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Antony Waste Handling Cell Ltd
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Ladies and gentlemen, good day, and welcome to Antony Waste Handling Cell Limited Q4 and FY '22 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 risk 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, Antony Waste Handling Cell Limited. Thank you and over to you, Mr. Jacob.
Good afternoon and a very warm welcome to everyone present on the call. Along with me, I have Mr. Subramanian, Group CFO; and SGA, our Investor Relation Advisor. I hope every one of you and your family continue to be in good health and safe. Our investor presentation is now available on the stock exchange and the company website. Let me now go over the business highlight of the period. We ended this fiscal year on a positive note reporting record high revenue of INR 667 crores helped by strong professional performance from all our sites, which reflected in improving the commit and the in-built price escalation also kicking in. During the year, increased activity from our new contract in Varanasi, Jhansi and Noida also contributed to our growth parameters.
On to business-wise performance. MSW C&T projects, municipal solid waste collection and transportation projects. We have 14 ongoing projects in this service after adding 2 new contracts during the year from Jhansi Smart City Limited and the NDMC Sadar Paharganj and City Zone. Jhansi is fully operational and NDMC new contract has contributed to only 15 days of revenue from the last year. Our MSW collection and transportation business volume increased by 7.4% year-on-year in Q4 FY '22 and by around 20% year-on-year in FY '22. This volume includes -- excludes waste transported where our billing is either on ship basis or on account of households or on a credit basis. Coming to Municipal Solid Waste Processing projects. We processed approximately 2.3 million metric tons of waste in our MSW Processing projects, which includes Kanjurmarg and Pimpri-Chinchwad. For the fiscal year ending March 2022, an increase of approximately 12% year-on-year.
We booked revenue from the greater Noida bio-mining activity for the first time in Q4 FY '22, a mere 10% of the total project value there. We expect to book a larger chunk of greater Noida bio-mining in the current fiscal year. Tonnage handled per day increased to 5,900 tonnes during the quarter and we expect this momentum to continue. The bio-mining of our first cell in Kanjurmarg is going well and we are pleased with the quality of compost and RDF produce. After this first cell is finished, we will begin the bio-mining in our second cell. We stand on our target to start operation in Pimpri-Chinchwad waste-to-energy project by March 2023. Also during the year the Board of Director of Antony Lara, our material subsidiary, has increased the controlling interest of Antony Waste Handling Cell in Antony Lara from 63.04% to 73%. We continue to focus on contracts in newer municipal areas while continuing our cluster-based approach.
We are seeing various municipalities coming up with tenders in both waste processing and Municipal Solid Waste collection and transportation segment, which will act as a good growth opportunity for us. In our aim to be recognized as a company that provides a sustainable living environment to the citizen, we have signed an EPR agreement for PET bottle disposals certificate with a large beverage company. During the course of engagement, the company aims to process and safely dispose 1,500 tonnes of pet bottles. We are pleased to inform you we just won a contract of collection and transportation of Municipal Corporations of Nashik. The capital, it is an annual revenue will be around INR 20 crores to INR 25 crores and it's a 5-years contract.
This is from my side. I now hand over the conference to Mr. Subramanian, Group CFO.
Good afternoon, everyone, and thank you for joining us for our fourth quarter 2022 earnings conference call. I will share the highlights of our financial performance. During Q4 2022, the company reported operating revenue of INR 146 crores as against INR 120 crores last year, which is up by 22% year-on-year. The increase in core revenue was driven by an increase in tonnage because of the addition of 3 new contracts in C&T and processing as well as the improved activities in both commercial and residential areas where we operate. Operating revenue for the fiscal year ending March '22 has increased by 32% to INR 568 crores as compared to INR 429 crores last year while total revenue is up by 39% at INR 667 crores, which includes project revenue. Consolidated EBITDA has registered a healthy growth of 35% to INR 46 crores in Q4 compared to INR 34 crores in the same period last year with an EBITDA margin at 24%.
The EBITDA margin was weighed by higher project expense to the tune of around INR 43 crores as work on our Pimpri cell began, which is reflected in the contract and other section. For the fiscal year ending March '22, adjusted EBITDA stood at INR 173 crores recording a 33% growth compared to 2021 with a 26% margin. Profit before taxes for the quarter stood at INR 34 crores, which reflect a 77% growth year-on-year. And for FY '22, pretax income stood at INR 113 crores, an increase of 16%. Profit after taxes for the quarter was INR 26 crores and for the full year it's at INR 90.4 crores, both being up by 63% and 41% year-on-year, respectively. Coming to business-wise performance. As Jose mentioned, our collection and transportation revenue is up by 31% at INR 108 crores compared to INR 83 crores in Q4 '21 and is up by 40% in FY '22 at INR 417 crores compared to INR 297 crores in FY '21.
