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

Ladies and gentlemen, good day, and welcome to Antony Waste Handling Cell Limited Q1 FY '27 Conference Call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantee 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 over the call to Mr. Jose Jacob, Chairman and Managing Director from Antony Waste Handling Cell Limited. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for joining us for our Q1 FY '27 hearing earnings conference call. With me, I have Mr. Mahendra Ananthula, our Group President, Operations, Business Development and Diversification; Mr. Subramanian, our Group CFO; and SGA, our Investor Relations Adviser. Our investor presentation for Q1 FY '27 is available on the stock exchange and on our company's website. Before discussing our business performance, I want to address the tragic incident at our Waste-to-Energy facility in PCMC. On July 8, the region received exceptionally heavy rainfall of approximately 650 mm, well above anything recorded historically in the area. During this event, amount of legacy waste at the dumping site adjacent to our facility collapsed onto the company's administrative building. 23 individuals were present at the time. The rescue operation began immediately and 14 people were safely rescued. Tragically, 9 individuals lost their lives. Our focus from day 1 has been on standing by the affected families. The company is bearing all medical and counsel expenses for the injured, providing financial assistance of INR 40 lakhs to each affected family and covering funeral-related expenses. We are offering employment to immediate family members of the deceased, supporting the education of their minor children and providing dedicated assistance in navigation -- in aggregating medical insurance and statutory claims. This support will continue for as long as it's needed. Those who lost were not nearly employed. They were valued members of our extended family and our thoughts remain with their loved ones. I want to be clear on the fact the waste amount involved was legacy waste located outside the area allocated to the company by the corporation and its remediation was not part of our contractual scope of work. On operations, as a precautionary measure, we temporarily suspended activity at the WtE plant pending a full structural and safety assessment. Municipal waste Collection and Transportation were unaffected throughout. MRF and composing operation resumed from July 28 and WtE operation will restart only after thorough review and certification by our OEMs and Hitachi. We continue to cooperate fully with all concerned authorities. Today, with more than a month on, we pause to remember the 9 colleagues we lost. The work they did, the people they wear and the family who carry this loss every day. We have stayed close to those families through this period, and we will continue to. As we remember then we also renew our commitment to one another. Nothing matters more than every person who comes to work returning home safely. Safety is in a set of rules on all. It's how we look out for each other every day. We owe that to the colleagues we lost, to their families and to each other. Turning now to the key highlights of the quarter. Our business performance, we delivered healthy year-on-year revenue growth of 6%, reaching INR 269 crores, driven by higher volumes across our project sites and supported by contractual tariff fleet escalation. On the balance sheet side, during the quarter we successfully refinanced the term loan of Antony Lara Renewable Energy Private Limited, our material subsidiary operating the WtE facility in PCMC. This refinancing brought the interest rate down from 10.25% to 8.25% per annum, a meaningful reduction that will support our cost of capital going forward. I'm also pleased to share a significant business win. We secured a new contract from the Greater Noida Industrial Development Authority for the procurement and comprehensive O&M of electrical mechanical road city, which is across Greater Noida East zone. This is a INR 243 crore project over 5 years with a further 2-year extension option expected to commence in Q3 FY '27 and contribute approximately INR 46 crores in revenue in its first year. The project involves deploying 16 electric sweepers along with supporting infrastructure and manpower covering approximately 640 kilometers of roads daily, further strengthening our footprint in sustainable urban waste management. Looking ahead, our focus remains on expanding processing infrastructure, enhance profitability and strengthening our presence in high-growth emerging sector. Backed by a strong operational and financial foundation, we are well positioned to meet the evolving needs of urban India. As the nation accelerates its transition towards sustainability and circular economy, we are fully prepared to deliver solutions that are practical, scalable and outcome-oriented driving long-term value for all our stakeholders. Thank you. And I now turn to the operational aspect. Let me get Mahendra. Mahendra, over to you.

