Q1 21/22

Aug 12, 2021

Ladies and gentlemen, good day and welcome to the Q1 FY 'twenty two Earnings Conference Call of Anthony Waste Handling hosted by IFL Securities Limited. 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 Please note that this conference is being recorded. I now hand the conference over to Mr. Anupam Gupta from ISL Securities Limited. Thank you, and over to you, sir. Thank you, Ruduja, and welcome everyone to the results discussion for Antinavia Standings Limited as well as the future outlook. From the management, we have Mr. Jules Jacob, Chairman and Managing Director for Antony Waste Sanding Cell and Mr. N. G. Subramaniam, the Group CFO, along with the SGA Investor Relations team. I will hand over to Mr. Jules Jacob for the initial remarks and post that we can take the Q and A. Over to you, Asaf. Good afternoon and very warm welcome to everyone present on the call. Along with me, I have Mr. Subramaniam, Group CFO and SDA, our Investor Relation Advisor. I hope and say that you and your families are safe, healthy and secure in these tough situations. We have uploaded our investor presentation on the stock exchanges and the company website. To start with, I would like to thank our employees for their courageous and dedication towards their work, which enabled us to continue our operations smoothly even during 2nd wave of COVID-nineteen, which was much severe than the 1st wave. The hard work enabled us to deliver highest ever quarterly revenue and EBITDA and net profit even during challenging quarter. As economic activities were disrupted due to 2nd wave of COVID-nineteen, we witnessed little softness in the volumes on a sequential basis. Having said that, with economic activity returning to normalcy, we are witnessing recovery in volumes. The sequential improvement in revenue was also aided by price escalation benefit in our tipping fee. Now moving on to business performances. Now CNT projects, which is municipal solid waste collection and transportation. In this service, we have 13 ongoing projects in these services. Our municipal solid waste collection and transportation business registered a volume growth of 45% in Q1 FY 2022 as compared to Q1 FY 2021. However, on a sequential basis, it registered a degrowth of 4%. We continue to add new projects in this business and further focus on improving our pipeline by bidding for new projects in this segment across municipalities. Municipal solid waste processing projects, that's the second one, what we do. We have 2 large ongoing projects, 1 in Kanjumma, Mumbai, which has a concession agreement till 2,036. 2nd is a Pune, which insured Pune and other concession agreement till 2,040. The volume of this business grew by 34% in Q1 FY 2022 as compared to Q1 FY 2021. However, on sequential basis, it de grew by 3%. Both our sites at Kanju and Synpric Interest Based to energy contract continue to perform in line with our expectation. So as you see that we have a record growth in profit in business revenue as well as EBITDA and profit. So this has been very good for our company. And further, I'll go ahead on update on the implementation towards base to energy. The work in progress is progressing at a site as per schedule. The civil work has already commenced in March 2021, and ancillary work order has been issued. As expected with the time line committed to our clients, we should have the waste to energy plant fully commissioned on or before March 2023. This is after taking into consideration the time delay due to COVID pandemic related commercial activity shutdowns. A further update on Varnasil, the project will be fully operational from mid October. Work there has already started, and we are providing services to approximately 60% of the city. And during the last quarter, we had announced the new project of biomining of legacy waste in Greater Noida. This is the first time we have won our legacy waste contract for bio mining. Though we are doing bio mining in Kanshu Ma, which is a part of our technology, The mobilization work has already started and we expect commercial operation to kick off from mid September. We are seeing good traction in our Compose sales. Customers are accepting our product very well. During quarter Q1 FY 'twenty two, our Compose sales stood at 4,850 tons, which is at similar volume compared to Q4 FY 2021. However, on year on year basis, it registered a growth of more than 5 70%. We have doubled our maturity pad capacity, which was commissioned during Q1 FY21. So basically, we have increased the capacity of compost production, and there's a good plan, and that's the reason we are seeing this exponential growth. Recently, CRISIL assigned CRISIL A2 for short term bank facilities and CRISIL BBB plus stable for long term bank facility of our material subsidiary, Antony Lara and Virus Solutions Private Limited. The improvement in overall credit rating has led to reductions in our average cost of borrowing at a consolidated level from 12.4% as of March 31, 2020, to 10.6% in Q1 FY 2022. So I'll hand over to Mr. Subramani, our Group CFO, and he will take it on further. Yes. Thank you, Joss, and good afternoon to all. I would like to