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

Ladies and gentlemen, good day, and welcome to Antony Waste Handling Cell Limited Q3 and 9 Months 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 the 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 Jacob, Chairman and Managing Director, Antony Waste Handling Cell Limited. Thank you, and over to you, Mr. Jacob.

Good afternoon, and a very warm welcome to everyone present on the call. Along with me, I have Mr. Subramanian, Group CFO; and SGA, our Investor Relations advisers. I hope and pray for your continued safety, health and security as well as that offshore families. Our investor presentation is now available on the stock exchanges and the company website. I'm happy to report that we had another record-breaking quarter in terms of revenue, exceeding previous quarter highs due to growth in tonnage from both commercial and residential areas in which we operate. We believe the impact of the third wave of the COVID-19, namely the Omicron variant is not very severe. And economic activity has started to normalize sooner than expected. In the future, apart from the normalization of economic activities, new contracts will enable volume growth for our company. Now moving on to business-wise performance, Municipal Solid Waste Collection & Transportation project. In these surveys, we had 13 ongoing, projects and all the region in which Antony has operations are showing sign of positive growth. Our Municipal Solid Waste Collection & Transport business registered a year-on-year volume growth of 13% in Q3 FY '22. And on a sequential basis, we registered a growth of 3%. I'm pleased to report that during quarter, our wholly owned subsidy, AG Enviro Infra Projects Private Limited was awarded a 10-year municipal solid waste collection and transport contract to disposal sites and operation and maintenance of equipment machineries from the city zone and Southern [indiscernible] of North Delhi Municipal Corporation. This contract is for the collection and transportation of approximate 1,000 tonnes per day. This contract has a dual revenue. Not only we'll be getting paid on tonnage handled, there's also a user fee collection model. The user fee collection will be split in that 85:15 split between NDMC and AG Enviro. Waste generator will be charged fee by the operator for the door-to-door collection and transportation of solid waste from households, commercial shop, establishment and bulk wage generators under the user fee collection revenue model. NDMC will part fund a portion of the CapEx, while AG Enviro will fund the remainder. We expect the contract to start operation by May or June of the current year. But a few works can see some operation as early as end of February itself. It depends on the ability of the corporation to provide us the [indiscernible]. Coming to municipal solid waste processing projects. For the 9-month period ending 2021, we have processed approximately 10.61 million metric tonnes of waste in our municipal solid waste processing projects, which include both Kanjurmarg and Pimpri Chinchwad. The Greater Noida biomining activity building will commence in the current quarter of Q4 '22. The volume at our waste processing business grew on a year-on-year basis by 6% in Q3 FY '22. And on a sequential basis, it has improved by 4%. In Kanjurmarg, we have commenced biomining, our first ever in order to convert [indiscernible] contains to compost and [indiscernible] futher cells. The activity was slightly delayed due to the late exit of monsoon in these parts. Our Pimpri Chinchwad waste to energy project is on track, and plant is scheduled to be fully operational by March 2023. During the quarter, the Board of Directors of Antony Lara, our material subsidiary, has approved the conversion of 3.5 lakh convertible preferred shares into fully paid-up equity share at a 1:1 ratio. As a result of this corporate activity, the controlling interest of Antony Waste Handling Cells Limited in Antony Lara has increased from 63.04% to 73%. Also during the quarter, Antony Lara has recognized -- was -- has been recognized by the CI with the prestigious merit for excellence in managing municipal solid waste award for [ a fourth ] in managing municipal solid waste in India. This award recognizes our entire team dedication to all of our plants as well as all of our support functions. This award is dedicated to all of our employees who have always done their job even in the face of adversities such as the COVID-19 pandemic. Additionally, during the quarter, the result of the Swachh Bharat survey was disclosed, and I'm happy to inform that few of the cities in which your company operates, which are [indiscernible], NDMC, MCGM, among the others, has scored higher [indiscernible]. It is our continuous endeavor to provide quality service to our clients and help them in the part of sustainability and preferring a better quality of living to its [ reserves ]. This is on my side. I now hand over the conference to Mr. Subramanian, our Group CFO.

