Betting on a jet of liquidity and a greater appetite for risk, Antony Waste Handling is making a second attempt to go public. The company’s three-day initial public offering (IPO) will open today at a price band of Rs 313-315 per share.
At the higher end of the price band, the solid waste management company expects to raise Rs 300 crore through the IPO. This amount, the company says, will be used to finance the PCMC WTE Project through investments in subsidiaries; to pay off the company’s consolidated loans through the infusion of debt into Subsidiary-AG Enviro; and to fulfill general corporate purposes.
The issue consists of a new issue of shares worth Rs 85 million and an offer to sell of 68,24,933 shares of capital by existing shareholders, and will be available in batches of 47 shares and their multiples.
Under the OFS, Leeds (Mauritius) will sell 13.90,330 shares, Tonbridge (Mauritius) will sell 20.85,510 shares, Cambridge (Mauritius) 11.58,667 shares; and Guildford (Mauritius) will sell 11.58,667 equity shares, according to the company’s red herring prospect.
As the sector remains in a nascent stage, analysts see that the company offers decent returns only in the long term. According to an analysis by Choice Broking, per capita waste generation in India ranges from 200 to 600 grams per day, below the global average of around 740 grams in 2018. Additionally, municipal waste management services in India they are controlled by relevant municipal corporations. and only between 30 and 35 percent is managed by professional waste management agents.
“Therefore, although the trend towards privatization is gradual, the push from the central government (through Swachh Bharat Mission and Smart City Mission) may lead to more and more municipalities moving towards privatization in the coming year,” he wrote the brokerage on an IPO note.
In broad analysis, the industry is expected to grow at a compound annual growth rate (CAGR) of 8.9 percent during fiscal 20-25 to reach 115 million tons per year in fiscal 25. Additionally, The domestic market for MSW management services, which was at Rs 5,000 crore in FY20, is expected to grow at a CAGR of 14.4 percent to reach Rs 9,800 crore in FY25.
So Antony Waste Handling, which is the second-largest player in the domestic MSW management sector with a market share of around 9 percent as of fiscal 2020, is the top earner, analysts say. .
Furthermore, increased energy demand and government initiatives are expected to see more PPP-based projects in the waste-to-energy (WTE) market. “Antony Waste, through its abatement subsidiary, has obtained a contract for the installation and operation of a WTE plant with a capacity of up to 1,000 tons per day (TPD) per PCMC, which shows the long-term growth prospects of the company “. said the Choice Broking IPO note.
That said, analysts remain cautious on the issue as concerns about the economic slowdown and the Covid-19 pandemic continue to persist “lower government allocation towards waste management projects; high risk of income concentration; and risk of project renewal.
The company’s financial performance took a hit amid the Covid-19 pandemic. Consolidated gross revenues decreased by 5.1 percent annually in the first half of fiscal year 21. Meanwhile, EBITDA and PAT margins contracted by 538 bp and 324 bp, respectively, to 25% and 9 ,5%. Analysts are now forecasting top-line CAGR growth of 9% during fiscal 20-23 with a 343 bps and 5 bps contraction in EBITDA and PAT margins, respectively.
Choice Broking is rated ‘Subscribe With Caution’ on the subject given industry macros, required valuations, and accounts receivable concerns.
For Keshav Lohati, Associate Equity Analyst at Angel Broking, he is concerned that if the company cannot win an existing major contract again, given that the top 5 clients contributed 81.8 percent of fiscal 2020 revenue, it could affect the finances negatively.
“In addition, the business involves risk of accounts receivable from the municipalities, which restricts future growth opportunities. Financial conditions may be negatively affected if new urban solid waste projects are not awarded to the company. So, considering the P / E valuation of 11.5x based on FY20 (in the upper price band), we recommend a ‘NEUTRAL’ rating on the matter, ”he said in a note.
Echoing similar views, analysts at SMC Securities also feel that the company’s over-reliance on municipal corporations for business contracts, the high working capital requirement, and a limited clientele pose a threat to business growth. Only those who take big risks, says the brokerage, should subscribe to the topic. It has a ‘neutral’ rating on the stock.
Prabhudas Lilladher recommended writing a rating on Antony Waste Handling Cell’s IPO issuance in the short term, as he sees reasonable trading gains given strong market sentiment and the huge outperformance of recent public issues, but he also remained cautious. on the long-term growth of the company.
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