welcome again everyone to this conference call to discuss our Q1 results of fiscal year 2022. As noted in our business update, broad based trend on a year on year basis grew our performance across the board during the reporting period. The total consolidated revenue and adjusted EBITDA has increased by 56 0.7% and 55.1% respectively on a year on year basis. The increase primarily reflects continued improvement in pricing and volumes growth. The growth is reflective of the standard commercial activities in the areas where we provide services. The profit before tax for the quarter ending June 21 stood at INR28.3 crores. This compares against INR12.2 crores in the June 2020 quarter. And the profit before tax margin has also improved to 18.9% during the quarter. Profit after tax at consolidated levels stood at INR22.4 crores for the quarter as compared to INR11.3 crores in the year ago period. Coming to business wise performance, the collection and transportation revenue is up by 54% year on year at INR94.7 crores. The growth being on account of increase in total C and D volumes was 45.8% and coupled with an incremental revenue from the new project of Varnati, which is still not fully operational. On a sequential basis, revenue from C and D is up by 15%. The MSW processing revenue is up by 45% at INR 36 crores as compared to INR 24.8 crores in the year over quarter, reflective of the improvement of 35% year on year in waste processing volumes from our Kanjur and PCMC waste to energy sites combined. These trends reflected in a steady trailing 12 month adjusted EBITDA margin of 27% and Health reported trailing 12 month revenue of INR535 crores at console level. On the balance sheet front, net debt to equity as of 30th June 2021 is 0.1x. The total debt as of June 2021 stood at INR 145 crores and our net worth has improved to INR473 crores. A word on our receivables, despite the financial stress due to the pandemic related expenses and also compounded by declines in property tax collection and other revenue sources drying out, the municipal authorities have reduced their non planned expenditures and have prioritized payouts to essential service providers like wage management and primary health care service providers. This is reflected in the improving DSOs. For us, this has improved from a high of 71 days in June 2020 to 56 in June 2021. Once things stabilize and we are back to conditions similar to pre COVID times, we expect our sales to revert to the mid historical levels. I would also like to point out the following. As mentioned by Juss, our media subsidiaries rating agency has credit rating has been assigned at SimpleB plus by GLSL. Our weighted average cost of borrowing has come down to 10.6% versus 12.4% in FY 2021 and we continue to work on this front. Another highlight of the event is post the quarter end, the company has realized INR 11.19 crores of retention money held by our client as per contract terms. These are normally reported as long term receivables from our clients and a deducted from our billing as per tender conditions. In the past certain sections of the investor community had raised concerns about such deductions and I hope this development allays their apprehension. That's it from my end and I will open the floor for Q and A. Thank you very much. We'll now begin the question and answer The first question is from the line of Faisal Hawa from H. C. Hawa and Company. Please go ahead. The congratulations on a very good set of numbers and a very good recovery. Having executed such a complex project in Kanjummar with the help of our JV partner, do you feel that if any such project comes up of a similar magnitude, we can now do it alone without the DV partners? That's 1. And second is, is there some development that the any kind of municipality is doing to ensure that lesser amount of waste came in goes into the sea and are we trying to develop some solutions for that? So for in waste processing, we have been doing for past 5, 6 years, our company has reached a stage where we can execute similar projects even without our support of a JV partner. But waste processing is not only confined to the one what we are being composting technology, there is waste to energy, a different technology and you can buy gas. So depending upon our clients' requirement, we will look forward whether we go for a JV, if we need a technical assistance or we go all alone. So that is up to waste processing. And second question is, so on the inflow of waste being generated from municipality, there's always a long term plan that the waste generation from cities should reduce because of the stress that is added onto the environment. So as of today, we don't see any concrete or substantial changes that's happening in the environment to reduce the inflow of waste or the generation of waste. So Mr. Hawar, on that aspect, the status quo remains. Is the Puna execution of the base to energy project doing? It's doing fine and the civil work is full swing. And by March 2023, it will be operational. Mr. Tejal, does this answer your question? Hello? That's my question. Thank you so much. Thank you. The next question is from the line of Arun