Thank you, Jose. Good afternoon. Good afternoon, everyone, and thank you for joining us for our third quarter 2022 earnings conference call. The year 2021 has been an eventful year at Antony Waste. We have completed our first year of being a separate entity. And during the calendar year, there is a 12 months' ending December 2021, we have processed approximately 1.9 million tonnes at our [indiscernible] facility. This is the highest tonnage being processed at our site till date. The year has also seen the company build on organic growth and also bag and build on 3 new contracts, namely the Greater Noida biomining, Jhansi and the recent NDMC C&T contract. During the third quarter ending December 2021, the company reported operating revenue of INR 148 crores, up 26% year-on-year and a total revenue of around INR 165.8 crores, which are up by 30% on a year-on-year basis. Sequentially, these are up by 4% and 5%, respectively. The growth in core revenue was driven by tonnage increase in both commercial and residential areas in which we operate. Operating revenues increased by 36% to INR 422 crores for the 9-month period ending December 2021 compared to INR 309 crores in the same period last year. While total revenue for the 9 month period is up 38% at INR 474 crores. Consolidated adjusted EBITDA has registered a marginal growth of 1% to INR 43 crores in Q3 FY '22 compared to INR 42.4 crores in Q2 FY '22, with an EBITDA margin being 26%. The EBITDA was impacted by provisions made on account of our conservative approach towards delay in the reconciliation of billings in the user collection fee model projects. The provision under these are to the tune of around INR 6.8 crores. Let me put some color on this. Based on the new building model or the user collection charges, our revenue recognition is from the household and commercial units, especially in the project of Varanasi and Jhansi and also in Noida. In collaboration with our clients and as per our tender conditions, we have implemented a more transparent technology to aid in the processing of error-free billing by adopting GPS-enabled geofence and an RFID-based billing processes and have moved away from manual entry. The reports and bills generated from our systems need to tally with the property records and property descriptions are also published. We have noticed some discrepancy with respect to the same. The company has decided that till the time the corporation systems are not updated and reflecting the ground picture, to go with the corporation's record for billing purposes. Note it doesn't take any additional operating cost for the company. What this means is a conscious deployment of revenue to the tune of approximately 3% to 5% of that particular site for approximately around INR 5 crores per annum. We are confident that the same will be addressed in the forthcoming quarters. Please note that means there is a potential increase in revenue as and when the scope of our work in Varanasi is increased. Currently, we are providing services in 90-odd awards, and there are 30-odd awards that our services can be started, but this is spending facilities being provided by the corporation. Furthermore, in the case of the user collection fee model, we have adopted a policy to fully provide for bad debt reserves in cases where bills remain unpaid for more than 180 days. As a result of these, we have taken a provision of approximately INR 6.8 crores at the consolidated level in the quarter ending December 2021. We are collaborating closely with our clients to help smoothen and speed up the billing processes as well as improve saturation ease of verification. Additionally, during the quarter, our employee cost has risen by 9.2% sequentially. Part of the increase is on account of the revision in minimum wage rate and the change in categorization of our employees, and the same will be reimbursed to the company in the subsequent quarters by the respective multiple corporations. Also, the increase in employee cost is due to the increase in headcount due to our scaling up of our operations in Jhansi. For the 9-month period ending December 2021, the adjusted EBITDA stood at INR 127 crores with 27% margins. Profit before tax loss was INR 23 crores for Q3 '22 or 14% of total revenue. And for 9 months, it was INR 79 crores or 17% of total revenue. Profit after tax stood at INR 19 crores for the quarter ending December '21. And for the 9 months related, it is INR 65 crores. Please note that the year-ago quarter had lower tax provisions due to losses incurred amid pandemic situations. Coming to business-wise performance. Our MSW C&T revenue is up by 4% to INR 109 crores during the quarter as compared to INR 105 crores in the last quarter. The growth was on account of increase in total MSW C&T volumes by 3% sequentially. Processing revenues are up by 5% at INR 39 crores versus INR 36.5 crores in Q2, reflecting a 4% increase in [indiscernible] tonnages being processed on a sequential basis. On the balance sheet front, our net debt to equity as on 31st December 2021 was maintained at 0.2x. The total debt as of 31st December '21 stood at INR 143 crores compared to INR 150 crores in 31st December 2021. And net debt is as of December '21, we said INR 79.4 crores. Net worth has improved to INR 507 crores as of December '21 versus INR 443 crores in March 2021. The improvement in our overall credit profile of the company has resulted in lowering of average cost of borrowing at a consolidated level of approximately 80 bps. Our receivable days as of 31st December stood at 74 days, and this is critical analytics that we would like to watch out for. Our capital return metrics remained strong with a return on capital employed of 19%, and our return on equity at around 16% as of December '21. Now on an update on the search conducted by the income tax department officials at our companies and subsidiaries [indiscernible]. There is no additional requests or inquiries from the tax authorities, and we are still waiting for the response on this matter. We'll keep you guys informed and the stockages updated. And we would like to reiterate that the proceedings have no effect on the company's operational performance. That's it from our side, and we can open the floor for Q&A.

[Operator Instructions] The first question is from the line of Hardik Jain from ISJ Securities Pvt. Ltd.

Sir, our major cost is like -- is fuel. And so most of our contracts, do they have escalation clause in them? Because fuel cost has increased a lot over past 1 year or something.

Yes. All our projects have escalation clauses. Approximately 45% of my projects have fixed escalation and the balance [indiscernible] has variable escalations. The escalations do capture the changes in fuel, labor costs and also miscellaneous items. The contracts are normally having an annual escalation. And sometimes over the last 3, 4 years, what we have noticed is newer contracts has an escalation half year and sometimes even monthly or quarterly. So to answer your question, we have escalation across all our contracts that we have today.

