Arman Nahar’s stance on Antony Waste Handling IPO – Neutral
(with a slight bias on positive looking the current IPO love and Liquidity)
Good Growth in Last Year
With good industry growth expected and good market position in MSW management but heavy dependence on Municipalities who in turn depends a lot on budgetary allocation also rising debt levels with a decent valuation.
Antony Waste Handling IPO was originally bound to come out in March 2020 but it was withdrawn due to poor response (Market conditions were very poor).
Now, the Antony Waste Handling IPO is coming up with a higher offer price of 313-315.
Pros of Investing in Antony Waste Handling IPO
1.) Track record of 19 years in Industry and one of the top 5 players in Indian MSW (Municipal Solid Waste) with no listed Industry peers. It has currently 18 projects going on for Municipal Corporation of Greater Mumbai, Navi Mumbai, North Delhi, etc with a fleet of 1147 vehicles
2.) MSW management market size in India is expected to grow at a CAGR of 14.4% till FY25.
Also, the fact that India’s per capita waste generation has grown from 300gram per person per day in 2001 to 450 grams per person per day, Antony Waste Handling IPO seems to have good prospects in terms of response.
Various Government initiatives like swatch Bharat Mission, Atal Mission for Rejuvenation and Urban Transformation, Smart City mission gives fuel to waste management business
3.) In two years, from FY18 to FY20, revenue grew at a CAGR of 27.8%(From 276Cr to 450Cr) and Profit at a CAGR of 24.8% (From 39.8Cr to 62Cr). However, in 6Months of FY21, there has been a dip mainly because of the lockdown.
4.) Valuation: Valued at PE of 15 and PB of 3, this seems to be good.
5.) Most of the ongoing projects have an escalation clause depending upon inflation. This helps in Maintaining Margins.
6.) Of the fresh issue of 85cr, it will be used for financing the project of the subsidiary by Investment in subsidiary and Reduction of borrowing. So end-use is good.
Cons of Investing in Antony Waste Handling IPO
1.) MSW management depends on the Municipalities of the country. Many Municipalities have been struggling to fund various solid waste management projects from their own revenue and are highly dependent on state/central grants/budget allocation. On average, in India, Municipalities generate only 39% of the funds they spend.
2.) The top five clients contribute 82% of total revenue which has although reduced from 91% in FY18 yet significant concentration.
3.) Post Issue implied the Market cap will be 891cr. Hence, Antony Waste is a small-cap company.
4.) The company’s plant and equipment costs, which include commercial vehicles, also rose from 40Cr as of 31 March 2018 to 137.9Cr as of 31 March 2020. However, during the same time, the borrowing rose from 111.3Cr to 175.5Cr. This implies that much of the CAPEX has been done from the borrowed money.
Watch: Anil Singhavi’s Views on Antony Waste IPO
Cover Image Source: Business Insider