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

Ladies and gentlemen, good day, and welcome to Antony Waste Handling Cell Limited Q4 FY '24 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 of Antony Waste Handling Cell Limited. Thank you, and over to you, sir.

Good afternoon, and thank you for joining us for our Q4 and FY '24 earnings conference call. With me, I have Shiju Jacob, Director and Chief Risk Officer; Mr. Mahendra Ananthula, our Group President; Mr. Subramanian, our Group CFO; and SGA, our Investor Relations advisers. Our investor presentation for Q4 and FY '24 is now available on the website of the stock exchanges and also on our company website. In FY '24, our core operating revenue recorded a 19% increase in operating revenue compared to the previous year, totaling INR 766 crores, which is in line with our expectations. With our PCMC WTE project now operational, there has been a noticeable drop in our contract revenue. Excluding contract revenue, but including revenue from recyclable and RDF, our total operating revenue stood at INR 829 crores, reflecting a 21% year-over-year growth. The uptick in core revenue is attributable to enhance operational efficiency driven by increases in tipping fee and revenue from fixed shifts, trips and household fees. Additional revenue growth was bolstered by a contribution from the new collection and transportation project in Panvel and the full -- first full quarter of power sales from Waste to Energy project. For FY '24, our core EBITDA amounted to INR 198 crores, making a 29% year-over-year growth. With core EBITDA margin of 23%, which is again in line with our expectation, boosting confidence in our stability and long-term growth. Additionally, on the corporate side, the Honorable National Company Law Tribunal has granted approval for the company scheme application filed with respect to the scheme of merger entailing the absorption of 2 wholly-owned subsidiary, namely Antony Infrastructure and Waste Management Service Private Limited and KL EnviTech Private Limited into AG Enviro Infra Project Private Limited. This strategy decision is aimed at rationalizing the group's organizational framework. Thank you, and I now hand over the call to Shiju Jacob, Director and our Chief Risk Officer. Shiju, over to you.

Thank you, Jose. Ladies and gentlemen, thank you for joining our earnings call for the fourth quarter. I am pleased to report significant improvements on the cash flow front. We have successfully secured substantial collections from our clients in the subsequent period including payments from a long-standing overdue account. Adjusted for the collections made till date, our March 2024, DSOs would now stand at 79 days as against the 103 days mentioned in the presentation. This achievement underscores our unwavering commitment to delivering exceptional service to our clients and ensuring timely payment for our efforts. Our diligent approach not only reinforces our financial stability, but also highlights our dedication to maintaining strong mutual beneficial relationship with our clients. Poorly managed landfills pose risk to base transporters, such as vehicle damage and delays. At Antony, we proactively mitigate these risks by keeping clients informed about potential impacts on service quality and efficiency, ensuring both operations. As landfill operators, we excel in maintaining scientifically managed sites to minimize environmental hazards and comply with regulations. Our significant investment in the -- in ongoing monitoring and advanced protocols ensures high standards and addresses any unforeseen challenges with expertise and resources. We prioritize safety, addressing human and machine-related accidents through stringent safety protocols, comprehensive training and regular equipment inspections. The commitment to safeguard our workers enhances productivity and reduce insurance costs and legal liabilities. In the face of natural disasters, Antony stands out with robust disaster preparedness plans. We protect critical infrastructure, mitigate environmental risks and ensure the safety of our employees and communities demonstrating our resilience and dedication to excellence in waste management. As we close FY '24 and move the bulk of our capital expenditure phase for existing projects, we are confident about reaching significant milestones. This confidence is bolstered by the launch of our construction and debris processing project in Mumbai and increased power sales in PCMC. I am pleased to inform that we have already successfully tested the C&D plant and it met all the performance parameter positively. Additionally, we will commence commercial operations at the CIDCO Biomining Site in the first quarter of FY '25. Our company remains dedicated to environmental sustainability and delivering value to our stakeholders. As we look to the future, we remain committed to driving progress, fostering innovation and achieving excellence in all our endeavors. Moving on to the operational aspect, let me get Mahendra in. Mahendra, over to you. Thank you.

