Antony Waste Handling Cell Limited (AWHCL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Antony Waste Handling Cell Limited Q2 FY '22 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. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jose Jacobs 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. Subramanian, Group CFO; and SGA, our Investor Relations advisers. 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 targets. We saw an increase in waste generation as the authority eased localized lockdown, resulting in restart of commercial activities in the region where we operate. Stock aggregation, building price 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 C&T projects. Now MS -- Municipal Solid Waste Collection & Transportation projects. In these services we have 14 ongoing projects. And all the region in which Antony has operation are showing sign of growth. Our Municipal Solid Waste Collection & Transportation business registered a volume growth of 20% in Q2 FY '22 as compared to Q2 FY '21. On a sequential basis, we registered a growth of 12%. Various municipal corporations have started moving forward with their tendering processes for Municipal Solid Waste Collection & Transportation, and we continue to be hopeful to report on the development on the same by the end of the current fiscal year. Municipal solid waste processing projects, that is the second one. To reiterate from our earlier calls, we have 3 large ongoing projects. One is at Kanjurmarg, Mumbai, which has a concession period agreement till 2036. Second is Pimpri Chinchwad, Pune, and has a concession agreement till 2040. And we have also won biomining project at Greater Noida. The volume at our processing business grew by 12% in Q2 FY '22 as compared to Q2 FY '21. However, on a sequential basis, it grew by 4%. Both our project at Kanjurmarg and PCMC, which is Pimpri Chinchwad Municipal Corporation continued to perform well. The groundwork and preoperating activities at our Greater Noida biomining projects have 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 seal 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 [ Alien Management ] on the Board of the company in 2007. Consequent to the sale of the entire shareholding in the company by the private equity investor, Mr. Karthik Muthuswamy, [ ink on ] suggestion with the P/E firm had resigned from the Board of the company with effect from October 30, 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 appreciations for the variable inputs provided by Mr. Karthik Muthuswamy during his associations 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 Kallarakkal's as Additional Director on the Board of the company with effect from 12 November, 2021. Mr. Shiju Antony brings in a decade-long experience in waste processing and has 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. Subramanian, 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. or the second quarter and the first half year ending September 2021, the company reported an operating revenue of around INR 143 crores in Q2 FY '22, up from INR 131 crores in Q1 FY '22, a 9% sequential increase in revenue. The growth in core revenue is being driven by tonnage increase and the inbuilt escalation clauses, as Jose mentioned. Operating revenues increased by 43% to INR 273 crores in the first half 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 & Transportation revenue and processing revenues. The total revenue, which includes contract and other revenues has increased 6% sequentially to INR 158 crores in second quarter of FY '22, up from INR 150 crores in the previous quarter. Revenue for the first half is standing at around INR 308 crores, up from INR 215 crores in the first half of FY '21. And this represents a 43% increase year-on-year. Business-wise, the Collection & Transportation revenue is up by 11% to INR 105 crores in second quarter as compared to INR 95 crores in the June quarter. The growth being reflective of the C&T volumes increase of 12% as compared to the June quarter. The processing revenue was up by 4% at INR 38 crores compared to INR 36 crores in June quarter. The improvement is purely reflecting the volume 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 maintaining the EBITDA margin in the face of rising fuel costs, and part of the credit goes to the operational efficiency 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 first half 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 the year-ago PAT of INR 18 crores. For H1 2022, consolidated PAT stood at INR 46.5 crores versus INR 29 crores for the first half 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 6-month period ending September, profit post minority interest stood at INR 34.8 crores and compared against the full year 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 to INR 443 crores as of March 2021. During the quarter, CRISIL has assigned BBB+ with a stable outlook and a 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 bps from 12.4% as of March 2021 to 10.7% 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 was 16.6% as of September 2021. Similarly, our net cash from operations activity stands at INR 47.7 crores for the first half 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 first process was completed on October 15, and the departments always aimed at verifying the claims of our vendors who provide subcontracting activities to our daily operations and was aimed at quantify and confirming the same. Just to well into this, the company through its subsidiary is providing collection and transportation operations through 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 until the time the new contract is tendered out and then operators are signed for the same given the fact that these are essential services that the company provides. So 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 proposed 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 decided by them in this matter. I would like to inform that all the payments to the vendors have been made through RTGS, NEFT 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 vendor's 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 for passing the assessment order. Since proceedings are at a preliminary stage and in the absence of any notice of 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 fact. We wish to inform that the proceedings had 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.