Thank you, Jose. I would like to walk you through the operational performance of Antony Waste Handling Cell Limited for the quarter. Starting with volumes. Our Collection and Transportation operations handled approximately 0.5 million tonnes of waste, while our processing facilities managed around 0.85 million tonnes of municipal solid waste, reflecting year-on-year growth of 6% and 5%, respectively. Total tonnage for quarter 1 of FY '27 came in at approximately 1.4 million tonnes, a 5% increase over the previous year. On the revenue side, our C&T business delivered healthy growth with revenue up to 10% year-on-year to INR 156 crores, while the processing segment grew 3% year-on-year to INR 75 crores. The operations continue to demonstrate resilience and consistency across segments. The Waste-to-Energy plant at PCMC generated over 20 million green units during the quarter, helping us avoid approximately 2,782 tonnes of CO2 equivalent emissions, a tangible contribution to India's renewable energy goals and to reducing our own carbon footprint. Our construction and demolition waste recycling facility continued to operate efficiently, achieving an industry-leading recycling rate of 96%, reinforcing our commitment to circular economy practices. The consistent performance across facilities reflects our broader focus on building scalable, sustainable infrastructure. Turning to resource recovery. RDF sales stood at approximately 40,000 tonnes, down around 28% year-on-year. This is not directly comparable to the quarter 1 of FY '26 which has benefited from a meaningful contribution from the CIDCO bio-mining project now completed. Compost sales remained broadly stable at approximately 6,000 tonnes. On ESG, we continue to make tangible progress against our sustainability road map. Scope 1 and Scope 2 emissions for the quarter stood at approximately 6,601 tonnes and 835 tonnes of CO2 equivalent, respectively, while avoided emissions were estimated at approximately 2,782 tonnes, reflecting our continued focus on resource efficiency and carbon reduction. Looking ahead, we remain focused on embedding sustainability deeper into our operations, enhancing waste recovery efficiency and driving process improvements through automation and innovation. Backed by a strong execution track record and a technology-driven approach, we are confident of not just meeting but exceeding, evolving environmental standards. and continuing to set new benchmarks in responsible waste management. Thank you. And I now hand over the call to NG for financial highlights.

Good afternoon, everyone, and thank you for joining us. Let me take you through the consolidated financial performance for Q1 FY '27. Our total operating revenue grew a steady 6% year-on-year to INR 269 crores, as mentioned by Jose, reflecting the resilience of our underlying business even as we navigated a challenging cost environment during the quarter. On revenue mix, Collection and Transportation contributed 62%, MSW processing was 28%, other operating income 7%, contracts and other, the remaining 3%. This compares against the 60%, 28%, 9% and 12%, respectively, in Q1 FY '26. The shift reflects the growing rate of our C&T business and our diversified revenue streams continue to give us strategic flexibility and position the company for sustained long-term growth. Turning to profit. I want to be direct with you on this quarter's numbers. The EBITDA came in at INR 45 crores, which is down 27% year-on-year and 33% sequentially with EBITDA margin at 16.8% compared to 24.4% in Q1 FY '26 and 22.8% in Q4 FY '26. This compression was driven by 3 factors, higher operating expenses, which included vehicle hiring and transportation costs at the CIDCO plant, employee costs, which rose 18% year-on-year and now represents 34% of our revenue versus 30% a year ago and the deferral of certain Q4 FY '26 waste disposal transformation activities into this quarter, which added an incremental expense of approximately INR 10 crores. Finance costs also rose 35% year-on-year, reflecting higher debt base ahead of our refinancing. These pressures flow through to the bottom line. PAT for the quarter stood at INR 0.7 crores, down sharply from INR 23 crores in the same period last year, further impacted by a one-time expense of INR 7 crores related to the prepayment of the Antony Lara Renewable Energy term loan. This was a deliberate strategic move. The refinancing reduced the interest rate by 200 bps from 10.25% to 8.25%, and we expect it to deliver recurring interest savings and support stronger cash flow generation from the WtE facility going forward. We view this quarter's profitability as transitional rather than the structural thing given the one-off nature of both the transportation cost and the refinancing charge. On the balance sheet, as of June 2026, gross debt stood at approximately INR 435 crores with cash and bank balances of around INR 111 crores, translating to a net debt of approximately INR 324 crores and a net debt-to-equity ratio of 0.4x. Our weighted average cost of debt stood at approximately 10.1%, a figure we expect to trend lower as Lara Renewable refinancing benefit fully reflects going forward. The DSOs remained stable at 114 days, underscoring the disciplined working capital management even through a cost heavy quarter. Before I move on, I would like to flag 1 separate item for the benefit of everyone on the call. As some of you may be aware, we experienced a force majeure event at our WtE project in CCFT caused by extreme monsoon conditions this year. This has resulted in damage to a portion of the project assets. I want to clarify that this does not impact our core operating assets. Based on our current assessment, we expect an impairment charge in the range of around INR 22 crores to INR 24 crores, which we will treat as an exceptional extraordinary item separate from our core operating performance. I would also like to note that this estimate does not yet factor any recovery we expect from insurance claims, which could offset part of this impact. I want to be transparent and that this situation is still evolving and more details will be captured in our Q2 results, along with any further clarity that emerges. In total, the top line momentum remains intact. This quarter's margin pressure was driven by identifiable largely nonrecurring items and the refinancing action we have taken strengthens our cost of capital and cash flow profile heading into the rest of FY '27. This concludes our remarks. We would now like to open the floor for Q&A. Thank you.