Thank you, Shiju. I'd like to provide an update on the operational performance of Antony Waste Handling Cell. During this period, we effectively managed 1.14 million tonnes of waste, demonstrating a notable 10% year-on-year increase. For the full year FY '24, we managed 4.67 million tonnes of waste, marking a 12% year-on-year increase. This growth can be attributed to the successful execution of operations in newly acquired contracts, improved volumes at existing collection and transportation sites and an uptick in tonnage process at our waste processing operations. In the collection and transportation business segment, we handled 0.47 million tonnes in quarter 4 of FY '24, reflecting a strong 15-year year-on-year growth. For the full year FY '24, our corresponding growth was 13% on a year-on-year basis. Furthermore, our waste processing business managed 0.67 million tonnes in quarter 4, a 6% increase over the previous year. For the full year FY '24, we managed a year-on-year growth of 11%. The company's defining moment in the fiscal year 2024 was, of course, commissioning of the 14 megawatts Waste to Energy plant in Pimpri-Chinchwad. The plant is running successfully since then and achieved an impressive plant-load factor of approximately 71% during its inaugural first quarter of operation. This marks a significant milestone and the company aims to stabilize their performance at about 80% going forward. This waste energy plant generated over 37 million green units of electricity, which highlights the plant's significant contribution to sustainable energy production. Each green unit of electricity generated from renewable sources help reduce -- helps in reducing our reliance on fossil fuels and minimizing carbon emissions. The success of this waste energy plant in generating green energy underscores our commitment to environmental sustainability and our role in promoting greener, more efficient energy solution. This achievement not only supports our revenue growth but also aligns with our mission to foster the greener future through innovative waste management practices. During FY '24, we also achieved a record RDF sale of 1.47 lakh tonnes. This indicates that our RDF has a very high calorific value, making it suitable substitute for coal, thus aiding cement companies in meeting their alternative fuel requirement objectives. We foresee continued growth in RDF sales. Additionally, we sold around 10,000 tonnes of compost during FY '24. Highlighting some of our business development activities during the year, the company successfully secured key contracts across various business segments. Among these, the company signed a contract worth approximately INR 386 crores for its collection and transportation projects of municipal solid waste in Panvel Municipal Corporation. Notably, Panvel Municipal Corporation will procure the entire infrastructure for the project, making it an asset-light model for the company. Another new project in the processing space was the company securing a biomining contract in CIDCO valued at approximately INR 77 crores in which the company will process about 8.6 lakh tonnes of legacy waste over 2 years. On the ESG front in terms of emissions, our Scope 1 emissions totaled about 24,519 tonnes of carbon dioxide equivalent in FY '24. Our Scope 2 emission was 4,162 tonnes. Our commitment to emission reduction is evident with awarded emissions of 2,787 tonnes. In conclusion, these accomplishments underscore our steadfast dedication to environmental sustainability, innovation and the creation of a greener future. We anticipate the core revenue growth to continue, driven by several key factors. The full year -- the first full year of operations from our Waste to Energy plants will significantly contribute to our revenue. Additionally, the company will commission its first construction and demolition plant in Mumbai shortly, which will further expand our product portfolio and enhance our financial performance. The ramp-up of the work at our Panvel operations is also expected to support the growth. Furthermore, with the elections behind us by the first half of the year, we expect to see positive traction in the announcement of new tenders. This postelection period typically brings increased government activity and investment in infrastructure projects, providing us with more opportunities to secure new contracts and expand our business. Thank you. And I now hand over the call to N. G. for financial highlights.