[Operator Instructions] The first question is from the line of [ Aakash Mehta ] from [ Topaz Investments ].

The first question I had was on the increase in the tipping fees during the quarter. You mentioned that this was due to the price escalation. So I just wanted to know if this escalation was across which contract.

So the contracts are either annual escalation or quarterly escalation. So 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. So 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 aspiration, which is linked to the WPI. 30% would be on a month -- half-yearly escalation and the balance is on quarterly escalation.

Okay. So just as a continuation, the new contracts, what is the period of this escalation?

So the new contracts have an escalation, which is normally of the ones that we have bagged recently was Jhansi and Varanasi, they have an annual escalation, and that has yet to kick in. So the escalations that we are benefiting are from our old contracts like the one in Nagpur, Navi Mumbai, Pimpri-Chinchwad and MCGM.

The next question is from the line of Kalpit Narvekar from Allianz Global Investors.

Congratulations on a good quarter. So my first question was on the income tax surge, right? So 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.

Hello? Yes, is this better?

Yes, this is audible.

Yes. So on the income tax surge, I just wanted to understand what exactly is the issue from our end. So 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 surge, yes, if you could…

Mr. Narvekar, the problem is, as you have rightly said, it's partly because of there the vendors' inability to conform and apply the compliances in the income tax returns. So all the payments that we have made to these subcontracting vendors are through RTGS and your bank transfers after directing 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 offtake 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. So there has been an underreporting of income at the vendors' end, and that is something that is being scrutinized by the tax authority.

But from the perspective of our company, it's -- you are totally compliant with the GST and the TDS requirements, is it?

Yes. So we -- all the TDS that is deducted gets paid by the company upfront. So there is no noncompliance at that end. And we don't take any GST credit. So there is no noncompliance on that part as well.

Okay. Sir, and 1 question is, say, in the future, then how do you sort of plan to change your vendor selection process or something to avoid issues like this? Do you…

So what we will do, and that is something that we have already initiated, our is, to have a strict vendor profiling revision, which in like any banks you need the vendors to provide us with the ITR acknowledgment number. We don't need ITR copies per se, but we need the acknowledgment that they're filing their returns on time. So as a company, our selection of vendors will be the only way that we can safeguard ourselves from this kind of action.

Great, sir. And 1 question from my side, 1 other question was on the order visibility. So 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 1 year or so?

Yes. So there is a few bids coming up, and we are working on it, few down south as well as in the north, and we are on the process to bid and win few contracts. As now we have already executing our 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?

So we will not be able to give you the number of bids. We look at the viability of the plant and our ability to maintain our financial returns and the profile of our company. So it is just not the number that we target. Operationally, we can take an incremental business of around 2,000 tonnes per day kind of a business, both collection and transportation and waste processing. So the company's business development team and the ops team are pretty geared to take up new projects. And the ones that we've already backed in are under execution and mobilization phase. So we are definitely talking about new clients and [ newer objects ]. And currently, we are seeing 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.

The next question is from the line of Anupam Gupta from IIFL.

Firstly, if you can talk a bit about the ramp-up which is happening in the Varanasi, Jhansi and the Greater Noida contract. If you can just talk that through how that will come through or how Varanasi is ramping up and how the other 2 will increase in the next -- in the second half.

On Jhansi, we would be -- we already started to work in certain sectors of the city. So by January 26, we plan to be rolling out the bulk of our operations. We should be 100% by Jan 26, that's an internal target that we have set. So maybe the fourth quarter we'll see full year revenue from -- 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 started -- we have completed our mobilization work in the month of October end. And November onwards we have already started the activity of biomining the zone. So maybe 1 month of revenue will be sitting in the month of -- in the third quarter of this current year and full quarter revenue of Greater Noida biomining in the fourth quarter.