[Operator Instructions] The first question is from the line of Ronak Shah from Equirus Securities.

Sir, first of all it was saddened to hear about the unfortunate event. Sir, my question is regarding to the Waste-to-Energy operation. So, into the results highlight wherein you have mentioned currently the operation are under the regulatory review. So, from that context, what is the status? And considering it is a high return churning and high-margin business what can be the near-term impact in terms of the Waste-to-Energy revenue? That was my first question.

On the WtE part, there are 2 operations that are undergoing. The material recovery and composting section has already started operations from 20th of July. We have started processing around 400 tonnes of waste a day. The WtE plant is expected back by first week of October. During this period, the fixed cost incurred would be in the range of around INR 2.5 crores to INR 3 crores per month for us. So that's like around INR 7 crores will be sitting on our books of accounts. The revenue will start technically from first week or second week of October for us on a full stream basis.

Okay. So, the tipping fee part will be continued, but the power generation and sale part will see some hampering. This is the broader understanding that I got.

That's correct.

Okay. Secondly, from the processing business, if we see the current quarter has seen some moderation in terms of the revenue growth. So, can you highlight the core any specific one-off or specific reason for that? And secondly, when you're calling out inflationary trend which are hampering the current profitability from the 2Q and 3Q perspective, considering current high crude, crude derivative related prices, secondly, the wage hikes which we have seen, how the near-term profitability going to see trajectory in terms of numbers?

So, to answer the first part on the softening processing volumes, that's mainly because of CIDCO bio-mining contract got over in the last quarter. This was a very specific 2-year project where we were supposed to bio mine a particular tract of land and that got over. So that is why we are seeing a moderation in the processing content in Q1. Going forward with the Atkoli Project up and running by Q4 of the current financial year, we will be back on the growth trajectory. On the margin profile, we have seen certain cost pressure mainly because of transportation and hiring related items. We expect those margin profile to slightly improve going forward. It will not be as bad as what we have encountered in Q1. We'll see some respite coming in because of renegotiation on the terms with the transport entities. On the labor front, yes, I mean that is something that has happened recently, we got a new Maharashtra state government revision in DA rates. So, there will be a timing issue of the cost pressure due to the labor front. But since bulk of our projects has got escalations linked in, we see some respite going maybe in the second half of the current financial year.