Kejriwal from Kejriwal Research. Please go ahead. Good afternoon, Joseph and Angie. Thanks for taking my question. Couple of questions. One, between the previous quarter and now, any new tenders that have come up for bidding and where we have participated? And any progress on the same? Good afternoon, Arunji. So yes, post in the last 4 months, I will not be able to specifically in the last since the last quarter and this quarter. But over the last 4 months, we have seen a flow of contracts from lot of city state capitals and we have tendered our opinion and interest for 6 of them. These are still in the discussion stage. The few of them would be like the one in Delhi, the North Delhi Municipal Corporation is one of them and there are landfill operations over there, there is a new tender for collection and transportation base in Pune. So these are the areas that we're looking at, not going into detail in that part. Fair enough. Second question, sir, on the in terms of dividend, has the Board formulated a policy because we have a lot of cash available on the balance sheet? So is there a dividend policy that has been debated and discussed or you are still in the process of finalizing? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] So we have a dividend policy which is being debated and finalized. We'll be putting it up shortly on our website. So the topic is very much on the table, our discussion. So we will have that out at the earliest. Okay. And one final question, if I can squeeze in. Just to understand from the type of projects that have come up for bidding, what is the flavor you are getting that municipal corporations are back in business, They are still toying with the idea of having private contractors or now that part of it is done and that's it and they believe that this is not their area of expertise? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] See, as I always said, there's a Swach Bharat program going PAN India level. And there's a lot of awareness in the municipal stop losses that and there's a marking by Swachh Bharat team who comes and give certain marks whether on state level and all that. So the evidence has reached to a level where every municipal corporation wants to perform. And one of the important area is municipal solid waste. So they get a good marketing and due to which their standard improves. So they want good players and to which we are getting good opportunities and going next 10, 15 years, panning their level to have all this situation improved. So we as a company is at the right spot and we feel that this business is going to grow. Right. Thanks a lot. Thank you. Thank you, sir. Thank you. The next question is from the line of Rohit Oja, an individual investor. Please go ahead. Yes. Good afternoon. You just mentioned that there is a tailwind of this such Bharat and also every new field population wants to get better and we are in the right spot. And from the business model, it appears to be very scalable, there is an opportunity. But in 2010, we had like 10 projects in 2016, we had 2016 and now we are at 16. So in the count of projects, we have not really grown at all, I would say, in last 4, 5 years. So when do you think can we hit a number like 30, for example? Is there a road map for this? Yes, let me take this. So if you look at the part, the kind of contracts that were available was very small sizes of less than 100 to 200 tons. Those are the kind of cities in the past which are coming up for opening in those contracts. Now we are seeing contracts that are of larger size and capacity and complexities where entire cities, schools are being given out like the one we do in Noida or in Greater Noida or in Nagpur, PCMC. The entire city or half of the city is now given off as projects. So we have seen that those are numbers remain stagnant. The size of these projects are significantly bigger than what it was in the past and that is a trend that we are seeing. A lot of cities are still done by the government themselves, so that is getting privatized and they are doing it in large swaths of silos. So we do expect our number of contacts to increase, but it will not jump from existing 16 to 30 in 4 years or 5 years. It is a gradual increase that will happen and we will keep working on that part. Okay. My next question is that I saw in the release that we've had a few completed projects, right. So that means that these were projects where we were where the time back probably ended and we did not take a renewal. So can you give some comments on what was the reason for not getting those tax? In the past, there were certain contracts that the company was doing like in cities of Unamalai, Thamaram, Jaipur and these were sub economical sizes for us now that we are looking at completely modernized fleet of operations and their efficiency mounts. So if the tonnage is less than 100 or 150 tonnes, I'm not able to completely utilize my fixed assets and have a fantastic fixed asset turn, which will help me have a higher operating leverage. So if I were to address a small portion of these markets today, this would be very high cost to the local operators. So we will not be in a sweet