Okay. And now most of our projects like, say, MSW C&T project of [ Thane ], which actually expired in 2020, that is under extension. Likewise, Navi Mumbai is about to expire in '22. Mangalore again in '22. And some of the projects are like NOIDA Zone 1, Zone 2, and all of these projects have expired, but they are under extension. So what kind of clarity do we have that whether these contracts will be extended for next 5, 7 years, 10 years? Or how can -- how should we see these contracts which are actually expired but under extension?

So these contracts have expired, and it is under extension. One reason is because of COVID. They have to call for a fresh tender. But they couldn't because of the pandemic-brought issue. But now they will be dropping the tender. So I think we may get an extension of maximum another 1 year. And when the tender comes out, it comes out, we'll definitely bid and try our best to win back.

Normally, Hardik, our ability to renew, like the ones in Navi Mumbai, NDMC, they have been -- and even in MCGM areas, we have a very high stake of renewing the contracts. So the latest one that we renewed, who was in NDMC, where we were doing a part of the [indiscernible] towards [indiscernible] area. And now when the tender was brought in, we managed to drag the entire zone with a higher tipping rate and also an increase in scope of activity.

Okay. Okay. And my next question, sir, we have around 12 lakh compulsory convertible preferentials, I think, still outstanding. So by when this can get converted?

Hardik, these are outstanding as of 31st of December 2021. After that, consequently, in the first week, once the demand accounts and everything was opened, we call those shares converted. So as of today, there are 0 convertible different shares of the [indiscernible] in December -- in Antony that has been converted.

Okay, okay. And my last question, sir, in Pimpri Chinchwad, how much amount we will invest over the next 1 year? And what kind of revenues we can expect over a long term from Pimpri Chinchwad project?

So we have an incremental CapEx to the tune [indiscernible] crores, which would be spent over the next 12 to 15 months. That is what we estimate to be the reach. And normally, we don't comment on the size of site-wise revenue generation model. But it's very simple to look at it on the tonnage and on the rate of unit that we have managed that. So at Pimpri Chinchwad, the revenue sources, one is from the tipping fee, which is at around INR 504 per tonne. And we will be managing and handling around 1,000 tonnes per day. Further, the plant at its peak would be generating around 14 megawatts of total power and the net metering is around 11.5 megawatts. And these units will be sold to the corporation at INR 5 per unit fixed for the entire period of 21 years.

Next question is from the line of Anupam Gupta from IIFL Capital.

Just a couple of questions. Firstly, on the C&T CapEx, so we haven't seen any uptick in the last few quarters there at all. And given that we have a commissioning deadline of March '23, what is the status as of now? How much has invested? How much will you -- and how will you ramp it up over the next few quarters?

Anupam, we have invested approximately around INR 7.5 crores to INR 8 crores in the last quarter. The reason was [indiscernible] the withdrawal of monsoon in the western side of the country was strong. So the civil activity could not get started at the pace that we have lagged it. But happy to inform you that mid of November onwards, the pace has increased, and we are still holding good to the time line that has been given to us by our contractors. So we expect the project to not have any additional time overrun in this aspect. And we're actually looking at options to crash this project, save us more time. And also, we'll try to incentivize the contractors if they are able to bring the entire project to fruition in the time line that has been given to us by the corporation.

So what is the total CapEx which has happened till date, including last quarter?

Around INR 36 crores.

Okay. And you have a total of INR 240 crores to invest, right?

Right. That is the total CapEx, including the capitalized interest, capitalization and everything. So we are very much in line with the speed and activity.

Okay. So as of now we should not build in any delay there?

We are not building any delay over here.

Okay. And secondly, if I look at your overall escalations, so let's say, as on 31st December, what proportion of cost would be left to be passed on to customers and through escalations?

I would -- normally, a bulk of our revenue escalation kicks in from February, March onwards. So based on what has actually [indiscernible] is given to the company by the -- in view of escalation, I would say about 60% of our revenue escalation has been given to the company. The balance 40% revenue will be given escalation from February onwards.

So let's say, if I were to take -- in terms of margins, if entire thing would have happened in third quarter, the margins would have been higher by what proportion, what percentage point broadly?

See, bulk of it is Collection & Transportation. So we would be slightly better off in the range of around at least 80 to 120 bps.

Okay, okay. So basically, fourth quarter margin then should look much better than third quarter given the escalations will come through in Feb and March?

Yes, the margins will be for sure be slightly better than Q3 margin for us.

Okay. And just one last question on the sort of provisions which you detailed here. So obviously, a part of these would have -- you would have known that this will happen even before you ended up accounting for the days in the end of the quarter. So what would help is a slightly better idea or better contract this thing so that we have clarity on what sort of margin trajectory can happen. This upfront guiding of these things would actually help. So this...

Definitely, definitely. So what has happened is we have not only actually had a physical fund along with our own team and technology platform, but we also involve health officers of a particular ward and the corporation, and they are physically verified. So that is still a discrepancy in the accounting norms of how property cards are issued and different and [ difficult ] as compared to the physical comp. So this is in lieu of the delay in the census numbers and the accounts, which get ratified over a period of time. So what we have done is we have launched our billings based on actual numbers, but we are going ahead with that building receipts based on what the corporations have in their report as of today. So if there is any reconciliation that happened in future, you will get a retrospective effect, obviously. It's too early for us to say by when will this activity will commence successfully.