Okay. And in terms of tenders, has -- so recently there was a reannouncement of the Swachh Bharat, slightly more details and more emphasis which is given there. So what sort of opportunities, if you can talk a bit more detail. Is it more of C&T? Or are you seeing more of biomining coming in incrementally? So slightly more details there if you can share. Not the name, but at least the trends and what sort of contracts are coming up.

So there are a few contracts on waste processing also pan-India level and as well as collection and transportation. Biomining this -- so we -- what we do is we do proper due diligence of the municipality, whether they have the funds available and then we go for bidding. And there are a few tenders in the North as well as the South. I've been told not to express about what are the municipalities and all that. But we are under bidding process, and we have submitted also some bids, and we are waiting for the results.

So Anupam, the kind of contract that's coming up, it's not purely collection and transportation of waste processing. It's a combination of both and also biomining that is happening in the established cities.

Okay. Okay. I understand. And in terms of the margin which came in slightly lower in this quarter because of the escalation which are delayed, so you said May and February the main times when it happens. So let's say from here till Feb or let's say, 3Q, the margins will again be subdued and only in the fourth quarter will you see a slight jump, assuming raw material or the -- or fuel remains where it is.

Yes. So for example, fuel today constitutes around 18% of my total operating expense, Anupam. And this has risen by 64%, partly because of increase in the cost per liter and also due to increased trips to handle the increase in tonnage. And part of the increase also comes from the start of the Varanasi operations. So we are seeing an increase in fuel coming in. What today is 18% of our total OpEx was just around 16% in the year-ago period. So this increase is, A, partly because of volume consumption and also because of the pricing that is coming and eating in my number. Escalation, yes, it's an annual or quarterly as the project spears out. So we would be getting some benefits in the beginning of the next calendar year.

The next question is from the line of Manav Vijay from Deep Financial.

Sir, I have 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%, so can you just…

So sir, you were -- so you had mentioned in last con call that by the end of quarter 2, which was September, the entire paperwork of increasing the stake from 63% to 73% will happen.

Right, right. So that was -- the Brazilian team actually had to come down to India to focus certain paperwork. So the team is already here. So we have submitted the document afresh to our bank. So that processes on. And we expect the same to be competed by the current calendar year. So the documents have been changed multiple times by the banking institutions. So 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. So certain norms and certain procedural delays kind of didn't help us do it. But the team is here from Brazil. They have fulfilled the documentation work now. So we expect the sale to be completed by the 31st of December.

So sir, in that case, so the profit of the additional 10% equivalent, so will come only in quarter 4? Or we will -- or that will come even in quarter 3?

No, no. So 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 an accounting perspective. From that point onwards, it will be prospected, it's not retrospect.

Okay. Okay. Fair enough. My second question would be, sir, regarding this Kanjurmarg project that you have. So last year, we processed roughly 1.7 million tonnes in that project, averaging to close to 4,700 tonnes per day. If you can explain what was the number in H1?

So for H1, we were averaging around 5,205, 5-2-0-5.

Okay. Because, sir, in your -- because in your quarter 2 PPT on Page 4, you mentioned that till date you have processed close to 10.01 million tonnes. And then again, in quarter 1 PPT, you had mentioned that, I would say, up till quarter after FY '21 you had done 9.69. So that converts into close to 3,20,000 tonnes for actually [ 90 ] days. So which converts into 1,800 tonnes per day. So is there something -- is there something typo that you have in the PPT?

I don't think because we are averaging around 5,200 tonnes at around at Kanjurmarg, 800 at our Pimpri Chinchwad waste to energy project. So maybe it's cumulative of both the side, 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 be helpful, sir. My next question, sir. Now 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 crores or INR 36 crores or so. Are you on track to do INR 100 crores to INR 120 crores CapEx in that project in this year?

So part of the first half of the year is because it's been monsoon in this part of the country. So part of the CapEx gets slightly delayed. The second half should be significantly more. So we already work -- started to work on that. So the numbers can vary based on the initialization of the work orders and everything, but we are targeting a CapEx to the tune of at least INR 90 crores to INR 110 crores in the current fiscal year.

