Antony Waste Handling Cell ₹300-crore IPO opens today — these are the risks and opportunities

• Antony Waste Handling Cell is all set to float its ₹300-crore initial public offer (IPO) for the second time on December 21.
• This will be the first and the biggest IPO by a solid waste management and transportation company as there are no listed peers of the company.
• Antony Waste Handling Cell Limited has an established track record of 17 years and is among the top five players in its space.
• There are various risk factors highlighted in the company’s red herring prospectus, which investors must consider before they decide to invest in the company.

India's second-largest Municipal Solid Waste Management (MSW) company, Antony Waste Handling Cell is all set to float its ₹300-crore initial public offer (IPO) for the second time on December 21. The company earlier in March launched a ₹200 crore IPO but had to withdraw it following a tepid response from investors.

But it looks like it is all geared up this time, and the company has revised the price band to ₹313-315 per share. The grey market premium for its shares is hovering at ₹45-50 — suggesting an upside of 15% over the issue price band.

This will be the first and the biggest IPO by an MSW collection and transportation company as there are no listed peers on the Indian stock exchanges as of now. The company said the proceeds from the issue would be utilised for part-financing for its PCMC WTE project through investment in its subsidiaries, and for the reduction of the consolidated borrowings.

Here’s are the Investment experts recommendations for Antony Waste Handling IPO


Strong track record and marquee clients

Antony Waste Handling Cell Limited has an established track record of 17 years and is among the top five players in the Indian MSW management industry. It is indulged in providing a full spectrum of MSW services which includes solid waste collection, transportation, processing and disposal services across the country, primarily catering to Indian municipalities.

The company has few of the marquee clients in its kitty including the Municipal Corporation of Greater Mumbai (MCGM), the Navi Mumbai Municipal Corporation (NMMC), the Thane Municipal Corporation (TMC), Pimpri Chinchwad Municipal Corporation (PCMC), the North Delhi Municipal Corporation (NDMC), and other municipal corporations.

Significant growth in revenue

Just like its strong client base, the company also has a strong track record of profitability in the past fiscals. Antony Waste Handling Cell profit has grown over 35% in the past three years.

And, its long-term nature of projects (ranging from 5-25 years) gives visibility for consistent revenue generation in future.

De-risked business model with a diverse portfolio of projects

According to Axis Capital, in this industry, the number, size and duration, of simultaneously ongoing projects is considered an indicator of future performance since they provide an indication of anticipated future revenue. Company’s project portfolio is diversified across services provided, counterparties, project duration, nature of contracts and geographical areas where they operate.

And, the growing MSW industry will ensure growth in its business. According to the Frost & Sullivan Report, The MSW Management market is estimated at ₹50,000 million for FY2020 and is expected to reach ₹98,000 million by FY 2025 at a CAGR of 14.4%.

Risk factors to consider before subscribing

Despite its established track record, there are various risk factors highlighted in the company’s red herring prospectus which investors must consider before they decide to invest in the company. Here a brief look at the top risk factors.

Majority portion of the revenue comes from limited clients

The company said it had derived a significant portion of our revenue from a limited number of clients and it may continue to derive a significant portion of its revenue from such clients. According to RHP, the top five clients contributed 81.76% in FY 2020.

And, any adverse development with any of its top clients, including as a result of a dispute with or disqualification by any major customers, may result in a significant reduction in its cash flows and liquidity.

Dependent on municipalities for budgets

The company is largely dependent on municipalities for a substantial proportion of its business and revenue. And, the company highlighted that many municipalities have been struggling to fund various solid waste management projects from their own revenue receipts and are highly dependent on the government's budget allocation. And, any decline in the budgetary allocation towards MSW projects will have a material adverse impact on its business, financial condition, and results of operations.

Out of 18 ongoing projects, 17 of its projects have been awarded by municipal corporations, according to the prospectus.

Limited reach

The company has its clients based out of limited geographies including Maharashtra, Delhi and other states. And, its exposure to projects in new geographies and with other municipal corporations may not yield much profit as its current contracts.

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