The growth was on account of an increase in total MSW C&T volume by 7.4% in Q4 as compared to Q4 of FY '21 and a growth of 20% for the full year of '22. We handled a total of 1.53 million tonnes in FY '22 in the C&T section. In the MSW Processing, the revenue has remained flat on a sequential basis at INR 38 crores and is up by 14% in FY '22 and this is also reflective of the 11.9% increase in the total tonnage processed for the entire year, which stood at 2.3 million tonnes. Coming to our balance sheet. Our net debt to equity as of 31st March was maintained at 0.2x. The total debt as of 31st March stood at INR 170 crores as compared to INR 150 crores last year. Net debt is at INR 77.5 crores. The company's overall credit profile has improved resulting in a 460 bps reduction in our average consolidated borrowing cost, which stood at 12.7% in March 2021 declined to 8.11% as of March 2022.
Our receivable period has also been steady with total receivables as of March 2022 on a DSO basis of 70. This is a critical metric for us and we keep a strong look-out on the same. The capital return metric remained strong with a return on capital employed of 19% and a return on equity of 17% as of March 31, 2022. The last quarter of FY '22's performance has set the tone for the new fiscal year. The company delivered strong volumes growth, higher execution in areas of service, which reflected in our double-digit growth of revenue, operating EBITDA and operating profit before working capital changes. Our quarter's performance was best-ever performance since inception and we'd like to build on the same.
That's all from our end. Now we are opening the floor for the Q&A.
[Operator Instructions] The first question is from the line of Nikhil Chowdhary from Kriis Portfolio Management Services.
And congratulations on a great set of numbers. I wanted to understand Note #6. You have an extra like line probably you are explaining some INR 29 crores of receivables that have come up new in this quarter. Can you explain this in depth what is it?
The new receivables that have come in from -- is our receivables from our line of activity because of new scope of operations that we have enhanced. So all our new contract revenue is coming in basically from Jhansi and Varanasi and to some extent in Noida new zones and from NDMC. So this is what has been the incremental revenue that's been built.
Okay. But we are explaining that it is in regards to some dispute like it is a disputed amount that is yet to be received because we may have recognized it in this quarter or earlier quarter.
This is a historical amount that is also being clubbed. So this is an ongoing as per the new Ind AS accounting norm under the standards of clarification. This is a new norm that has come in so that is why we need to incorporate in our announcement.
Okay. Understood. So any pending receivables like that is probably yet to be recognized?
No. These are all recognized. This is the new disclosure norms as per the new accounting standard so that is why we are seeing it for the first time.
The next question is from the line of Manav Vijay from Deep Financial Consultants.
Sir, my first question is regarding your PCMC project in Pune. So last time we shared that the costing of that project has moved up from INR 240 crore to INR 264 crores. Now we have seen in last few months the way commodity prices have moved up. So is there any further escalation in that project cost or that INR 264 crores remain true as of now?
Manav, the CapEx cost has been fixed and formed with our vendors so we sign an agreement to that extent. So the vendors have also gone ahead and hedged their position. So the cost for the company is capped at that amount.
Okay. This would be helpful. Sir, second thing is that -- so now in your opening remarks, you mentioned that now this NDMC project is now fully operational. So it was a INR 1,000 crore project for 10 years. So now would it be safe to assume that we will have roughly INR 100 crores per annum and INR 25 crores per quarter? Would that be a safe assumption to make for that project?
Manav, what Jose had mentioned is there were 2 new contracts, Jhansi and NDMC. When he was talking about fully operational, he was talking about Jhansi contract. NDMC we have just started the operation in one of the zones so we expect the total procurement of assets by the corporation to be completed by June/July. So it's only after maybe the start of -- end of Q2 or beginning of Q3 that 100% scale-up of operations in NDMC will happen.
Okay. So in terms of revenue, it was a INR 1,000 crore project for 10 years. So can we assume INR 100 crores per annum in terms of revenue from that project?
Yes, that is a safe assumption based on the tonnage that we're clicking in. So starting from the period, you will have a running run rate annualized revenue of around INR 95 crores to INR 110 crores.
Manav, I'll request you to come back in the question queue for a follow-up question. [Operator Instructions] The next question is from the line of [ Akash Mehta from CAPS Investment ].
I have a couple of questions. Firstly, are you open to bidding for a new processing contract as of now? And if yes, then what is the kind of investment that you're comfortable with?
Yes, we are definitely open for bidding for new processing contracts. Over the last couple of years what we have seen is there's a decent amount of capital grant that's been provided either by the state, central or by the municipal corporations themselves. So the capital requirement depends upon the technology, the space and the subsidies that have been provided by the clients. Normally we have seen a fixed asset turn of around 0.4 to 0.6 for an annualized site. So it depends upon the need of the client and the technologies that they want. So it will be very difficult to give a very generic statement there. But definitely yes, we are looking for more processing contracts.