[Operator Instructions] The next question is from the line of Jigar Shah from Maybank.

My first question is regarding your carbon footprint. So you employ a lot of vehicles for the carrying of the waste to transportation. Also, I think the waste processing generates a certain amount of emissions. So can you give some idea about the emission profile of the company? And what's the strategy to tackle that?

Yes. So yes, we are very aware of the kind of impact that we're having on the environment. So if you look at our business, you can keep it into 2 parts. On the Collection & Transportation business, what the company has adopted is all the primary collections, which are basically smaller-sized vehicles. Those have now been migrating out of the diesel fuel-based injection into a CNG/electronic vehicle. The company is planning to increase its EV footprint on the smaller-sized components of that. Unfortunately, the large-sized compactors and my [indiscernible] and specialized equipment still will be using diesel as a fuel mechanism. So unless until I get support from the automobile industry to replace the large engines out, I would still be relying on them. But the smaller sub-1 tonne machines will be shifting to a CNG footprint on an aggressive mode. The company has just gone ahead and purchased 40 more EV vehicles for us to be used across its sites across the country. On the waste processing, in Kanjurmarg, for example, we have a base to energy component while 9 megawatts of the power is generated from the landfill gas that gets captured internally. So that entire thing is capitally consumed. So to a great extent, the methane emission is controlled. In the waste to energy section at Pimpri Chinchwad, which is under construction, the entire base will be controlled -- converted into green energy and will be pumped back to the grid through the corporation. So these are steps that we have taken. We will be shortly publishing our ESG report, which will quantify these numbers. And we'll be open for [ scoping ] from any other third-party that wants to look at the same.

One more quick question. What are the practices of other waste management companies or the models which you would have seen outside India which you admire? And what, over a period of time, can be incorporated over here?

What we actually like abroad and hopefully the same gets implemented in India is the level of segregation. In India, what we collect is a very highly mixed form of waste, both that and drivers get mixed and handed out to the base operator. Globally, the dry waste, the wet waste, the recycles are given so separately. So that it's easy for the end consumer, like an end operator, like an Antony Waste or any management incorporated kind of entities to extract resources in a more efficient manner and reduce the impact on the environment. So the waste that ends in the landfill is significantly of inert nature than what happens in a developing economy, especially at countries like India. But segregation is still to be caught on a serious footing. So that is one thing that we are watching for. Maybe the government will track down hard on segregation and needs to segregate into various formats. And we have this business to collect waste in segregated format. But when the waste itself is mixed, there is very little that an operator can do over here.

We have also implemented RFID tags on our bins, so we can read the locations like in collection and transportation, which is being implemented vastly in Europe. And so we know [indiscernible] lifted every day. So we are -- our company is always looking for new technologies and ideas. Even our waste processing, that is composting unit, we are -- our recovery facility is one of the best in the country because we adopted a similar facility, which is -- which we've seen in San Francisco. And our composting system, which is also controlled totally by [indiscernible] with 0 human intervention, due to which the quality of compost is very good and all the fertilizer company is appreciating and they're buying and there's a huge demand for it. So basically, Antony Waste, we always look outside what are the best technology being implemented and cost effective. Cost also plays a very central role in our market. So that's what we are admiring presently.

[Operator Instructions] The next question is from the line of Nikhil Chowdhary from Kriis Portfolio Private Limited.

Sir, I wanted to understand more the user collection model. Apologies, if you're going to repeat it because I joined a bit late. Can you explain it like if this model continues, the risk of receivables, can this be something that collectively continues going forward? Or is it just a one-off thing? And probably going forward, I heard something that integration is pending with respect to the corporation and your system. So is this a one-off thing? Or is this a risk in this model?

Yes. So this is something, user collection model, globally, in many developed countries is already going on. So in India, it has just been recently implemented in many municipality. In Noida, where we are doing presently collection and transportation, we have a user fee model. So going forward, this will reduce the strength on companies like us for receivables and being totally dependent on the corporation. So part of our risk will be reduced. And we will get paid from the commercial housing and all that. And as years go by, I think it may include and it can reach to a level where the company just will not be dependent on [ professional's ] payment. So -- but for that -- but this is a start and this is a good start for our industry.

Just to build on that, so that is -- these are [ sweeping ] problems. So when you were to do an actual survey of the zonal award, and if you were to actually do a count of the households that normally has a large effect when you look at the property cards in different cities, so we have learned that we need to take the corporation together and verify the accounts so that we award such kind of overstatement and then [indiscernible] that as an issue. So this is something that we have learned. We don't foresee similar activity to happen in future because we have got the consensus along with the corporation department heads that these are accounts and what is going to be. Till the time they verify it, there won't be any significant swings in the revenue recognition pattern.