Thank you, Mahendra. Good afternoon, everyone. We have seen a significant shift in our revenue mix for FY '24 as compared to FY '23, and this is reflective of the commencement of the PCMC Waste to Energy plant and the resultant reduction in the contract revenue. In FY '23, our revenue was distributed as 54% coming from C&T, 20% from MSW processing and 26% from contracts and others. This has shifted to 62% from C&T, 23% from processing and 15% from contracts and others. In Q4 '24, the company achieved strong growth with operating revenue rising to INR 196 crores, a 16% increase versus INR 169 crores. On a full year basis, it's reported an operating revenue of INR 766 crores, an increase of 19%. The total operating revenue, excluding contract revenue, but including revenue from sale of recyclables and RDF stood at INR 829 crores, which reflects a 21% growth year-on-year. The total contract revenue in FY '24 for reference stood at INR 43.4 crores, and this compares against INR 171.7 crores last year. And for FY '24, the same was INR 3.13 crores versus INR 21.1 crores in the same period last year. The growth in operating revenue is equitably distributed across operational efficiency and the new contracts, as mentioned by Jose and Mahendra. In terms of consolidated core EBITDA performance, the group demonstrated a growth of 15%, achieving INR 43 crores in Q4 versus INR 38 crores in the same period last year and the margin stood at around 20%. For the FY '24, the company has exhibited a robust 29% growth in core EBITDA reaching INR 198 crores with a core EBITDA margin of 23% as was in line with our expectation. Interest cost has jumped from INR 26.6 crores to INR 39.5 crores, while deficit [indiscernible] 37%. These increases are primarily due to the commercial start of the Waste to Energy project. As of March '24, the company's group debt stood at INR 414.6 crores and net debt is at around INR 343 crores indicating net debt to equity of around 0.5x. The weighted cost of debt for the group stands at around 8.5%. On the tax component during the year, there has been a significant change. We would like to clarify on that. The company has conducted a comprehensive evaluation of its deferred tax position as of March 31, 2024. As a result of this thorough review, the company has decided to derecognize the nonrecurring deferred tax liability associated with the available and distributable surplus at a key subsidiary. This decision reflects a detailed assessment of our financial standing and alliance with our commitment to maintaining an accurate and transparent financial record. By removing this nonrecurring liability, we are better positioned to reflect the true financial health and the potential of our subsidiary, ensuring clarity and precision in our reporting. Finally, I would also like to provide an update on the income tax search that was conducted in the company in 2021. We have received a total claim from the authority amounting to INR 9 crores. This represents about 9% of our annual profit for FY '24. Our dedicated team is diligently planning to contest this claim through CIT appeal. We are committed to ensuring that our position is appropriately presented and will pursue all necessary avenues to address this matter effectively. We'll keep you informed about any further development regarding this issue as transparency and communication remain paramount in our approach to managing such challenges. That is all from our end, and now we'd like to open the floor for Q&A.

[Operator Instructions] Our first question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking.

Sir, can you just repeat the gross and net debt figure?

The total gross debt was INR 414.6 crores and the net debt is around INR 343 crores.

INR 343 crores?

Yes. 343. We have a cash of around INR 70-odd crores.

Okay. Got it. And sir, with respect to your revenue for FY '25, you mentioned that we'll see a full year of Waste to Energy. So how much revenue are we expecting from that?

So normally, based on the tipping fee and rate at which the power is sold, we would be looking at anywhere in the range of INR 45 crores to INR 55 crores depending upon the tonnage flows and everything. So that is the incremental revenue that we expect from the Waste to Energy project.

Right. And similarly, for the construction and debris project?

That would be about INR 30-odd crores in the first full year.

Okay. And we'll be starting somewhere in June. So I mean, we will see only 9 months of revenue, right, for '25?

Yes, the INR 30 crore number that we gave is for -- as you make it full year annualized basis. But yes, you are right, we are likely to commission it in June.

Okay. And when will the Panvel operations start and how much revenue are we expecting from that?

It's already started. Panvel project has already started.

Okay. And how much are we expecting on a full yearly basis?

This year, I think we should do about INR 35 crores to INR 40 crores.

INR 35 crores to INR 40 crores. Okay. Basically, this would be the incremental revenue on the 3 revenue streams, I would say. No other revenue, which is going to sort of accrue on our books now unless there's a new contract.

One which is CIDCO Biomining, which will be coming in...

CIDCO biomining, how much would be the revenue, total revenue?

So that -- sorry, maybe I misunderstood the question. When I said about INR 35 crores to INR 40 crores, that was for CIDCO biomining project.

Okay. So how much would be the construction and debris revenue that we are expecting?

That one is about INR 30 crores in annualized basis first year.

Okay. Okay. CIDCO biomining would also be for 9 months, if I'm not wrong?

CIDCO biomining will be, yes. We have already started. So yes, you can say close to 10 months or so. Yes.

10 months or so. Okay. And can you throw some light on the total outstanding debtors that we have? And how much -- I mean, have we made any provisions for the year, any doubtful provisions?

So the total current outstanding is around INR 250-odd crores in the books. And we have made a small provision of around INR 1.6 crores because the matter is still under the Amritsar High Court issue. So we have created a provision of INR 1.6 crores. But we are expecting a positive update on that once the vacation gets over and the courts start hearing.

Okay. And for the PCMC we were going to receive some subsidiary. Can you throw some light on the status of subsidy?

So you're talking to the VGF funding, right, the grant?

Yes. Yes.

That is in the final stage. The municipality has promised that it should come in, in the next few weeks.

How much amount are we looking out for?

It should be in the range of around INR 35-odd crores, and that will go towards the -- completely towards debt repayment.

Okay. That will go towards debt repayment. Okay. Any -- I mean, can you throw some light on the entire debt repayment strategy going forward? Or will we still maintain...