Okay. And secondly, with the fuel prices like reaching such [indiscernible] levels, are you able to pass on the same or is there any pending unabsorbed portion?
So 48% of our total revenue has a variable escalation which is either quarterly, half yearly or monthly and 62% of our total operating costs excluding contract cost is labor and fuel. So we are pretty much great action in that aspect. So this is a factor which is a platform for us. There is always a timing lag because we incur it today and we get it reimbursed later so there is always a timing mismatch that happens. So we are able to pass on decent amount of hard burn that we have faced down to the client.
Okay. So any pending unabsorbed portion as such?
No. We expense all our expenditures out and the reimbursements come in view of escalation process as mentioned in the tender.
The next question is from the line of Jigar Mistry from Buoyant Capital.
Two questions, sir. Firstly, can you throw some light on how fast can you go ahead with the 5,000 tonne per day to the limit of 7,500 tonne. I'm sure Mumbai is producing a lot more waste in terms of overall daily production. So what really is the constraint? Second question is with regards to the compost. I think this is arguably the first quarter where we are starting to mine compost and RDS and how has been the experience in terms of pricing or the overall production? If you can split out the revenue, that would be great too. And last question is any incremental disclosures with regard to the income tax that you would like to make?
So point one, the current tonnage that we are processing around 5,300 is not a static amount. Like last month in the month of April, it was all the way up to 5,800 tonnes per day. So it's not a very static amount, it keeps on swinging on the upside. As for the tender norm, there is a step-up in the tonnage that will flow to our processing site so there's a gradual increase. So will I reach 7,500 tonnes in 2 years' time, 3 years' time, that's something we would not like to step out there right now. But we definitely have seen an increased intake on inflow of waste to the system. So we presume in the next 3 years or 4 years' time, we will be reaching that number safely.
Sale of compost from the bio-mined materials include the sale of RDF, we don't see a significant quality differential. Actually the quality is significantly better because of our technology where we recirculate the leachate into the system so there is a decent amount of bacterial action that helps the quality of compost doing sustainably well. So realization is at par with the compost that we generate from fresh waste so there is no disparity just because it's coming from bio-mined materials. And third point that you asked about the income tax inquiry. I mean, we have not heard anything over and above what we have already informed in the first 2 quarters after the incident happened in October 2021. We have yet to receive any further input or reply or inquiry or questions from the income tax authority.
And just one follow-up on this combined compost and RDF, are we good to look at something like INR 80 crores to INR 100 crores in the coming year in terms of revenue?
Today, Jigar, it would be not wise on the company's part to venture out and give you a number. But definitely maybe 3 quarters on when the traction happens and we are able to supply the stock to our clients, we'll be in a position to venture out and give you a number there.
The next question is from the line of [ Xavier ] from [indiscernible].
And congratulations on a very good set of numbers. My question is regarding the margins. I see you'll have very good margins, but also in the investor presentation you'll have mentioned that most of the contracts so the revenue is already hedged to the inflation. So going forward, would the margins remain same or is there any way where you'll can -- actually there is a scope of increasing the margins? Or in case say tomorrow the cost increases, do we have the headroom to pass it on to our customers? Please if you can throw some light on that.
Xavier, if you look at collection and transportation contracts, approximately 62% of my operating costs are fuel and labor. And all the tenders that we signed or all those tenders in the waste collection and transportation business have escalation clause wherein either they are linked to certain parameters of high speed diesel of the WTI component or the minimum wage of that particular region. So as and when these things change, we get the tipping fee that is a rate per tonne that will go to the plant gets recalibrated so it's a pass-on benefit to us. And there's also a line item for miscellaneous items, which is also captured in the tipping fees. To a great extent, the tipping fee helps insulate us from spikes in cost. Now there is always an event when the tonnage for, like for example in COVID, so there is a fixed cost of running a shift. Now if the tonnage drops, you definitely see a fall in margin and if the tonnage increases, there is a spike in our margin. So that is a factor that we work on.
And Antony believes in having a very optimum route planning wherein we are able to spread out our assets in a much better manner. So that is the only way we can improve our margins and that is something that the company tirelessly works on. We use artificial intelligence, we use route planning, we use all kind of technology-enabled solutions to improve our systems. Approximately 90% of my vehicles have GPS, which helps us reroute the vehicles so that the tonnages that they carry can be maximized. So that is what we can do on the collection and transportation side of business. Waste processing, these are long-term contracts and depending upon the waste generation and the technology that we select, the margins are normally steady and the escalations are linked either to a WTI or to the different parameters here. So margins are normally steady in these kind of businesses. The scope for improvement lies on your ability to derive a delta on your higher maintenance or better maintenance of the vehicles and having fewer downtime of your plant and machinery.