Okay. Fair enough. My next question would be, sir, last -- so 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 2, again fuel prices have moved up -- so 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, I believe, all the contracts that you had. So 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. But the tender clearly says that the escalation is on a time-bound fashion, which is like P1 divided by P0 and P1 being the plus-12-month time of the horizon. So that is by tender that is 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 corporations' officers and the standing committee to agree to the same. So 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 that -- is there any update that you can provide us on the dividend policy? Because last call you mentioned that you guys are working on a dividend policy. And in due course, it will be informed.

Yes. So on the dividend the state has remained the same because we already discussed this in our last AGM, the Board meeting before -- pre the AGM where the dividend policy of the company was adopted. So the company definitely plans to have a dividend once things stabilize either on the COVID front or on the CapEx rollout. And 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.

[Operator Instructions] The next question is from the line of Depesh from Equirus.

Sir, just want an update, is there any clarity on the closure of ending contracts in the next 6 to -- 6 months to 1 year, the contracts which are already expired. Is there any clarity from the municipalities?

Actually, Depesh, the contracts have been extended by 1 year according to the media report, so that's -- for the next -- the Mangalore project which will expire in February 2022, is been -- unofficially been -- it's been reported in the media that it's been extended by another year. The other contracts have all been extended by 6 to 12 months.

Got it. Got it. Got it. And any particular contract or place that you can highlight where the volumes are still below the pre-COVID levels?

Certain areas in Pimpri Chinchwad is slightly softer than what it was in the past, and also in Noida. These are the 2 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 really sustainable.

Got it, sir. Sir, so putting all this together, so you have done like INR 75 crore EBITDA in the first half of this year, and you have annuity-based model, right? And the second half, you have basically the new contracts coming in of Greater Noida and your Jhansi. And also Varanasi full ramp-up will be visible. And also, if you think about it, the fuel cost, the worst part of the fuel inflation, I think we've already seen, if the fuel doesn't increase further. So any guidance you want to give, sir, for the full year EBITDA number, what you're looking at right now?

See, we will be very happy to maintain EBITDA margin of around 27% to 27.5%. I mean if fuel prices don't go 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…

Absolute number, but margins can go up and down depending on the contract revenue that you booked, but the INR 75 crore absolute EBITDA that you have booked in the first half, that should be the base, right, and you should build over it, right, for second half?

Definitely. It will definitely build on -- over it. But just a point, there is always a seasonality in our business because the first half of the year always has monsoon, which increases the tonnage and moisture level around, a fraction of around 8% to 9%. So that benefit may not be available in the second half, but that gets compensated by increase in new businesses like from Greater Noida and Jhansi as you rightly mentioned.

Got it, sir. So like INR 75 crore, okay, right. So at least INR 150 crore kind of EBITDA we are seeing, so versus last year INR 114 crores. Okay, I 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 of effective tax rate for the full year, please?

So for the current year and the next year, we will be having the same tax -- effective tax rate like what we had enjoyed in the first quarter of the current year. So that is going to continue because in the previous years we had accumulated losses as much standing -- as a stand-alone entity, that's got completely taken care of. So our tax rate will be in the range of around 22.5% to 24%, in that area.

Got it, sir. And 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 of the Greater Noida contract that I think is expanding?

Greater Noida CapEx is done, there is no incremental CapEx at Greater Noida. That is the incremental CapEx at Kanjur facility to the tune of around INR 28 crores over the next 2 years. But for these 2, we don't have any other CapEx 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, that EVs kind of a thing because we want to try and test them out in our existing setup. So 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. So that -- I mean, that's a very small CapEx amount, not significant.

The next question is from the line of Sagar Sanghvi from ADD Capital.

Couple of questions from my end. Sir, when we look at your business, so last quarter you mentioned you have bid for 6 projects, 3 into collection and transportation and 3 into processing business. Any progress on that, if you can…

So the company has already provided the technical information to the clients and the corporation, and they're reviewing the same. And based on these things, they will rework on the tendering requirement and then the bids will be opened up for our processes. So there's -- it takes anywhere between 6 to 12 months for collection and transportation business to get from the intent stage to the lowest stage. So the work is in progress in this…

Any guidance, if we add 1 or 2 or 3, all the 3 of it, how much revenue that would contribute in Collection & Transportation. And also on the processing side, what kind of CapEx is this bid -- this bid would require what kind of CapEx or something?