Understood. Understood. So just a bit clarification. In the user collection model, like the user pays it to the corporation and then they share it with us?

Sorry, we couldn't get that question clearly.

No. I was just trying to understand the user collection model. Like we don't probably collect like it from the commercials or the commercial shops and the end user environment. But the corporation collects it and then it is distributed and shared with us, right?

We collect it as a company. The collection scope is given to us. So we have our team to do the collections.

Whether you collect it and keep it with yourself or you collect it on behalf of the corporation and handing to the corporation. So scopes are determined in the tender itself.

Okay. Because I was just trying to think loudly. If it is a one party collecting and if you have to collect it for the corporation, you just have to do it with one party. Whereas we have to deal with several users in this model. So I was just trying to think like how probably, going forward, will it not be a more challenging task for us? Or like this is the way forward that's intend work?

Normally, in user collection model, as in other areas, we have the ABC kind of a structure where 80% of the revenue will be contributed by 20% of the generators, which will be commercials and other large generators. The units -- the residential units are smaller. They will definitely be numerous, but the impact on the revenue will not be as significant. So this is like your [indiscernible] gas or any of the utility business. It's something which is happening for the first time in the country. So until the time that is a very easy and smooth process, there will be some hiccups.

So what we have noticed is the user fee, people are willing to pay. So that nobody is going like we have to just pay a fee of INR 15 per month. So it's not a big money, which is in -- and when we go to society, we get paid further from the society. We don't go to each and every...

Next question is from the line of Manav Vijay from Deep Financial Consultants.

Sir, am I audible?

Yes.

Okay. So sir, my first question is regarding the NDMC project that we won last quarter, so INR 1,000 crore project, 10 years. So first of all, would it be safe to assume that it would be INR 100 crores per annum?

It is a fair assumption to have.

Okay. Okay. So second question regarding to that. So we were already involved, I would say, in the NDMC region and we were already doing some. So would it be possible for you to quantify as to what would be the incremental revenue? Or we should assume INR 100 crores per annum as the new revenue from this contract?

I think it is a fair assumption because that would -- we don't normally get into site details. But it's -- we are okay with that statement of an incremental annual revenue once the projects start at full throttle to generate an annualized revenue in the tune of around INR 100 crores.

Okay. And so -- and will it be also possible for you to detail out the CapEx involved in this project?

Yes. So in this project, we estimate the total CapEx to be in the range of around INR 101 crores to INR 107 crores. It's just getting fragile in the last final bid because of the price escalation that's likely to happen from 1st of March or 1st of June as the case may be. Approximately around INR 30-odd crores will be funded by the corporation. The balance, the company would need to fund the same.

Okay. So approximately INR 70 crores is what you will spend between quarter 4 and quarter 1 put together?

Depends as and when the corporation provides it. But yes, we would like to get the entirety done before the monsoon starts.

Sure. Okay. And sir, in terms of, let's say, step-up function like the way we have in Kanjurmarg, there is no step-up function over there. So when you say you will have to collect 1,000 tonnes per day from these areas, so this starts from day 1? There is no step-up.

Normally, the scale-up of operations start zone-wise or [indiscernible]. So it's not that from the rest of the quarter, the 1,000 tonnes start kicking to your system. So it's a gradual process. You slowly roll out your machinery. You garner more and more equipment. You put them on the ground. You start taking over the controls from those awards. So it takes normally 3 to 6 months for the entire mobilization to happen. We expect the start of work by end of February onwards and 100% scale up to be done before May, end of June. If things go as per schedule and everything happens, so by June end, we should be 100% on the ground.

That means from quarter 2, we will have full revenue from this contract?

If everything goes as per plan, we are able to mobilize as there are no hiccups on the delivery of equipment, yes.

Perfect. Okay. My second question is, sir, in regard to some of the one-off that you have made in this quarter. So for the INR 6.8 crores provision that you have made, so this is a onetime and going -- that means in quarter 4? Or further, all the other quarters, we will not get to see this kind of a year provision and you will get a refund of this amount? Maybe -- I mean time lines are difficult to estimate. Is that a fair assumption?

That is a very fair assumption. Of the INR 6.8 crores, we are very positive. Up to INR 1.2 crores to INR 1.4 crores to be reversed by the end of the current quarter or maybe the first quarter itself because that work has already been started, and that is getting very far. But the pace is something that we will not like to comment and build it at this stage.

So sir, I basically ask you, is that -- so this INR 6.8 crores is a onetime provision? Quarter 4 or quarter 1, we will not have seen of a hit?

Yes, it's a onetime provision for the cumulative work that we have done in these sites. It's a onetime provision that we have taken.

Okay. Now is it possible for you to also quantify the increase in employee expenses because of the minimum wages and the [indiscernible] everything? Would that be possible for you to follow up that number?

The increase in minimum wage and the categorization that's had an impact in Q3 is to the tune of around INR 2.28 crores. The entire account is being reimbursed in Q4 by the corporations.

So you will get this money back in Q4 only?