The next question is from the line of Akhil from Robocapital.
Am I audible?
Yes.
So regarding just going back to the opening remarks that you had made. The project expenses are high due to the work at Pimpri-Chinchwad currently. So I just wanted to know how long will it take for project expenses to remain at this level?
So the project expenses will increase and proportionately the revenue from project income will also increase in the current financial year. So we expect the total project cost and maybe a revenue to the tune of INR 120 crore odd expense to be booked in the current financial year. And after the transaction is over, you will not see a spike or maybe an absence of the same in that particular line item.
Okay. And contract revenue currently for this quarter because the Jhansi contract has been high and now going forward you have mentioned going to be at INR 100 crores per annum?
No. Contract revenue is basically related to the contract costs. So as per the Ind AS accounting treatment for project costing wherein you do a [ deboot ] activity, which is what we do for both Kanjurmarg and PCMC waste-to-energy. The capital that we invest has to be routed to the income statement. That is why you see a contract revenue and a contract cost. So these will increase as and when I do a CapEx at my waste energy plant. The revenue from Jhansi and what you refer to the NDMLC contract will be part of my tipping fee, MSW C&T revenue.
Okay. So this depends on whenever you do CapEx, this will increase. So because of the CapEx that you're doing, currently the contract revenue has increased in Q4.
Yes, exactly. So we will continue as and when the company bags deboot basis or we are getting any other new contracts in this nature wherein the assets are transferable to the client, you will see this line item coming in.
Okay. And just regarding the guidance that you've given in Q3, 37% in EBITDA going forward and 30% increase in the top line. I just wanted to know does that guidance still stand for FY '23?
At core level -- I mean when I talk about core, I'm talking about my actual tonnage movement and the contracts and everything, we are very comfortable with this number. But the 30% growth that you're talking about also includes my Ind AS project costing revenue. So we are -- we still hold good by those numbers. On the margins depending -- because we saw the fuel price increases effective from March 15 onwards and the escalation, as I said, kicks in later so we will see some volatility in the margin, but these get reimbursed maybe end of the quarter or end of the reporting period. So there will be some -- maybe 100 bps swing here and there on my EBITDA margin till the time things stabilize globally and in domestic markets.
The next question is from the line of Neerav Dalal from Maybank.
I had 3 questions.
Neerav, sorry to interrupt you. Can I request you to speak through the handset?
Yes. Now is it clear?
No, sir.
Can you just hold on for a minute?
Yes, we can hear you now.
So I had 3 questions. First is on the C&T revenues. If you see the C&T revenues over the last 3 quarters, we've done about INR 105 crores to INR 109 crores. In this period we've also secured 2 -- so the Jhansi started to happen in this quarter and obviously we had certain of last year's contract come in. So going ahead in terms of FY '23, how do you see this line item? That is number one. Number 2 is on the contract revenues and project expenses. Now if you see the project expenses as a percentage of contract revenues has actually been volatile in this year. In the last quarter it was like 66%, in the third quarter it was like 33%. So what should one take as a thumb rule here? And lastly, we've seen a decline in the employee cost and we've also obviously seen a decline in the employee headcount. So what are the reasons for the same? And then how should then one look at this line item going ahead?
So Neerav, we normally don't comment on the segment-wise performance. But it would be good to understand that when we talk about collection and transportation, it's completely derived on the tonnages that moves in. So normally Q2 and Q3 are the wet season for India so the tonnages are normally higher. So if you take 100% of the total tonnage to be for the full year, I would say 50%-odd of that gets clocked in Q2 and Q3, 45% gets clocked in Q3 and -- Q4 and Q1 because the dry season comes in and [indiscernible] goes down. So that is 1 parameter. So we will not be able to see an apples-to-apples comparison or a sequential growth kicking in as when it happens from the same sites that we're talking about. Jhansi, Varanasi and even the new project that Jose mentioned about Nashik; these are conditional. Jhansi, the CapEx is completely borne by the corporation.
So as and when the corporation provides us with the additional equipment that they should have procured and given it to us, the ramp-up will happen gradually and that is seen happening in the current quarter onwards. So that is fully operational. Same is the case with Varanasi. So we will see a traction there. So we would be comfortable with the guidance that we gave of approximately 30% to 35% growth at the top line, including processing and C&T per se. Your second point was on the rationalization on the labor cost. The labor cost is down purely because in Q3 we took an excess of expenses that was passed on because of a minimum wage revision. So we took a cumulative impact for 5 months and we booked in around INR 6.8 crores in view of the same. So that is why you're seeing it spiked in Q3 and Q4 onwards it's rationalized because of the absence of such increase and the same gets passed on to the operator that is us by way of escalations that is inbuilt in the tender.
Okay. Just 1 follow-up on this. We've also seen a decline in the employee headcount so is it that -- how does this work?