That would be in the range of around 0.5x. And given the way the debt profile is, we have a steady cash flow from operations, which kind of gives us a decent window to repay our debt as per the schedule. So if the company doesn't bag any contract or doesn't win any new Waste to Energy projects, that group would be debt-free in 4 years' time.

Got it. Got it. And just 1 last thing. Would you like to give any revenue EBITDA or PAT guidance for next 2, 3 years?

So on the core operating front, which is excluding Ind AS, looking at our tipping fee and sale of RDF, we would be in the range of around 20% growth over the next 2 years backed fully by ongoing contracts. EBITDA margins will be in the range of around 22% to 24%. Given the fact that the contract revenue is off, and those were the margin weighing entities. PAT should improve marginally, but -- the PAT margin, I would say, would improve marginally because going forward, interest and depreciation will still be heavy for the first couple of years due to the Waste to Energy project. So we would be happy with the PAT margin of around 10.5% to 11.25% going forward.

[Operator Instructions] The next question is from the line of [ Ambar Taneja ] from [ Geomatrix ].

Just a quick one. What is the status of the collection post March that you just mentioned? And second year running in a row now there is no possibility of a dividend, et cetera. So any comments on these two?

Good afternoon, Ambar. So on the total receivables front, I mean, as of 31st of March, we had a DSOs of 103 and that stands to improve as of yesterday to 79. So we have realized around INR 36-odd crores of the current receivables in the 45 days period. Additionally, we have received a large chunk to the tune of INR 15 crores from an old receivable, which is over and above the INR 38 crores from a client who was going through some financial constraints. So that has also been realized. So that is what the CRO was referring to as improving the cash flow trend. On the dividend part, the board is very much aware of this point and they have discussed this at multiple forums. So I think within the next 2 or 3 quarters that the Board would be in a position to give a direction on that front.

The next question is from the line of Faisal Hawa from H.G. Hawa.

Sir, constantly, our ROE and ROC has been falling from many years and this is also coincided with our going public. So any views on how that can be improved? And secondly, sir, why are we not doing more things in e-waste and then again, vehicle scrapping and even this tire recycling and many quarters go by, and there's virtually no action on that.

Yes. Mr. Hawa, on the first part, on the ROC and the ROE, the main factor for the number slightly slipping is mainly because of the large denominator. Over the last 3 years, significant CapEx has been done for the Waste to Energy project and the [indiscernible] projects. And on the ROE front, the profits have been increasing over the last 3 years from all the subsidiaries. So that is kind of inflating our equity and the capital employed. And hence, you are seeing the ROE and ROC being softer than what it was in the past. If you look at the CapEx phase, till 2018, the total asset block was around INR 240-odd crores. Today, we are in the range of around INR 600 crores to INR 800-odd crores of the total sales. And the revenue from these CapEx is now coming in. So over the next 3 to 4 years, you will see the ROCE and the ROE improve a bit. With dividends being declared by the company in future, you will see a lower equity base that can also improve your ROE metrics. On the other question, Mahendra?

On the vehicle scrapping and the tire recycling, we have already identified land, and we are currently closing that land lease deal with the owners. Finally, we have also applied for the registration license that we need from the respective government authority. So we have made progress this quarter. And very soon, we should also be closing in -- I mean, so for the equipment supplier for the tire recycling, we have already finalized. We just have to finalize some final numbers. On the vehicle scrapping equipment, I mean, we have narrowed down our choices to 2 vendors. And that also we should be closing by the time we get our approval.

And sir, how many more Waste to Energy plants are we targeting all over the country? And what is the likelihood of getting 1 or 2 more such large contracts in the next couple of years?

So there is one ongoing tender, which we are very seriously pursuing in the city of Chennai. That's a very large -- I would not say it's just as a Waste to Energy because that's a very large waste processing, you can say, plant which they have contemplated. So this is a 20-year completion period project, which they are likely to increase to 30 years, in which we are supposed to find processing -- we are supposed to set up processing facilities for capacity starting from 3,000 tonnes per day going up to 4,000 tonnes per day by the end of 20 years. So as part of this, we are required to set up minimum 1,400 tonnes per day of waste to energy and minimum 300 tonnes per day of biomining project. So this is a tender which we are seriously pursuing. And we should be submitting our proposal sometime in July or so.

And any other things that we are doing with e-waste?

Not so much in e-waste, but as I mentioned, I mean, earlier that we are first focused on getting our bearings right on vehicle scrapping and tire recycling. Parallelly, we have started to work on the battery recycling thing. So that is something that we are -- we think probably has got a little more traction. E-waste, we think is a bit crowded for the time being given its size.