Okay. So, on a long-term guidance wherein we are likely to post around 22% to 24% sort of EBITDA margin. But from the FY '27 perspective, could it be below 20-odd percent considering all the macro factors?

On the processing side, we don't see a lot of pressure coming in. On the Collection and Transport business, yes, because of higher repairs and maintenance costs and a few of our contracts getting old, we see some margin pressure coming in. Having said that, FY '27 still has certain upticks mainly because our BMC contract will start from the third quarter onwards. So that has a slightly better margin profile. Our Atkoli CapEx reimburse will also come in by Q4. That has a higher margin profile. So, the internal threshold should be to go back to our historical margin trend, but yes, it can be a plus or minus a quarter here and there.

Okay. So, in terms of the balance sheet, we have refinanced the loan. So can you highlight the quantum of that? And secondly, there is some INR 15-odd crores sort of receivable, which we have got a favorable judgement from the court. So what is the timeline for that in terms of the receivables?

So, total amount that got refined is around INR 40-odd crores at the Lara Renewables end. That is the quantum of that is getting restated at a lower cost. And on the INR 15 crore amount, the amount is still pending. The corporation is working and they will get back to us shortly.

Okay. And sir, lastly, on the Andhra project, so what is the status on the Andhra project? And secondly, in terms of the C&T, how it is progressing considering current monsoon related some disruption?

So on the Andhra project, we have got position of land at both the sites Kadapa as well as Kurnool. As we had indicated in our earlier calls, the technology and the EPC contractor JFE India has already completed the civil designs. We have also appointed the civil contractor and the civil contractor has mobilized its equipment in Kadapa. Kurnool should happen in the next couple of weeks. So things are going as per schedule. I think NG has already brief to you earlier about the financial closure, which is also almost at the last stage. So we are confident of completing these projects as per schedule.

Okay. And in terms of the C& D operation, how it is progressing right now?

C&T actually has recovered. I mean BMC came up with 2 policy decisions, which ensured that all the large builders start sending part of their construction demolition waste to the processing plant, which means that it became mandatory on their part, on the builders' part to get their waste processed. So that has really helped us in achieving the tonnages that was a problem in the initial year. Now we are getting close to 600 to 650 tonnes per day, and we have a capacity of 600 tonnes per day, plus or minus 10% that we can process. So, I think that plant has started giving better financial results.

The next question is from the line of Manish Agarwal from Tradeswift.

I have a couple of questions. My first question is, sir, can you give a brief on CIDCO bio-mining project? Can you explain the economics of the project like revenue expected margin and transportation cost per tonne? What I actually want to understand is this INR 10 crore incremental transportation, which we incurred in Q1, how much was timing related and how much in the project cost?

So the -- so the revenue model for the bio-mining project is basis the tipping fee that we get from the client plus the sale of RDF revenue that we get by selling it to the cement companies, okay? So there is -- these are the 2 revenue streams. And the cost is the cost of transportation that you incur for paying to the transporters and disposal of inert in the low-lying areas.

Okay. So is this INR 10 crore incremental just for 1 quarter? Or is it like increase in the project cost itself?

It's a cumulative effect. So what happens when you do biomining is as and when you bio-mine a particular area, the inerts are kept aside and you dispose of the RDF material to the cement companies, as Mahendra mentioned. Now after the project nears this end, there are a lot of inerts which cannot be sold to cement companies because they need RDF and not inerts. So the last quarter was reflective of the disposal costs related to the inerts to low-lying areas as earmarked by the corporation and the authority. So the last part of any bio-mining contract would see a jump in transportation/disposal cost. Similarly, what we have incurred in Greater Noida bio-mining as well.

You can say it is the closure cost of the project.

We can expect this will not be forward-looking like for the next quarter or whatever.

CIDCO bio-mining tender is over. We have already completed the project. So it's completed.

So yes, to answer your question, this is not a repetitive line item for you.