So the employee headcount is more of a rationalization process that keeps on happening because during the first 2 quarters and Q3, there is always a larger demand for manpower to be laid down and that kind of keeps swinging. So this is more of a rationalization effort that the company has initiated in certain zones that we work in and based on that, we have fine-tuned the route planning and everything. That helps us in having a higher operational performance.
Got that. And my last question on the contract revenues and contract project costs?
That will be difficult. It's not a linear thing. Because last year till November, we had monsoons in several parts of Pimpri-Chinchwad so civil work could not be done in a time bound manner. So that got scaled up later. So it's like more of a CPM kind of thing so we try to thrash the project so that we are able to complete the project by March 2023. So it will not be possible for us today to give you a guidance like if the balance of INR 130-odd crores is to be spent; it's not going to be spent 40% now, 40% in the second quarter and the balance in Q3. Depends upon the ability of the vendor to also get those assets delivered, installed and verified by the independent engineers and that's how the work gets done. But it would be safe to assume that the entire amount has to be spent and will be spent in the next 11 months.
Sorry, just 1 small clarification here because I was of the impression that the contract revenues so the project expenses, you add cost plus and you book the project revenue. So in that sense, I was expecting that both the line items would move...
Would move parallelly.
Yes. But then in the current quarter if you see, project expenses as a percentage of contract revenue is like 66% and in the previous quarter it was like 33%. So that was the reason that...
So certain expenses needs to be confirmed with the independent engineer so that takes a timing lag because they also provide us with abilities to verify the same. So based on the CapEx that we spend, we book it in our system and we also have to recognize it as per the waste that comes into my Kanjur project. So there is a deal limitation that happens on the amortization on the fixed -- financial assets that gets locked into the contract revenue line item.
So that -- I was of the impression that we also...
No, no, this is also a standing. Both of them come into together, right?
Next question is from the line of Pavan from RatnaTraya Capital.
Sir, when I'm looking at your Note #5 and 6 regarding the receivables, I just wanted to understand if there are cost inflation clauses and wage hikes already built into the contract, how come the particular receivables are still outstanding? You have said that there are claims and legal issues going on. So I just wanted to understand how these contracts are framed and when do these contracts actually get into this kind of, what should I say, disputes?
So normally the litigations and arbitrations kick in when the interpretation of a tender are not very clear. So the amount that we are referring to about INR 26-odd crores, all put into contracts that were signed and executed pre-2016 where the terminologies were vague and they were not crisp and open for deliberation from both the sides of the entities. So for example if we are allowed to carry waste and then suddenly the law comes to effect saying that you need to carry segregated waste, the tender which is smooth at one point gets deliberated upon and it goes for dispute. These were the line items that get disputed when the terms of the contract is not clear.
Since 2016, '17, most of the tenders that the company has signed has seen that the tenders are -- the tender documentation, the clauses are clear on these aspects so the redressal mechanism is smoother, there are clauses wherein the arbitration process is defined and escalation which is where a lot of gray areas were mentioned is also thrashed out during the pre-bid meetings. So these are all old contracts signed, executed pre-2015 that is in the arbitration or in dispute lines. But happy to inform you that certain disputes haven't redressed like the ones that we have with Bhiwandi, the ones that we have in [ Mahimanda ] corporation. They have all been cleared and the company would be reporting positive numbers post the settlement and the money gets transferred to the coffers.
So the Note #5 where there are INR 45 crores plus around INR 9.83 crores, there is INR 55 crores pertains to receivables before 2016?
No. Some of them are pertaining to the current year also according to the minimum wage revision that has happened in the particular state. Now the contract says that revision in salary will be reimbursed, but change in minimum wages will not be reimbursed is their interpretation. But there is a High Court of Bombay ruling, which says that change in minimum wage also may change in wages. So we have got an escalation, which we already won in 1 of the multiple corporation and this amount that you're standing -- which you're referring to has also been accepted by the corporation saying that this is payable by the corporation to the client, which is us. So the payment has been accepted. The views have been accepted that this is payable by the client to the company. The timing since the amount is more than 180 days over so we need to bring it to the notice of the investors and to the regulators.
Okay. And on the Pimpri-Chinchwad project, what kind of contract revenues are you expected to book in 2023 and 2024?
We expect all our contract revenue to be booked in FY 2023 itself. The project we are expecting it to be completed on March '23. So we expect another additional INR 110 crore to INR 120-odd crores of contract revenue to be booked there. We don't expect a similar line item in FY '24 because we just -- there's no timelines that we are working with our vendors and the client. You would -- we are targeting March '23 to be the time when the project is -- the construction of the waste energy plant to be completed.
So just wanted to clarify my understanding. So INR 140 crores of contract revenues from Pimpri-Chinchwad has been booked in '22 and the rest will be booked in '23. Is it my understanding right?
That is right.