Yes.

Okay. Fair enough. My second question is, sir -- so I would say in quarter 1 and in quarter 2 call, you mentioned that roughly 65% of your contracts got renewed in terms of price escalation. And then in quarter 4, we should -- I would say, H2, we should have a revision on the remaining contracts. Now what you mentioned in one of the earlier participant question is that the February, we should have the price revision for the remaining 35%. Now going forward, we should be -- so that is how we should be building in H2, let's say, maybe by March -- or sorry, May or June, we will have 65% and then by February, we should have 100% revision?

Assuming that I don't bag any new contract and there's no significant change in my revenue contribution from these projects, this assumption of yours will stand good. But what we foresee with NDMC and Varanasi kicks and even Jhansi kicks in a bigger way, the escalation metrics will slightly change. We will definitely update the team as and when we see that.

Sure. Okay. Sir, my next question is regarding these 3 projects that you mentioned, so Varanasi, Jhansi and Greater Noida mining project. So my understanding was that -- is that these projects are supposed to add close to INR 9 crores to INR 10 crores per quarter to your top line. And I was expecting that we should have this number in this quarter, quarter 3, that just went by. Now the quarter-on-quarter jump in revenues just only, I believe, INR 4 crores. So now in quarter 4, we should have all these 3 projects in full operation and the consequent revenue to that?

We expect, yes, Greater Noida to be 100% on for Q4. Similar to Jhansi, we have rolled out all the machines that have been given to us by the corporation. If you remember, Jhansi is a project that CapEx has been funded completely by the corporation. They have not handed over the entire CapEx till date. So whatever CapEx that they have given, we have been utilized it, so -- but it's still not serving our purpose. So we expect additional assets to be added over by the Jhansi Corporation shortly. So as and when those overall assets are deployed, you will see a spike in our revenue. In Varanasi, yes, what we have seen is almost 80%, 85% of our peak revenue. So we want to just get it confirmed once again with those corporation agencies and the department before we jump the full throttle here.

Sure. Okay. My last question would be, so between, let's say, quarter 2 and quarter 3, one of the major items that has changed in your [ PND ] is the decrease in the diesel prices of close to 8% to 9% because of a reduction in taxes. Now that happens closer to end of quarter 3. So in quarter 4, we should get to see the full benefit of that because fuel is approximately 19% to 20% of recovery cost.

Except for Napoor and PCMC, which have a monthly escalation, all other projects have mostly a half year annual escalation. So the escalations we have built today, I will be able to enjoy it for some time. The benefit of lower fuel costs is also offset partly by higher [indiscernible] of machines because of the machines also catches up. So the benefit from a lower fuel price in the interim or any small vessel that we may get, might get, I'm just saying, I'm being very cautious and conservative here, might get slightly offset by slightly higher revised maintenance costs as we go towards the middle of the life of these projects.

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

Sir, on PCMC CapEx, you highlighted that only INR 36 crores is the CapEx done until now and nearly INR 200 crores CapEx is pending, right? So wanted to check what kind of CapEx you can do in fourth quarter itself? And given the time lines, do you think you'll be able to commercialize the contract by March '23 given that during the monsoon period, you will not be able to do any [ middle ] CapEx?

This is [indiscernible]. So bulk of the civil work has got completed now and before the monsoon. And after the election of the plant started, we already completed the election on 27th of January, we started election on that date. So we don't foresee a significant delay or any change in the time lines because of the launching. And we hope that as per the schedule of the plant that we have internally along with our contractors, which is Hitachi and [indiscernible], we should be able to complete bulk of the work before the calendar year or maybe the fourth quarter of the current financial year results.

So Depesh, what is happening in this WT project, the civil work, the construction work, that is completed, which is usually -- which gets affected by monsoon. But the remaining part, which is the sheet metal work, like the boiler, everything, is built in the plant of [indiscernible] or any other company. So they have to just supply and assemble and erect it in our site. And as and when like the boiler will come, maybe 1, 1.5, 2 months, they will come and erect it and they'll do a testing. And so erection work will be going on more rather than field work.

Understood, sir. So maybe on the INR 200 crores will be major of this machinery, will be installed in a particular time, right? So maybe like fourth quarter FY '23, you can see that entire CapEx is still coming in one go. Is that the right way to look at it?

It will spread over 3 quarters. But yes, bulk of it will happen in the calendar year itself.

Got it. Got it. Understood. And Jose sir, now that the COVID situation like seems to be improving, are you seeing or expecting any improvement, any acceleration in the new tenders that are coming in? If you can talk about the pipeline that you have.

Yes. So the new business is being under process, tenders are being prepared. Except for 1 or 2 states, there is this board of conduct going on for next 1, 1.5 months. Everything is kept on hold. So once those states open up, there also, their bids are coming up. So we foresee a lot of opportunities in the coming months for new contracts.

Understood. Understood. And sir, just a follow-up on the previous question. Will there be any penalty clause if you delay the WTE commission? If it doesn't happen in March, will there be any penalty for that?

