders have been put out and they have been coming in around. That's what the trend is as of today.
What I want to understand is there are so many cities like, you know, Kanpur, Agra, just to name, you know, there are so many cities that come to our mind. Any particular cities that you're targeting or right now there's no particular city you're targeting, you're just waiting, you know, for the tide to change basically.
As a company, we avoid naming the cities as our next target or place to work as a policy. Definitely the names that you mentioned have been in our radar for quite some time, and we are looking at areas in and around that area. If you look at our presentation, we normally have a cluster-based approach, wherein once we get a project in a particular city, we look in and around that city and we kind of gather more businesses around those areas. That would be our slide number 11, which gives you a focus about once we enter, we are able to leverage on the overheads, capital overheads and your corporate overhead structure and kind of get more businesses in that area. We are-
The thing is your predominant presence is in Maharashtra, right? Apart from Thane, Pimpri-Chinchwad, and Mumbai, are there other cities or towns that can generate that kind of waste? Because I think that the main cities, the densely populated cities are in UP and Bihar, where, you know, like Kanpur, Agra, Varanasi, the likes of Muzaffarpur in Bihar and Darbhanga. These are the cities I think that should be of more importance, right? If you're following a cluster approach. In Maharashtra, beyond Mumbai and Thane, is that like an opportunity for growth?
In UP, we have contracts already in Varanasi and Jhansi. In the state of Bihar and West Bengal, there has been requests. There are officials visiting our site who also wants to modernize their present collection and transportation and even waste processing. We are looking pan-India level. We are not only Maharashtra focused. Pan-India level, wherever municipality who wants to bring in modern technology and ideas, we will definitely go there and bid. We really don't bid in contracts where there's no technology. Like, you know, just some tasks are lifting where we go in for where they want to introduce garbage compactors, transfer stations or waste processing scientifically, you know, biomining also.
We look into where the bids are also prepared as per the international standards. There are few bids in the pipeline, and we look forward to win few of them in coming months.
Also, to win these contracts, is it like mainly on merit or is there some, you know, sort of nepotism that comes to play? I know it's a sensitive question, but just to get a better understanding.
Usually what happens is in our business, they appoint, we always request the government to appoint top four, top five consultants in the country so that they prepare a quality bid, you know. The bid based on technical as well, marking and also technical and commercial marking, you know. The bidder who has or holds a good ranking has a better chance to win the contract. We only bid for such contract where the bid is prepared in a professional way and as per international standard. Which also the government is looking forward because they also want to modernize their present collection waste management system because there's a Swachh Bharat Abhiyan and every municipality is
Evaluated and there's a ranking given. The more the better the ranking, the better they get the funds and also is appreciated at the top level. There's a lot of change in the solid waste management sector in the country, all over India, and every municipality is going the right direction by preparing proper bids. Of late we have seen, recently the government also has brought in a new law. The bids will now be awarded to only L1 bidder. It will be this is also a good opportunity for quality bidders like us to win more contract in pan-India levels.
Understood. My last question is with respect to the trade receivables that you mentioned in point number four and five of your notes to financial statements. It's approximately INR 8 crore plus INR 41 crore. So as an analyst, what should we consider this to be? Will the money come?
Normally our trade receivables swing between 60 to 75 days on a weighted average basis. That is what we have maintained in the past, and that is the range that we are comfortable with. This is a mix of all the clients that we have. Certain clients pays on a monthly basis, certain clients pays on a quarterly basis. In the last couple of quarters, we have seen some decent amount of improvement in our trade receivables. We feel that once things stabilize and the non-developmental expenditures also kick in, once things stabilize at the urban local bodies financial level, we see our receivables swing to around 65 to 70 days.
No, I'm asking you with regards to the trade receivables which are in arbitration or which are not coming from the municipalities, which you mentioned in point number four and five of the notes to the financial statements of INR 8 crore and INR 41 crore.
Yeah. Of that amount, we have already provided a decent chunk of provisioning, and these are under arbitration processes. Few of the arbitration has already been awarded in favor of the company. Now, based on the judicial process, the same will be remitted by the corporations to the company. These were passed in the last year itself, but because of COVID, the priorities of the urban local bodies were differentiated. We are in touch with the corporations, and we expect the same to be received by the corporations in the next few quarters.
How much have you provided for, and in which quarter have you provided for this?
It has been provided historically. Nothing in the last quarter or in the current financial. This has been provided historically.
Out of INR 41 crore + INR 8 crore, that's INR 49 crore. Approximately how much have you provided for in this quarter?
We would have provided around 35% of that amount.
Okay. If I see the previous quarter's financials, I should find the provision.
Yes.
Okay. Thank you.
Thank you. The next question is from the line of Harish from Harish Swaminathan family office. Please go ahead.
Thank you for taking my question. My question is related specifically to the income tax search. Now, the department had come out with a communication that about INR 70 crore in cash was taken, and also that a property document for about INR 7 crore was identified. Now I wanted to know if this is true. My second question is, would we be liable for the action of our vendors? Thank you very much.
Answering to your second part, no, we will not be liable to the action of the vendors because at the most we would be answerable to the point of justifying whether the services so claimed by the company has been delivered by the vendors. These are services provided for renting of JCBs, dumpers, trippers, and specialized equipment in our Delhi operations, for which we have justification that we need to provide to the income tax authority to justify that the expenses incurred in our books have genuinely been spent and TDSs on the same have been deducted and given. That vendor then has to confirm whether the receipt of his income, he has paid taxes or not, and that is his lookout. Second, this answers your point number two.