Okay. And Jhansi, how would that split be?
Jhansi, we don't -- Jhansi is the collection and transportation contract where the CapEx is funded entirely by the corporation. So there is no contract income or contract expenses in Jhansi at all.
And one small clarification, sir. When we are doing this contract -- booking these contract revenues so we are executing that particular project and so we'll be keeping some margin in terms of profitability with us that is given, right?
So contract cost and contract revenue pertains to only those contracts which are on deboot basis so which are predominantly in our case being processing contracts at Pimpri-Chinchwad and at Kanjur. So as and when I do the capital expenditure, yes, we would be recurring a preset project IRR rate as my revenue line item and expanding out the cost as the project cost and the same sits in my balance sheet either as financial assets or as intangibles.
And project costs would be expensed for the entire duration of the...
For the CapEx that we have done, yes.
The next question is from the line of Faisal Hawa from H.G Hawa and Co.
Broadly in 3 to 5 years, do you think that we could ever get a similar contract like Kanjur with any of the large metros, which would really be big game changers for our company, let's say, in Bangalore or Delhi or even Ahmedabad? Given that now so many lessons and experiences have been learned by us over the last 25, 30 years, which probably no other company would be having.
So what I have notice is like MC, Mumbai Corporation, the area of jurisdiction is very, very vague and so I don't see any multiparty having 6,000 tonnes or 7,000 tonnes per day. But what I have noticed is there are many smaller municipalities who's producing around 1,000 tonnes of waste per day and things are now starting -- and so we can go for 5 to 10 municipalities, which will be equivalent to 8,000 tonnes to 10,000 tonnes per day. So we are exploring with many municipal corporation. Last 2 years was because of COVID, the municipality was more focusing how to tackle COVID and now they have come up with new tenders wherein they are willing even to fund -- funding up to 30% to 40% on the capital. So we are exploring many corporations and all have come out and they have been asking us to give presentations. They want to know what is the best solution for the waste for them and we are doing it.
And sir, what are our efforts in really increasing our dry waste content, which can be sold again because that contribution to revenue remains low all throughout? And one more thing is that are we looking at carbon credits on different new exchanges that are now coming up, which are trading much more actively on this and blockchain-based solutions to really earn more revenue out of what we are already doing?
So we are now -- presently we are focusing on 2 things. The RDFs, we are converting that into pellets and there's a market for the pellets. And 1 more thing is the coal price has shot up everywhere and so the RDF demand has been increasing from various cement companies. So that is 1 good news for us. And also extended producer responsibility of all large bottling company, F&BC companies. So they have to comply with the EPR thing based on the Pollution Control Board and for which they need company like us who can support them and help them in achieving those targets. So because if they do not comply, there's a huge penalty from the Pollution Control Board on recycling of their bottles. And as far as carbon credit is concerned, it is opening up. We are exploring. Once we get our -- because few years back it has gone down very badly so now we are exploring and if it's really doing big difference coming up in the right way, then I can discuss with the client how we can make some revenue on that.
And sir, what are the discussions in the Board meetings and strategy like? I mean how you want to take this coming forward because I mean the whole -- I feel is that the sector is coming up great and it's so much necessary and we are at the forefront of having done this for almost so many decades. And what are the discussions like on how to take the company forward?
Faisal, the discussions are around multiple prongs. One is increasing focus from our existing clients so that we derisk our revenue model so that we are not relying on a few set of clients, one. Second is increasing our non-municipality revenue, which is basically meaning not just focusing on comport and RDF which is coming from our recycling process, but also targeting the procurement and processing of and directly getting into the recycling segment wherein the dry waste can be tackled because we have an end reach to the both generators -- or even generators on that side. More importantly, we are also working on certain areas about getting into vehicle scrapping. We are looking at getting into certain areas wherein waste management as an entire cyclical resource extraction works on. So we are trying to work as one of my partner talks about going the reverse Amazon way.
So Amazon, you just buy and take the product into our house. In this manner, we are going to go to the houses, pick up the recyclable waste and source it out, segregate it, give it to the recyclers. So the waste that enters the landfill is fewer than what it is today. So these are the areas that we are definitely working on and that is a near-term focus. The long-term focus would be to go into -- through not only MSW, which is what constitutes bulk of our revenue today, will be a part of the revenue. We will get into maybe hazardous waste, bio waste and more importantly e-waste. We are looking at medical equipment scrapping policy, we are looking at vehicle scrapping policy. Those are the growth areas of the company which has never explored in the past, we'll start exploring them when we are having the right strategy and right people to take the company forward in those lines.
I'm like extremely happy to hear what the Board is discussing. It is really heartening to note that we are actually not taking on all these in the Board meetings. And one last question if I may be allowed. This INR 10 drop in diesel and petrol prices, what kind of effect would it have on the EBITDA going in this quarter and the next one as it pertains to you?