There is no plans of penalty, but it's in our own directive to get it done at the time lines that we committed. So there are no penalties mentioned in the tender contract or in the agreement that we have signed with the clients.

Got it. And lastly, sir, the debtor days have been increasing in the last 2 quarters. So if you can highlight like anything which is like leading to this?

Actually, this is what we had expected and we also highlighted in the past. So a lot of the corporations over the last 2 years, because of COVID, they have not done any other activity in the development space that were expected to do. So there has been a shift in the fund allocation, and this is in line with our developmental plans. So this doesn't come as a surprise. The new budgeting allocation, for example, that has been announced by MCGM and another corporation are very much in line and are showing a higher outlay in the waste management and in the waste water treatment businesses. So we expect these numbers to stabilize at these levels today.

Okay. And sir, what about the pending receivables that you had, the long-term receivables and like 1 or 2 multi-parties where we were having some long debt, are we're getting the money on time? And what is the thought process there?

Both the clients are paying us on time on the routine expenditures. And there has been special grant that they have asked for from that respect to state governments to bail them out because these corporations also have been using their surplus funds for the COVID-related activity. So in order to replenish their coffers and [indiscernible], they have reached out to the special department grants, and those therefore are in place.

Annual contract is basically getting over in March '22, right, so barring the [indiscernible] contract. So if you don't continue that, so how will the money come? Will that come in one go? Or like it will take years and years? Like what...

Contract has been extended by another year for us so [indiscernible] for another year. The city is yet to come out with new tender, and we will definitely continue that till time the status [indiscernible].

The next question is from the line of Jigar Mistry from Buoyant Capital.

Sir, you just mentioned at the start of the opening comments that the biomining that Kanjurmarg has started. The activity will be late due to the late exit of monsoon. Can you just sort of fully apprise us on what sort of numbers could we look at on a full year basis once this fully starts?

So this biomining activity is part of our design where bio and landfill, we bring in base and we see to that this is cared for the next 5 years for decomposition. And after 5 years, we have to empty it out. So it is a part of our technology. And we have to do the biomining to vacate that waste so that fresh space can come in. So -- but when we mine, we get soil conditioners like compost material. We can -- we'll get plastics, which has a recycle value. At the same time, we get RDS where there's a demand for resin cement factory. But there is a cost also for mining. So the revenue pattern changes, sometimes earlier. Now -- in the past, this -- manufacturer is to pay -- not pay more than INR 600, INR 700 per tonne. But now, we are close to INR 2,000 per tonne. So it's the pattern way that has passed by.

So it was my estimate that RDF, we could be at 2,000, and say, between 300 and 500 tonnes per day, we could be looking at something like INR 30 crores or maybe INR 20-odd crore on a per annum basis. And compost when fully mined, let's say, between 18,000 tonnes per month, we could be probably be looking at a much, much higher number, right, 4,000-plus? So combined, what sort of region maybe could this actually report something like, I think, had [indiscernible] between INR 65 crores and INR 75 crores per annum?

That is a very safe assumption, I would say. But it all depends upon our ability to biomine the entire cell one, for example, within the non-monsoon period. Now over the last 2 years, that has been tricky for us. So that is something that we have not accounted for. But on an annualized basis, given what we are seeing, they are achievable numbers.

Right. So INR 70-odd crores of EBITDA just from the biomining on an annualized basis?

If everything goes well, the prices of coal remains as high as today, yes.

The next question is from the line of Anurag Patil from Roha Asset Managers.

Sir, on top of this INR 200 crores remaining CapEx of PCMC and the INR 70 crore of Delhi, how much will be funded through debt?

I think for INR 200-odd crores of PCMC, INR 370 crores would be through debt. That is for the waste processing contract. In case of Collection & Transportation business, normally around 90% to 95% of the total CapEx is debt funded, which comes to us at around 8 -- 7.75% to 8.5% cost of borrowing.

Okay. So for New Delhi, INR 70 crores, it will be majority debt. That is clear?

Yes, that's very clear.

Okay. And sir, now next year, a New Delhi contract in FY '24, again, PCMC will come into the picture. So what sort of revenue growth we can expect next 2 years?

If everything goes well, we should be able to show at least a 30% top line growth. We are in the process of just putting those things in a budgetary spread. So once we close our current fiscal year, when we are making our Q4 numbers, we will be happy to share our projected target numbers that we have set internally. We will be happy to share with the investor community.

The next question is from the line of Rohit Ohri from Progressive Shares.

I have few questions. First one is a hypothetical one. Considering that x city is having an operator and the operator is not performing the business quite well, the multiple corporation says that the contract is void or it is canceled. Under such circumstances, what would be the approximate time that it would take for the contract to be transferred to another operator, including the tender timing as well as the survey and then the commencement of the project?

Usually, if an operator is not operating and if they have to terminate, which is also a very difficult task for the municipality. Because once you terminate, a new operator, when he comes, he takes around 7 to 8 months to bring his own vehicles and trucks and compactors and then their everything. So it takes -- it becomes a 12-month time. So that's roughly 12 months [indiscernible].