Okay. So my second question is like our processing volume has grown by 6%, but our RDF sales have declined by 28%. So is this purely a timing issue in dispatches, inventory accumulation or a weaker customer demand? How should we look at it? And what is the realization per tonne?

It's only a timing issue. I mean because we also are in the process of adding more and more customers. So the more customers -- and also selling from our PCMC plant apart from CIDCO and Kanjurmarg from where we are already selling. In terms of realization, we make a net realization of -- it's a positive realization of upwards of INR 300 per tonne.

What it was in last year?

It was INR 250 or so.

Okay. Realization have improved basically. Sir, my last question. Sir, on refinance, what -- you said that outstanding amount was close to, if I'm not wrong, it was INR 40 crores. So for that, we have incurred additional INR 7 crores prepayment cost and we are saving downpayment reduction in interest cost. So what is the payback period for that, sir?

The amount that got refinanced is INR 140 crores, not just INR 40 crores.

Okay, INR 140 crores. Okay. So, what would be the payback period?

The payback for it is 15 years.

15 years?

Sir, we are talking about the tenure is now extended to 15 years and we're having a net benefit of INR 14 crores despite paying the INR 6 crores of prepayment charge.

[Operator Instructions] The next question is from the line of Taha Ansari from Taha Capital Management.

Am I audible?

Yes.

Yes, you're audible.

Okay, fine. Sir, my very first question to you comes from the side of Collection and Transportation business of yours. In Q1 FY 2027, we did around INR 166 crores of revenue and around...

Can you speak a bit louder?

Yes, sure. Sir, I am talking about your C&T business, your Collection and Transportation business. We did around INR 166 crores of revenues and around 5.5 lakh tonne of tonnage in the very first quarter. So, sir, what should we assume as our revenue or sales per tonne for this C&T business?

So it will be very difficult to quantify because of 2 factors. One is the Collection and Transportation revenue also includes revenue from 3 other projects where the billing terms are not on tonnage, but it's on number of households and the number of trips. So like the ones in Thane, Jhansi and Varanasi, the billing is on the number of units/household/commercial units and the number of trips that we run. So that tonnage is not getting captured in the tonnage group. Second, more importantly, the scope of each project is different. So it will be very difficult to quantify on a per tonne revenue rate what will be the size because each contract has a different scope, the tipping fee ranges between INR 1,800 to INR 4,200, depending on the scope, depending on the number of vehicles and the number of years within which the work needs we completed.

Okay. I got it. It is up to the area and up to the size of the project. If you give me a EBITDA margin idea for this Collection and Transport business, it might be difficult, but if you can put a number into it.

We never comment on each division's performance, and it's very difficult because it's a B2B market, right? So these are pretty commercially sensitive points to discuss.

Okay. I got it. And receivable package in this Collection and Transport business, sir?

Sorry, we couldn't -- can you repeat that question a bit clearer?

I can get an idea of what are the receivables?

So we have 114 DSOs is what we have reported for the first quarter. So normally, our DSOs range anywhere between 90 to 115 kind of a number. So that's the range that we have over the last 18 quarters.

Okay, sir. You're talking on a consolidated basis or I am just asking about...

Consolidated basis.

Okay, on a consolidated basis you are talking.

The next question is from the line of Mihir Shah from MB Securities.

Am I audible, sir?

Yes.

Yes, you're audible.

So I would like to know which of our current segments offer the strongest growth opportunity going ahead from now? Like is it C&T, processing, WtE segments?

So going forward, I think given focus of the management is to concentrate more on waste processing/WtE projects for us. But having said that, Collection and Transportation is also an area where we have been growing by leaps and bonds. I mean the last 4 years, we have got more C&T contracts and mechanical sweeping contracts. And even yesterday, we got a new contract from the Greater Noida Municipal Corporation. So I mean for us, growth will come from both the sites. But the focus where it's more margin accretive and more CapEx intensive, it is waste processing/WtE for us.