spot. So that is one of the reason why we are avoiding small cities. We are looking at large cities and the business potential in the large cities is significantly higher because less than 70% of the state capitals are privatized. So A, they are financially better off than smaller cities and be the size of the contract is something that makes our returns and financial asset turn and the fleet asset turn profitable. Okay. And there have been places where we have said that we probably didn't win those contracts. And historically, what has been the reason for not winning those contracts? Is it possible for you to give some? Sorry, can you repeat that question? Your voice is very easy. In past, have there been cases where we have bid but not won the contract? And what were the top reasons for not winning this contract that has been tested? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] So as you are aware, it is not necessary we have to win all the bid, but we have competition from companies. There are 2, 3 quality players. But our strike rate has always been good because our pricing is competitive. And we being the early players, we have better chances to price based on a competitive side. So that is our strength. And we also have a very firm pricing discipline when we bid for these contracts because approximately 60% of my expense, of course, operating expenses is labor and fuel. So there are very little headroom that I have for going around with the project at low cost just to win the contract. So we have a very stringent financial modeling and the financial discipline when we bid for those contracts. So in scenarios where we would not have bagged the contract, it's basically below our threshold limit of comfort. Okay, understood. And sir, my last question is that do we see our margin hitting or crossing even 30% sometime now with normalization and with pricing benefits coming back. So when do you think we can exactly thought those in FY 2020, I guess. So can you comment there? So the factor of EBITDA is driven by the product mix that we have. We have processing and we have CNT. So as and when we see a higher mix of processing coming into my portfolio, my margins would be better in that and will move northwards. Okay. Thank you for explaining all these things. Thanks a lot. And I believe in TCM, I just like to say that I've seen some differences here. So, yes. Happy to know that. Thank you. Thank you. The next question is from the line of Anupam Gupta from IFL Securities Limited. Please go ahead. Hello? Hello? Yes. Yes. So on the opening remarks, you mentioned that the Varanasi and the Greater Nodal project will come up over this quarter end September for the Greater Nodal project. Is the Nagpur project fully ramped up or is still in the phase of ramp up at this point of time? Nagpur is already 100% active. I think you're wrong number, Varnas. No, no. So I was asking so Natur is the Natur which we had started last year, a bit operational since December 20 19 onwards. So Nagpur is completely operational for us. As Joss mentioned, Greater Nodar Biomining by end September or mid October, we'll have all those activities happening at full phase at Greater Noida and in Varanasi. Okay, okay. Understand. And just secondly, I just wanted a clarity on the proposed increase in shareholding, which you had to do in for the both the processing contracts? What is the status as of now there? Anshoom, the same thing will be completed by 30th September. We have received almost all the documents and the same has been given to the bankers. So we will have the proportionate shareholding changes from 30th September onwards. Okay. Shareholding from so second half effect then. Okay. That's all from my side. Thank you. Thank you. Thank you. The next question is from the line of Rajesh Kumar, an Individual Investor. Please go ahead. Good afternoon. Am I audible? Yes. Good day. Hope you and your family workers, family, everybody is safe and healthy. Yes, yes. Thank you for your wish. Same to you. Yes, yes. Thank you. So my first question is, you have mentioned in the RHP that Indian municipality solid waste is around 5,000 crore potential. Just wanted to know, does it cover all the Tier 1, Tier 2 cities only? Or does it have any limitation on the solid waste produced per day? Sir, so this data is part of the study done from various sources wherein the budgetary allocation of lot of municipal corporations which were available has been taken and that forms the basis for this. So this INR 5,000 crores is all inclusive of Tier 1, Tier 2, Tier 3 cities. We have disclosed these numbers under budgeting provision under the fiscal months. Okay. Sir, since Antony has its own business financial stringent parameters while bidding for these tender, So keeping those in mind, out of this INR 5,000 crores, how much is for our graph? I mean, how much Antoni can bid for the business? So as I said, like today with 5,000 gold, we have almost 10% market share like if you see that. So what we believe is some of the municipality is yet to privatize the operations. Some have to modernize. So all of them are floating tenders by appointing top consultants and we are in the process of bidding those tender and winning and modernizing municipal with solid waste collection and transportation. So the potentials are there and we can see business out there. But all this 5,000 crores bids are now going to come overnight, it will take time as months pass by. So wherever it is coming alive, we are bidding and we are taking that opportunity to grow our so I don't see the major southern states, cities like Bangalore, Chennai, Coimbatore, Mysore, Hyderabad or few other states like Orissa, Rajasthan and so on. So is that these cities are handled by our competitors or is there these cities are yet to be privatized? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] See, in the southern part, we are already doing in Mangalore. And in Anglo, they are in the process of modernizing. And in the southern part of India, in Chennai, there's other bidder who have taken up the contract. And in our Northeast area, we may we usually look at do a due diligence whether the municipal corporation has a fund. And we usually when we our strategy also is to have a cluster formation. Suppose we want we win a city, we try to win nearby cities because that reduces our overall cost and our management cost. So we so our strategy has been like that. If we win in 1 city, we look out for the neighboring city. So But at the same time, we look for a good opportunity if any bids are coming up as per our standard, which is built after by top 4, top 5 consultants. And we have quality bidders coming in, then we bid for those status. Okay. So next question is, is it a norm that Munciequalities follow not to have a single vendor for both collection and transport as well as the processing of the municipal solid waste? Or as a company, we don't want to have both the contracts? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] It depends. Now municipality, the problem is like the waste processing contracts are typically 25 years because the capital involved is high. And the project to start will take at least 2.5 years. And if you think collection and transportation is 8 to 10 years. So there is a lot of mismatch. So what happens in some municipality already there is a contract signed for collection and transportation And at that time they will cannot wait for the CNT collection transportation tenure to get over to have together the same bid. So that is one issue. Second thing is the risk. Multipality thinks that giving one operator to run the entire operation can be a risk. So they evaluate and but at the same time there are municipality who prefer to give single contract to one operator. But majority of the municipality prefer to have 2 separate contracts. So it is not the policy of the company, but it is policies of the respective multi policies? Absolutely. It is not the policy of the multiple conditions. Okay. Sir, this like in CNT contract, this MSW processing contract periods are also extendable? Currently, sir, we have not seen any such contracts getting extended because these are normally long tenure contracts and we have yet to see an operator complete a single large long duration contract yet. It's only since 2,000 and 8 have you seen such waste processing contracts being awarded in the country. So as operator, we are a 2 phase situation. Yes, yes. It is not because it is a 25 years contract and we don't know what's going to happen after we have not seen anybody else. We haven't seen a complete cycle. Okay. Sir, unlike the CNT and waste processing projects, the bio mining projects are seem to be short duration projects. So is there any chances that they could also contribute sizable revenues in the near future? Yes. So we have taken up one contract in Greater Noida for bio mining and we build this contract up for 2, 2.5 years. And there are a lot of bids coming around for bio mining, a few of them here and there. But we analyze and we see whether it is good to bid or not and based on those things we bid. So there are these are the 3 business where we can increase. Okay. Sir, in particularly in the case of Greater Noida, we did not have any prior experience. So but still we have won that. So what are the basis for winning that order? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] No, we have an experience. We in Kajumark project, what we do, it's a bioreactor there is a bio mining experience already because that technology includes bio mining. So that's a big experience. So we have already have a bio mining experience, and we were the first to have those experience. Okay. Sir, in the investor presentation, I think you have mentioned Indore, Delhi, Mangalore, Coimbatore and those cities have started a bio mining project. Just to get a flavor, how much time do you feel that they will take to and award the tenders in the respective municipalities of these cities? Normally, municipalities of these cities? Normally, sir, it takes around 3 to 6 months depending upon how efficiently the department works and how inputs have been given to them from the ground departments. So it normally takes anywhere from 3 to 6 months from the order from the tender designing stage to the tender awarding stage. So that