Assuming there is a timing lag that comes in for every INR 5 increase in diesel prices, my -- so let me give you the other way round. Approximately 16% of my total operating cost is fuel. So if there is a INR 10 increase in fuel price of diesel, which basically means an 8% increase, my margins will be softer by around 80 bps maximum. So this reimbursed to me maybe quarterly or half yearly so it gets set off in the forthcoming quarter. So on a quarterly basis you'll see some volatility, as I mentioned, anywhere between 80 bps to 120 bps, maximum I'm saying. I mean these are including looking at DA fluctuations and everything.
The next question is from the line of Akshay Kothari from Envision Capital.
Sir, I wanted to know there has been an increasing awareness regarding solid -- the segregation of solid and liquid waste from the source itself like from the households itself. How does this positively impact us?
It impacts -- it has a positive impact for us because it helps in segregation. The collection and transportation business doesn't really have an impact because the total tonnage gets picked up and we move them and then we are getting paid on a tonnage basis. If you're looking from a processing point of view, then the work is easier for the waste -- garbage processing entity because the organic waste gets processed faster, there is no segregation required. So it's a pure organic matter, which comes in through your organic compost for a significantly higher quality than mixed with that [indiscernible], fewer CapEx to be made and fewer manpower to be deployed. So it's a positive thing if things get done and gets deployed and accepted and rolled out effectively.
Okay. Just on the collection and transportation so if liquid waste is getting segregated and what I understand is from the green waste, when there is a wet waste, our tonnage gets more and so increase in revenue. So that won't have a negative effect on us?
So we actually when you talk about green weight, I mean we don't have any such thing called liquid waste. I mean the septic tanks and everything is still not enough that we cater to. But the green waste is bulk, it's tonnage waste so we don't have an issue there because the tonnage -- despite segregation, there are very few cities which have ensured segregation made mandatory and getting disposed at buildings themselves. And that percentage of waste is not a significant sum today and we don't foresee this number to be large going forward also.
The next question is from the line of [ Gaurav Gandhi from Gronton Capital Management ].
I just wanted to ask that do we face any kind of competition risk? And if yes, does it put any impact on -- will it put any kind of impact on our margins going ahead?
So Antony has been in the waste management business for 20 years and we always watch out what will be the price at which our equity and our project IRRs are safe guarded. So when we bid for a project, we look at the viability of the project operationally and we of course take into consideration the kind of players who might be bidding with us. But that doesn't -- that is not the deciding factor for our quoting a price.
Another thing is these contracts are long-term contracts so any bidder who's coming, he has to give services for next 5 to 10 years if it is collection and transportation and if it is waste processing, it is 25 years. So the pricing has to be reported with proper IRR and all that. So I have not seen aggressive bidding because if they quote a wrong price and then they're stuck and their company can go for a toss. So if anybody wants to underquote, okay, that's their problem. But we want to be super careful and we bid right way with proper IRR.
And one more question I have. Have we received any kind of subsidy from the government for our WTE project at TCMC?
We have a INR 50 crore capital subsidy from the corporation. So as per the tender condition, this was stated upfront that there will be a capital subsidy to the tune of INR 50 crores and power purchase at the fixed price of INR 5 per unit for the tenure of the project. So this is what has been mentioned in the tender. It's from the corporation and not from the government per se.
And are we going to account it in our financial -- I have read somewhere that the promoter is taking that subsidy so that's why I'm asking.
No, it's not taken by the promoter. It is sitting in the company's books as a financial asset as and when it gets brought up and the capital account will be adjusted to that effect. And of the money that comes in, the repayment will be in the debt-to-equity ratio. So we will be using the capital to repay the debt for the project and also the equity that comes in will be used to either for keeping the debt again or for future growth opportunities that might come along. So this is not going to the promoter. Let me be clear.
Congratulations on a great set of numbers.
The next question is from the line of Rohit Ohri from Progressive Shares.
Sir, 2 questions. For this Nashik project for Panchvati and Satpur, the revenue of INR 25-odd crores, by when do you think that this will start hitting the P&L?
We got the offer today -- yesterday late night, today morning I would say. So from what we understand, it will take us anywhere between 3 to 4 months to get the assets in place and then maybe mid -- I would say post monsoon is when we would start working on that site. It normally takes 3 to 4 months for the asset mobilization and the team to be mobilized because there are 2 zones which has been awarded. So we would need at least 3 to 4 months for entire fleets to be mobilized, the manpower to be streamed up and the route line to do perfected again so that we can do it at go. So maybe by October onwards, we will be starting to see some revenue from this project.
Okay. We try to serve some surplus electricity at around INR 3 or so to the BMC in future of course. What sort of requirement would be there to be connected to the grid? And if you can just take us through that how feasible or how possible is this and who will be paying for the cost or the funding of these collections and equipment acquired?