So it should say, waste processing contract, the normal gross asset turnover is in the ratio around 0.3 to 0.4x. So if it's like a -- so that gives you a sense, if you say 800 tonnes per day or 1,000 tonnes per day number and the CapEx is around maybe around INR 100 crores, the revenue -- annualized revenue would be around INR 30 crores to INR 45 crores depending upon the technology that we use and the kind of processes that need to be involved. And these are normally around 20 to 25-year long tenure with an EBITDA upwards of 50%, 55%. So that is on the waste processing side. Collection & Transportation, the gross asset turnover would be in the reason 1 to 1.25x. These are normally around 7 to 8 years kind of a contract. And so depending upon the size of -- or the mix of the contracts that we are talking about and annualized revenue anywhere in the range of INR 60 crores to INR 80 crores from that particular project win can be added from the start of operation.

Okay. Sir, looking at FY '24, so FY '23 we understand there will be some contract revenue and expenses which is a 10% margin business for you. How should we look at FY '24 and onwards? What kind of blended EBITDA margin is company looking at? And especially into your Collection & Transportation and the waste to energy project.

So on a steady state of affairs, if I want to split my entire revenue into 2 components, my core revenue and my contract revenue. The core revenue normally comes in an EBITDA of around 28% to 32% through the project life. That's on a very conservative level. And the contract revenues, which are nothing but construction-related activity for debut projects, that has a lower EBITDA number. So as -- over the next 2 years, we are seeing a significant increase in construction of my waste-to-energy plant in Pimpri Chinchwad, so that will reflect into a higher top line and a softer EBITDA at a consol level. But at my core EBITDA level, that will see an expansion because the last 2 years my EBITDA was depressed because of lower tonnages due to COVID-related activity where the commercial activity was 0. So 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. But sir, that is your integral part of your business. What I understand you have bidded for all these 3 more projects as well. Your existing will get -- concession will get over in FY '23? So '24, '25, '26, that continue -- the contract revenues will continue to kick in and your blended EBITDA margins would still remain in 27%, 28%.

It should be higher than those rates. It should be higher than those. It should be in the range of 30% to 32% because that is what historically we have maintained pre the construction phase.

Okay. Got it, sir. And if you can give you 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.

The next question is from the line of Ashutosh Parashar from Growthx.

So 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 getting commercially active in March 2023. From that point onwards, we'll see there to be around a 50-50 kind of a break. And long term, we would continue to have that kind of a outlook because, A, those capital intense in the waste processing arm, there are higher EBITDA generation and there is a stability in the revenue generation forecast also. So that gives you a decent amount of visibility. And the cash thrown out from the waste processing can go for fueling the growth at the Collection & Transportation business. So in the medium term, the product mix or the revenue mix would be 50-50 between Collection & Transportation and waste processing.

The next question is from the line of [ Kaushal Kedia ], individual investor.

Yes. I just wanted to know in terms of cities can you say which cities are you targeting or which cities are you filling tenders for just to get the visibility on the growth?

So there are a few tenders like -- as you know, solid waste management new rules has come up, and there is a pressure on the municipality to modernize their present collection and transportation as well as waste processing. And there are a lot of legacy waste for biomining. So -- and 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 bid, 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. And you can see the waste management capital growth has been around 8% to 10% pan-India level. And similarly, we also try to target growth. And I think post IPO we even won biomining contract, and now we are looking for more biomining contracts in pan-India level.

Further to add to Jose's point, we normally target cities with at least 4 lakh population, which generates around 300 tonnes per day kind of a waste. So that's the sweet spot that we have but that is when the asset turns and asset turnovers can be most judicially be used and we are able to maximize our returns on our fixed assets. So that really helps us. And if you were to look at any source of information, there are at least 70 to 74 cities, which in the country which satisfies this need. And bulk of them are still being worked by municipal corporations or by the state enterprises themselves. So 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. And that is where the large number of tenders have been touted out and they have been coming down. So that's what the trend is, as hopefully.