means is it fair to assume that by the end of this year, we could have come to know the status of these tenders also like they would have also finalized the operator and all? Yes. Now only problem that is happening is these tenders have been designing phase for the last one and a half years. Because of COVID, these things have been put into a hold. The financials of the corporations also needs to be taken into consideration when the because for the speed of new tenders coming out. Okay. So just to get an idea, how are the margins in this segment, sir? Is it similar to C and P or the waste processing? This would in our experience, since we don't have a standalone experience, but based on what we understand, this is in between these two projects, sir. This is towards processing, but it's not as high as processing. Okay. Fair enough. So if I am allowed to squeeze in one more question based on this one. Sir, in the PIM3, once we start this PIM3 processing plant, waste processing project, on a consolidated basis, the margin should head northwards. Okay. Now on the long term basis, is it possible to tell us what could be the sustainable operating margins? We always have a mix of C and T and processing and we like to maintain the current mix which is around sixty-forty ratio CNT and waste per unit. So we expect the margins to hover in the current range would be a very conservative estimate from the management, sir. Got it. And may I request Mr. Rajesh Kumar to please rejoin the queue? We have participants waiting for the term. Madhav, last follow-up question, Madhav, if I may not. Hello? Hello, sir. Sir, the last participant you said that we have applied for 6 tenders. So is it possible to tell us how much of this is the CNT and how much is the processing 1? It's fifty-fifty, sir. 50. Thank you very much, sir, and wish you all the best. Thank you, sir. Yes. Thank you. The next question is from the line of Swadu Teem, an individual investor. Please go ahead. Hi. Am I audible? Yes. Yes. Yes, yes. Hi, congratulations on the exclusive set of numbers. So I don't have any question around the numbers or any kind of this presentation. I have one question around the Mangalore Municipal Corporation. There is a I think there is some I need some clarification around our news because what I see that Mangalore Municipal Corporation is not happening with your service. I'm not sure about the whole stuff, but what I'm reading, I'm just telling that. So just need a clarification because what I understand there is after 6 months your contract is getting, I think, closed and after that there will be an issue of contract. But before that I think there is some they are not happy with the service. And then so can you just clarify on this? The Mangalore contract is a 10 year contract and is expiring in February 2022 as per the tender conditions. The fact is Mangalore in the state of Karnataka has been standing number 1 in the Swachh Bharat survey in the particular population category. So the flow of information is different from what is happening at the ground. Now there has been certain instances, one being the landfill management, which is not in the scope of the company is being poorly managed. That could be one of the reason why the SWM department is not satisfied at the core. But on the collection, transportation and the sanitation work which is called in the company's purview, We have done a fantastic work to which the corporation has managed to get the number one citation on the 1st virus survey because of the work and this has been continuing for the last 3 years. Okay, okay. Thanks for the clarification. And how much Mangalore this contract is contributing to the revenue and percentage wise? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Percentage wise, Mangalore as of Q1 contributes to around 6% of my top line. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Okay. It's negligible. Yes. Okay. Thank you. That was the only question I had. Thanks for clarity, Sathiya. Sure. Thank you. Thank you. The next question is from the line of Richard D'Souza from SBI Mutual Fund. Please go ahead. Hi, good afternoon. Thanks for giving me the opportunity. Just wanted to ask on fuel cost escalations, how was they being managed in the Q1? And going ahead, what is the learning? So in your new contracts, you have amended terms and conditions? Hi, Richard. Yes, the fuel contributes a decent chunk of our cost, as you know. So fuel contributes around 19% of our total operating cost. So the learning that we have realized over the last 1 year is nowadays whenever we go for any creeping meeting, we make it a point to address it that the escalation should be on a monthly basis. And if possible to have an average rate of fuel of that particular area to be the benchmark, it could be an IOC or a VTCL nominated one. If the escalations are not monthly, if it's semi annually or quarterly or annual, we don't we are recommending to the corporation that instead of taking an end of the period number for calculating the escalation, they should take an average price for the period as the basis for the calculation. Because we have seen in the past in the recent past