Around 3 to 4 months for a new tender to be put in the -- the bids to be put in and scrutinized and awarded, and another 3 to 6 months for the new operator to mobilize his assets and roll it out.

Okay. Any such contracts or tenders which are there floating in the market as of now?

No, I'm not seeing anything much. Because see, once you terminate, then somebody has to list a bid. So -- and having an alternate arrangement, then they have to list to open dumpers and all that, which is sometimes really very difficult.

So what we have seen over the last 10 years, there's a lot of the cities that we target as A and B category cities. They normally have a really set tendering processes wherein rather do we see serious malfunction or derailment operations of such essential services. So normally, there's a really strong feedback mechanism as our operators build up for nonperformance. And there's [indiscernible] things have taken up. And that information is already in the market scenario. So it normally doesn't come as a surprise to operators in this industry in certain large cities when the new bids are ordered or the existing contractor gets terminated. So there's always a process of getting this thing done.

Okay. My second question is related to Mazaya Waste Management in U.A.E., which is also a joint venture as well as our noncurrent investment. Can you take us through the rationale for the investment?

Yes. In Mazaya, this was something that the company had explored in early 2014 or even before that. This was pre-Lehman crisis. So there was an opportunity where we could get a license to operate waste management solutions in the area. And the company has got the license. Now post the Lehman crisis, the entire activity, especially in that GCC area [indiscernible] and the company decided to close those operations and scale down their operations completely. So that is the background of the story of the company and invested some money to the tune of around INR 3-odd crores, and the entire money was provided for -- by 2014, '15 itself. So -- and after that, we have had no interaction whatsoever with that entity.

So this INR 3 crore is the asset sale, which lies in our balance sheet as well. Is it correct?

No, no. That amount is [indiscernible]. It's not asset held for sale. Now the reason we can't write it off is because we need to provide audited numbers for those entities to justify the claims of the Central Bank of India. Now we are not able to reach out to the agencies in the local country because those operations are completely being pulled down and there's nothing whatsoever there. So we're finding a [indiscernible] mechanism wherein we can approach the Central Bank. We already asked Deloitte to help us out in addressing the same issue. So we don't foresee any significant issues here. But the procedural part is what is stuck. And that is what the company is trying to [ climb ] over.

So this INR 3.3 crore asset for sale is related to what then, if you can elaborate?

These are old assets or old projects that the company had in the MCGM area and in NMMC. These were old contracts. Now the vehicles of these contracts, they were used as backdrops in other vehicles, and they're past their prime area. So these are assets held for sale. We have provided for them completely. And these are just the scrap rate that we are having based on the resistant valuation of the scrap steel prices. So once we get the all clear and certifications from the local RPs, the same with the scrap out and we'll be exiting from the [indiscernible].

The next question is from the line of [ Ketan Shira ], a retail investor.

Yes. Am I audible?

Yes.

Yes. My first question is with respect to the project expenses and the other expenses. So if I look at the 9-month numbers for your FY '22 and '21, there's a significant jump in the current year. So I wanted an explanation of what constituted this. This could be maybe start of a new project or some fuel expense or some kind of expenses. So I wanted an explanation on this increase. Or what is the reason for the increase and on the contribution side of these increases?

Yes. The contract expenses are ledgered to my waste processing projects that are ongoing, which is the capital part of it, which is mainly my base to energy project in [indiscernible]. So as and when [indiscernible] the CapEx [indiscernible] that same thing gets reflected in my contract segment, which has seen an increase that you're talking about. And these are a very low-margin business because these are basically book entries as per the intact accounting norms. So you will not see a significant contribution coming from the CapEx that I'm doing. And that is what is getting reflected as my contract revenue in this part.

Okay. So do you -- whatever spend you are doing would be shown as per either project expenses or other expenses?

Yes.

Okay. Okay. Fine. And my other question is, what is -- would you be able to provide some kind of a guidance for the free cash flow for FY '22 and '23? Would that be possible?

Well, I do not understand the question. You're looking at what?

A guidance on the free cash flow for FY '22 and FY '23. Would that will be possible?

So if you were to remove my waste processing part, I would be looking at around INR 70 crores to INR 80-odd crores of free cash flow from my Collection & Transportation business. But if you were to look at the console part, my free cash flow generation will not be positive because of the upcoming INR 170-odd crore of CapEx at Pimpri Chinchwad and the INR 70-odd crore of CapEx that is being planned at the NDMC contract. And I'm talking about annualized numbers over here, so it is going to be in that phase. So if I don't bag any new contracts, if I don't execute any new projects, I would be a debt-free company in 4 quarters, less than 4 quarters, I would say.

I now hand the conference over to Jose Jacob for closing comments.

I take this opportunity to thank everyone for joining the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with me or Strategic Growth Advisors, our Investor Relations adviser. Thank you very much.

Thank you very much. On behalf of Antony Waste Handling Cell Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.