So what I want to understand is there are some cities like Kanpur, Agra, just to name, there are so many cities that come to our mind. So any particular city that you're targeting? Or right now there's no particularity you're targeting? You're just waiting for the tide to change basically…

So as a company we avoid naming the cities as our next target or place to work as a policy. So definitely the names that you mentioned have been on our radar for quite some time. And we are looking at areas in and around our 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 business around those areas. That would be Slide #11, which gives you a focus about once we enter, we are able to leverage on the overheads, capital overheads and corporate overhead structure and kind of get more businesses in that area. So we are…

That I agree with. But the -- your predominant presence is in Maharashtra, right? So 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, you know, like Kanpur, Agra, Varanasi, the likes of Muzaffarpur, Bihar and Bangra. So these are the cities that should be of more importance, right? If you're following up [indiscernible] because Maharashtra -- in Maharashtra, beyond Mumbai and Thane, is there like further opportunity for growth?

So in UP we have contracts already in Varanasi and Jhansi. And in the state of Bihar and West Bengal, there have been requests and we -- there are officials visiting our sites who also want to modernize their present collection and transportation and even waste processing. So 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 build. And also we really don't bid in contract where there is no technology. It's just some trucks lifting where we will go in for where they want to introduce garbage compactors, transfer stations or waste processing scientifically, so and biomining also. So we look in where the bids are also prepared as for the international standards. So -- and there are a few bids in the pipeline, and we look forward to win few of them in coming months.

Also from previous contracts, is it like mainly on merits? Or is there some sort of nepotism that comes to place? 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 4, top 5 consultants in the country so that they prepare a quality bid and the bid based on technical as well as marking and also technical and commercial marking. So the bidder who has -- holds and good ranking has a better chance to win the contract. So we only bid for such contracts where the bid is prepared in a professional way and as per international standard. And which also the government is looking forward because they also want to modernize their present collection-based management system because there's a Swachh Bharat Abhiyan and every municipality is evaluated and there is a ranking given. So -- and the more, the better the ranking, the better they get funds and also is appreciated at the top level. So there's a lot of change in the solid waste management sector in the country, all over India. And every municipality is going in the right direction by preparing proper bids. And off-late we have seen recently the government also has bought in a new law, the bids will not be awarded to only L1 bidders. So it will be -- this is also a good opportunity for our quality bidders like us to win more contracts in pan-India level.

Understood. And my last question is with respect to these trade receivables that you mentioned in point #4 and 5 of the notes, the financial statements, it's approximately INR 8 crores or INR 41 crores. So as a analyst, what should you consider this to be? This the normal…

Normally our trade receivables swing between 60 to 75 days on a weighted average basis. And that is what we have maintained in the past, and that is a range that we are comfortable with. This is a mix of all the clients that we have, certain clients play us on a monthly basis, certain client pays on a quarterly basis. So in the last couple of quarters, we have seen some decent amount of improvement in our trade receivables. But we feel that once things stabilize and the nondevelopmental expenditures also kick in once things stabilize at the urban, local bodies' financial level, we will 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 #4 and 5 of the notes to the financial statements of INR 8 crores and INR 41 crores.

Yes. Of that amount, we have already provided a decent chunk of provisioning and these are under arbitration processes. So [ fuel ] arbitration has already been awarded in favor of the company. Now based on the judicial process, the same will be limited by the corporation to the company. These have passed in the last year itself. But because of COVID, the priorities of the urban local bodies were differentiated. So we are in touch with the corporations, and we expect the same to be received by the -- in the next few quarters.

How much have you provided for and in which quarters you provided because I can't see…

So this has been provided historically. Nothing in the last quarter or the -- in the current financials, this has been provided historically.

Please, out of 41, sir [ DSO ] is at 49. Approximately how much we have provided for?

We would have provided around 75% of that amount.

Okay. So if I see the previous quarter's financials, I should find the provision?

Yes.

The next question is from the line of [ Harish from Harish Swaminathan Family Office ].

My question is related specifically to the income tax search. Now the department had come out with a communication that about INR 70 crores in cash was taken and also that the property document for about INR 7 crores was identified. Now I wanted to know if this is true. And my second question is, would we be liable for the action of our vendors.