that the prices spike up by 5%, 6% then end of the quarter because of some requirement comes back to the same base. So we might lose out on certain situations. So this is a change that we have initiated internally that any pre build meeting that the company attempts, this issue is raised and all the other operators have seconded this move. Okay, okay. So is there a chance that your existing CNT contracts, you can right now get shipped post or those will continue? We have opposed municipal authorities and requested them to consider this as a special request. The same is being forwarded by the authorities to the standing committees. We are yet to hear from them on this aspect, Vijay. Okay. Thank you. The next question is from the line of Dadeesh from Equidus. Please go ahead. Yes. Hi, Joseph. Hi, Angie. Thank you for the opportunity. So I also have a question on the fuel part only. So last time you explained that most of the contracts will see a price renewal in July. So just want to check how many of the contracts have already seen the pass through and how many contracts have been left? We have seen escalation come through for almost 65% of our contracts in the Q1. So the balance will be happening by December. So we expect some relief coming in, in the Q3 period and Q4. Okay. 65% you're saying happened in Q1 itself, not in July? Not in July. Okay. Got it. And sir, is the price escalation good enough to take care of the fuel price hike? It is more than adequate, Dipesh. Okay, okay. Got it. As a in the last quarter, you spoke about the one time Krisha payment to employees, right, of around INR 2.3 crores. But sequentially, again, your employee cost has increased. So just want to understand what are the reasons for the same? Our vehicle has increased by 28% to INR 45.7 crores. This is mainly because of the startup of Varmati expense which has added around INR3.7 crores to the increase. In the year ago period these were absent. So this increase is from Varnati. Secondly, the DA has been revised in the month of July 20 Jan 21. That has also come and hit us. So if you were to ask for a reconstruction of the 28% increase, 11% of the increase is coming from the new project and around 15% of that impact is coming from DAA revisions. Okay, okay, got it. And sir, last time you also highlighted that the NCR region is still seeing the lower volumes as compared to the pre COVID levels. So just want to understand how the things are now? Is it back to the normal level? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Yes, it's improved a lot and it's coming close to the normal level. Got it. And then lastly, there are like many projects which are running beyond their end date, right, like maybe Pane and all. So any update on those? When will the new kind of get floated or will we continue to work on that? Presently, they are under the process because of pandemic, they are extending our contracts from quite a few months. Once situation improves, then they will think of floating new bids and then we are adding next another 4, 5 months we will come to know. Okay. And sir, in this extension that they have allowed you for 4, 5 months, there is no price escalation thing, right, in these contracts? There are no price escalation for these extension periods because they have to get a specific approval for the same. But these contracts, the assets are completely depreciated. It's a pure pass through for us in those cases. So there is no asset amount and these are on a self sustaining auto collect mode. Okay. And so overall what is your view on the CNT margin Because of the fuel price don't rise further, do you think these margins will sustain and improve going forward? Around 55% of my almost 100% of my revenue has escalation, right, of which I would say 57% of them are under the variable escalation clause. So if you remember the previous quarter, we had a hit because of the escalations coming in of the timing effect. So we believe even if the fuel prices oscillates between current price and another 5% to 7% increase, the escalation will catch up in the forthcoming quarters and margins of the CNG business is stabilized at least 6. Got it, sir. And thank you and all the rest. Thank you, Dipesh. Thank you. The next question is from the line of Neerjan from Medicati Securities. Please go ahead. Mr. Meijan, please go ahead with your question. Hello, sir. Am I audible? Yes. Yes. Thank you for the opportunity. I have just one question on our receivables side. So are you facing any delays with the credit receivables from the Mutual Corporation? Sorry, can you repeat the question please? Yes. I'm asking on the receivable side, are you expecting any delays from getting receivables from our municipal corporations and other customers? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] No, no, because of see what has happened in the last three quarters, we have seen a slight improvement in our payment cycle. I mean that is what is reflected in our DSOs, which has improved from 71 in the last year to 56 in the latest quarter. A lot of actually prioritize payment to these kind of expenditures. We are not expecting any delays in a regular payment from our existing clients. Okay. And what will be sustainable DSO days raise going forward? Honestly speaking, these are the best DSO raise that the company has ever achieved in the last 8 years of working with these clients. So I'm if you ask a honest question, what is the DSO that we would like to live with, these would be the best rates. But historically, our DSOs average anywhere between 60 to 70 days. And that is something which has been built into our system and that is something that we have taken into consideration at the time of bidding for such projects. So currently we are at 56. Historically we have been at 65.17. We are happy to be in this range. Okay. Yes. Thank you, sir. Sure. Thank you. The next question is from the line of Dhruv Dindrajpa from Monark IF. Please go ahead. Yes. Good afternoon. So my question is related to your cost of debt, which is which was previously very high at 10.4%. But now it has reduced to 10.63%. How much scope do you see for further reduction in the cost of borrowing given that after the IPO money you must have repaid that also and you might be getting a rating update in the coming time. So where do we see this cost of borrowing going further down? Hi. We are looking at least if not 1% or a 0.75 percentage improvement in our cost of borrowing for the next 2 quarters. That is something that we are working with our financers and bankers. Okay. But then for even if it goes down that they are 100, it would still be high at 9.60%, don't you think so? It is higher because of the long gone risk associated with the kind of receivables. So we have addressed that to our clients and bankers who see in the past the waste management industry was not favorably looked at because as part of the infrastructure space, the cost of borrowing was always higher. It's only because our performance over the last 5 years of the traction and our ability to repay debt at an aggressive clip has given support and comfort to the lenders. So the rate that you see today of 10.63 is reflective of the same lenders renegotiating on the rates because they would like to retain us as their clients and then other lenders willing to come and take away the pipe. So this decrease in cost of borrowing is reflective of support and confidence that the finance industry now has with the waste management industry especially with Anthony Waste. Our businesses are steady in nature. They are more like annuity models. There is a contract which is signed with the quasi government agency. The payment comes on time that has been negligible financial stress despite COVID and all those situations. The EMIs have been going online. So that has given them a lot of comfort and the performance of the company. If you look at my balance sheet, it's pretty strong. My net debt to equity is 0.1x. I have around INR 97 crores of money in cash today, which can take care of my future receivable increases and still make my payment on time. So from a lending perspective, from a credit risk perspective, I have significantly improved by 2 notches, at least in 1 quarter And we will work to get into the A category rating in the foreseeable future. Okay. I think that's fair to understand the space. So because majority of your clients are municipal corporations, which are basically government sponsored entities, so don't you think that the receivables from their end are not paper and don't you think the banks would be doing this in that sense or is there something which I'm missing? The government agencies historically have been known to kind of not be very efficient paymasters on time. That has been one of the concerns for infrastructure companies from the banking industry. So even if your clients are Bombay Corporation or Pimpericenter Corporation, if you are in a road repair or you are in street lighting, they have historically faced some delay in the releasing the payment because of the procedural delay that happens. Maybe that is one of the reasons why banking industry doesn't give us such high rating despite the receivables are coming from almost sovereign backed institutions, but these are not. These are not state governments, these are not central government, these are municipal corporations which have a different identity of them. Right. Okay. Okay. Very well, sir. Thank you so much for the answer. Thank you. Sure. Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Anupam Gupta for closing comments. Thanks, Sujha, and thanks to the management for taking our time for answering the questions. I hand it over back to Mr. Jules for any closing comments that you might have. Hello, everybody. Thanks for all of you for the valid questions. And these are our tough times and uncertainties ahead of us. So we are hopeful that Indian economy will bounce back and we will see growth momentum going ahead. I would like to thank you all to participate on our earnings calls. Once again, I hope we could address all your queries adequately. And for any further information, please call SDA, our Investor Relation Advisor. So anyway, thanks once again. Please take care and stay safe. Thank you. On behalf of ISL Securities Limited, that concludes this conference.