And sir, what is the kind of opportunity that we have with the private sector? Because we always say that we want to increase the business of private sector in our company, but there's not much traction on that.

So on this, we are -- currently, we have sort of finalized 1 contract with a large FMCG multinational, which is basically -- which wants us to source and process rPET, which is a recycled pet bottles, so that they can use it for their requirement. So this is something which is something which we have already discussed the proposal with it. We have also agreed on the price. The company is currently getting clearances from their headquarters for this project to go ahead. So this is one such venture. Another venture...

This is part of their APR?

It's part of -- for them, it is part of the APR mandate, yes.

Okay. And this company would be amongst the top 5 FMCG companies of India?

Of course.

Okay. And I mean, I must congratulate you on that. And also, there's a very good LinkedIn presence that we have and a page that we maintain. I must also commend you for that. It's a very good move.

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

Firstly, on the tire and the vehicle scrapping venture, what sort of -- if you can maybe discuss the economics of this in terms of what sort of CapEx is required, what sort of margins and IRRs you expect to make from these two ventures?

So we are looking at -- I mean, these kinds of capacities are very modular and they can be scaled up easily. The configuration that we are working on vehicle scrapping is essentially to start with about 50 to 60 vehicles per day, going up to 100 to 150 vehicles per day by year 5. So that's the kind of model that we are working on. And we want to process both the passenger cars as well as the trucks. In terms of investments, we expect an investment of about INR 20 crores to start with, okay? That's the CapEx because we are not buying lands, we have decided to go on lease lands. So it's going to be an OpEx item.

Okay. And similarly for tires?

Tires also is going to be in the range of INR 5 crores to INR 6 crores, I mean, depending on how we listing because we are going to import tires as well to make the project viable for some of the end applications. So depending -- so the investment will also be a function of how much tires we import. But ballpark is about INR 5 crores to INR 7 crores.

Okay. Okay. And -- fine. And the second thing which you mentioned for the tender in Chennai, will this be similar to what you do in consumer or is it different than what you do?

So -- Okay. So as I said, that they're going to be Waste to Energy. So this will be exactly seen as what we have in PCMC, the Pimpri Chinchwad city, okay? Here also, like Pimpri, we are working with Hitachi Zosen as a technology vendor -- as a technology partner. So that part is going to be similar to the PCMC. BIO CNG is something that we have not done so far. It's not part of our portfolio yet. Although we have a lot of discussions with lot many other companies as well. But for the time being, we are more likely to go with Hitachi Zosen also for the BIO CNG module. The remaining part of the composting and MRF is going to be similar to what we have in Kanjur. So to answer your question, it's going to be a combination of the Pimpri business plus the Kanjur business.

And the CapEx should be approximately what here?

So we are still working on because we are still waiting for some critical input -- key inputs from Hitachi Zosen, the technology vendor. So maybe we can take that in the next call when we are in -- and also because this is a tender. So we also don't want to reveal too much about our commercial divisions.

Okay. Okay. And sir, second question is for N. G. So now that your contribution from WTE PCMC project goes up in this year, and I assume it is a much higher margin business compared to what you do in C&T. Why are we not guiding to a higher margin? Is it because of the new projects being lower margins or what's the math there?

No, no. The reason the margins are likely to be inching up and not jumping is the contribution to the top line. I mean we will be looking at around INR 50-odd crores of revenue from the WTE, while my C&T business today is around INR 400-plus crores. So it's not a significant contributor to the top line, but the margin profile definitely shifts. So today, my -- if you look at the core business, my revenue share within C&T and processing is around 67 to 33. That will marginally change to 65 to 35, so it's not a significant jump today. Maybe as the business progresses and we shift more to processing, you will see a significant shift in the margins going forward.

And the Panvel project which you have, which is where CapEx is done by the authorities, it is safe to assume that, that would be a 12%, 13% margin business?

It should be around that because the CapEx is not done by -- so the main is your recovery of your OpEx cost plus the margin over there. So it could be a safer assumption in those fronts.

Sure. And just one clarification. If you can repeat what you said in terms of incremental revenues from each of the projects -- the four projects which you mentioned PCMC, Panvel, CIDCO and...

So for the C&D, the construction and debris business in Mumbai, we said annualized revenue would be about INR 30 crores per year, the annual revenue will be about INR 30 crores, 3-0. For the Panvel biomining projects, this year, we should clock about INR 35 crores to INR 40 crores of revenue. The third one was which one? You said, the PCMC Waste to Energy?

Yes.