On point number one, the number that you're suggesting, sir, it's a highly inflated number and there is no justification. All these expenses have been incurred under subcontracting point, Section 194C and Section 194IA of the schedules, where the expenses have been incurred under the head of subcontracting since 2016, 2017. To give you a background, these expenses were incurred only for our Delhi operation, which was a ten-year project which the company had bagged in 2005. The project expired in 2015, and since then the project has been given a short-term extension of six months. The tender clearly mentions that in the absence of a new tender or a new operator, the existing party has to continue to operate since it's an essential services.
Now, as a company, when there is no visibility on how long a project is going to run, we always prefer to hire these vehicles because any and every tender that comes out mandates that we need to deploy new assets. We have hired these subcontractors in the Delhi project after 2016, only when the project's life were under extension period. All the payment to the vendors have been made through EFT, NEFT and RTGS and bank transfers. TDS has been deducted and the same has been deposited with the appropriate authorities. Now all these vendors, bulk of them are either sole trading concerns or MSMEs. The compliances has been, it should be their part of the role.
We have now realized that as a filtering process, we need to have a higher filtering mechanism for our vendor profiling to be done. On the other part that you mentioned on the property details, those properties are not owned by the company. There have been no purchase of properties whatsoever by the company.
Thank you. Thank you very much.
Thank you. The next question is from the line of Sunil Shah from TurtleStar Portfolio Managers. Please go ahead.
Yeah. Sir, thanks for this opportunity. My question is to understand the risk side of the business. Sir, the Kanjurmarg property that we have in Bombay, where we are doing the processing work, sir, as the tonnage grows, you know, we will be having more and more of air pollution. Do we have some kind of a threat that if the residents in and around that locality complain or there are some issues on that ground, then, you know, the land area has to be shifted or what happens in such a situation? Meaning, does the government come there and, you know, protect our work which is happening? I just want to understand the risk element in the business.
It's to get a big chunk of land to do waste processing outside Mumbai is big. It's not that easy, you know. This land was allocated by the state government, and it was given to the municipality and only for waste processing. This is purely for waste processing. The risk element of just shifting overall, you know, in a year or two or something is not that easy for. That is one thing. Second thing is we are doing a scientific processing center where waste is being disposed scientifically and all the methane is sucked out. With that methane gas, we are generating power and electricity, and also the organic part is converted into compost.
It is a scientific process, and if anybody visits, they can see how a well advanced system we have. Even we are now producing RDF. Whatever waste we are generating, we are shredding it and converting into RDF, which means refuse-derived fuel, which is a similar product like coal, and we are marketing that as coal. It is a scientific process, and we have people visiting our site for academic reasons. It is something which is very important for the society. You know, it's like having a toilet in a house. We can't say we don't want to have a toilet, but we need a toilet. We're in the city. Every city needs a waste disposal site, and it has to be done in a proper manner so people, residents don't complain.
Yes. Okay. Sir, my second question pertains to the contracts that we have. Sir, in that there are two parts. First is when you say we have contract up to 2036 and 2040, it means we have monopoly for the entire state of Mumbai. The boundaries of the city, we will be the sole agency doing this work. The second question on the contract is what are the broader terms? Meaning it is in context with the tonnage, it is in context with the number of days, it is in context with the vehicles which operate. How are those broader terms? I'm not asking about the nitty-gritties, but just to get a sense on those things.
The tender clearly says that it's a 25-year contract wherein you would be processing waste from the city of Bombay. There's a minimum assured tonnage of around 3,000t per day, going all the way up to 7,500 t per day gradually. The broader terminology is very simple. You will be asked to process around 7,500 t per day of the waste which the city of Bombay generates. Now, currently there is only one waste processing site. The other one, which is located in Deonar, is an open dumping ground. There is a Waste to Energy project that is being planned for construction in that area, which is yet to start commercial activity or construction activity as well.
The tender clearly says that you will have to process around 7,500 t per day minimum over the project life.
Okay. In that period, we will be the virtual monopoly, meaning there will be no other company which can bid sometime in between. Nothing of that. It remains with us.
Today, the city of Bombay generates anywhere betwewn 8,500t to 9,000t per day. There is a significant amount of pressure on the authority to reduce the generation of waste because there are not adequate space for waste to be disposed. The existing site at Kanjurmarg where Antony is operating can, based on the design that we have today, process up to 7,500 t per day. The balance waste is currently dumped openly at Deonar. We don't foresee a situation where the waste keeps on increasing. You will have a problem. The entire city will have a problem of disposing this waste. Yes, to answer your question, currently we have a monopoly of the entire waste that is being processed in the city of Bombay.
The government is also putting up a Waste to Energy project in Deonar, which will also cater to this space. This definitely takes care that we would be assured around 7,500t of waste to be processed.
Okay. Sir, so just the last bit is our revenues are linked to the quantum that is the 7,500 t which we are talking about.
Yes.
Correct? Yeah.
Correct.
Okay. Thank you very much for all this understanding, sir. Bye.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Jose Jacob for closing comments. Thank you and over to you, sir.
Thank you, SGA. I would like to state that we believe the growth story remains vibrant and strong. In the coming years, we will continue to pursue top line growth through contract wins as well as volume and value growth. I would like to thank everyone who took the time to listen in our earning calls. I hope we were able to adequately address your questions, and if you require any additional information, please contact SGA, our investor relations advisor. Please take care and stay safe and wish you all a very happy and healthy New Year in advance. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Antony Waste and