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. So these are services provided for renting of JCBs, dumpers, tippers and specialized equipments 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 the books have genuinely been spent and TDS on the same has been directed and given. So that vendor then has to confirm whether the receipt of his income he has paid taxes or not, and that is his lookup. So second, this answers your point #2. On point #1, the number that you're suggesting, sir, it's a highly inflated number, and there is no justification. All these expenses have been incurred and a subcontracting 94C and 94IA of the schedules, that 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 10-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 6 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. So we have hired these subcontractors in the Delhi project after 2016 only when the project's life was under extension period. All the payment to the vendors have been made through [ ETF ], NEFTs and RTGS and bank transfers. TDS has been deducted and the same has been deposited with the appropriate authorities. Now with the -- all these vendors, bulk of them are either sole trading concerns or MSMEs. And the compliances has been -- it should be direct part of the rule. We have now realized that as a filtering process, we need to have a higher filtering mechanism for our vendor profiling to be done. And on the other part that you have mentioned on the property details, those properties are not owned by the company, there have been no purchase of properties whatsoever by the company.

The next question is from the line of Sunil Shah from Turtle Star Portfolio Managers.

Sir, 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, will we be having more and more of air pollution. So will 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 the land area has to be shifted? Or what happens in such a situation? Meaning, does the government come there and protect our work which is happening. So I just want to understand the risk element in the business.

So to get a big chunk of land to do waste processing outside Mumbai is big, it's not that easy. So this land was allocated by the state government, and it was given to the municipality. And for only for waste processing. And this is purely for waste processing. So the risk element of just shifting overall in a year or 2 or something is not that easy for. So that is one thing. And second thing is we are doing a scientific processing center where waste is being disposed scientifically and all the methane and all is sucked out. And with that methane gas we are generating power and electricity. And also the organic part is converting to compost. So it is a scientific process. And if anybody visits, can see how well-advanced system we have. And even we are now producing RDF. Whatever waste we are generating, we are shredding it and converting into -- RDF means refuse-derived fuel which is a similar product like coal. And we are marketing that as coal. So it is a scientific process. And we have people visiting our site for academic reasons. So it is something which is very important for the society. 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. So in the city, every city needs a waste disposal site. And it has to be done in a proper manner so people, citizens don't complain.

Okay. Sir, my second question pertains to the contracts that we have. Sir, in that there are 2 parts. First is, when you say you 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? And the second question in the contract is what are the broader terms, meaning it is in context with the tonnage, it is contact -- in context with the number of days, that 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.

So the tender clearly says that it's a 25-year contract wherein you would be processing waste from the city of Bombay. And there's a minimum assured tonnage of around 3,000 tonnes per day, going all the way up to 7,500 tonnes per day gradually. So the broader terminology is very simple. You will be asked to process around 7,500 tonnes per day of the waste which the city of Bombay generates. Now currently there is only 1 waste processing site. The other one which is located in Deonar is an open dumping ground. And 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. So the tender clearly says that you will have to process around 7,500 tonnes per day minimum over the project life.

Okay. And in that period we will be the virtual monopoly, meaning there will be no other company which can bid some time in between nothing of that? It remains with us?

Today, the city of Bombay generates anywhere between 8,500 to 9,000 tonnes 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, can process up to 7,500 tonnes per day. The balance waste is currently dumped openly at Deonar. So we don't foresee a situation where the waste keeps on increasing. And then you will have a problem, the entire city will have a problem of disposing this waste. So yes, to answer your question, currently we have a monopoly of the entire waste that has been 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. But this definitely takes care that we would be assured around 7,500 tonnes of waste to be processed.

And sir, just the last detail, so power revenues are linked to the quantum, that is the 7,500 tonnes which we are talking about, correct?

Yes. Correct.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Jose Jacobs for closing comments. Thank you, and over to you, sir.

Thank you, SGA. I would like to say 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 earnings calls. I hope we were able to adequately address your questions. And if you require any additional information, please contact SGA, our Investor Relations adviser. 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 Handling Cell Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.