So we don't foresee a situation where the excess will be available honestly speaking because we are now ramping up our bio-mining equipment. So currently the 0.97 megawatts that we are generating we are using as captively for powering my MRF and the site requirement. With the bio-mining equipment being placed and my shredders and [ tromoles ] running, I foresee from what I understand from our project team that anything excess will be consumed internally and we are actually doubling our power generation capacity. So over the next 3 to 4 years, we don't see a surplus power situation that we expect. If it's there, then we will be selling it to the grid. But joining and opening is at the MCGM's end. And the power -- as our revenue will be paid by MCGM and not by this DISCOM.
If you see the share of MSW Processing as a percentage of the total turnover, it is kind of reducing and it's kind of stuck in the range of 23%, 24%-odd from the earlier 29%, 26%, the highs which we have seen. So would you like to share something on this? Do you feel that going forward this 23%, 24% kind of MSW Processing would sustain or do you see it coming down more because more projects are coming to C&T?
MSW Processing inches gradually once the waste-to-energy project was stabilized so you would see higher contribution coming from MSW Processing. So that is what will change the tenure now. And we are also looking at higher contribution coming from a greater Noida bio-mining project, which was absent in FY '22. So that contribution will also inch up our numbers. But having said that, this might be offset with the increased revenue from NDMC and the newly bagged Jhansi contract. So maybe in the next 2 years' time, we will see this inch up to 32%, 33%. But in the near to medium term, we see this range to be consistent.
Okay. The last question is related to these new contracts which we are building. So if you can just take us through these contracts are related to C&T, processing, bio-mining or others? And which geographies you are looking at? And what could be the approximate size of these projects?
So we are looking at a mix of both C&T and waste processing contracts. So we -- as of now, we have bid for 5 more contracts and 3 of them are collection and transportation and 2 are waste processing. The time lines are very -- I mean in the sense they will take anywhere between 6 to 12 months to know the status and the workflow of the same. But these would be of sizes, collection and transportation of each contract will be in the tune of around 300 tonnes to 500 tonnes per day and waste processing would be in the range of around 700 tonnes to 1,000 tonnes per day. And these are predominantly in the Western part of the country as of now. The newer contracts that have been coming up are either in Northern part of the country, but they are still in design phase. They are yet to come out with the LOI to that effect.
So the MCD that is emerging, that should have some more advantage for us, right? Because we are in talks to merge the 3 parts of Delhi into 1 consolidated kind of corporation So anything from that end?
That is a positive news for all the operators because that will also open up a decent amount of work to be done because if you read the newspapers about the Ghazi fire, there's a large amount of work that we should have done in that part of the country. So yes, merging all the 3 municipal corporations is definitely a positive news, but it also means more restructure to be done, but this is something that we feel will take at least a year or 2 for things to settle down and formulate a policy driven note on that.
The next question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking.
Sir, I just wanted the gross block figure before accumulated depreciation?
So gross block at the group level you're mentioning, right?
Yes, at the group level.
That should be around INR 600 crores, but let me just give you the right thing for you. Because we always look at the gross block. Including financial assets and everything, it's around INR 600 crores.
If you remove the financial assets then?
Financial assets are basically capital that we have deployed in our bioreactors so it actually should be forming a part of my structure.
Okay. And suppose if we remove the financial assets, then what would be the figure really like?
Around INR 380 crores.
INR 380 crores. Okay. And sir, I just wanted a broad overview with respect to say maybe we have visibility for next 2, 3 years. Post that, what is our long-run road map maybe 5, 6 years road map because then -- so how do we plan to take it forward post 2, 3 years? From a revenue standpoint because how are we going to expand our revenue stream because overall the market still looks very small in terms of value.
So the market is completely under-served and under-researched in that sense because waste is something that has been there since your Indus Valley civilization. I mean it's been there, somebody has to get rid of it. Population now is growing all over the place so we are seeing waste management as a solution to be more prevalent and more taken up by municipalities in a more aggressive term and maybe the project allocation will be more higher. So we feel the size of municipal service itself is going to grow at around 30% year-on-year because of the need of new infrastructure, machinery, technology to be deployed. That is just on MSW part.
But now we are talking about vehicle scrapping policy, we are talking about biomedical waste disposal post the COVID impact, we are looking at medical equipment being scrapped in a very scientific manner. So those are the areas that will definitely take this industry to the next level. I mean we're talking about waste water treatment, which has been a requirement for urban area, but it's also a requirement for the rural areas because of groundwater level depleting. So there is a definite need for water treatment maybe not for potable use, but at least for irrigational purposes to be in a recycled manner.
So post 2, 3 years, we'll be able to still grow at maybe an exponential rate, maybe around 25% sort of on a broad level, not exact figures, but at least?
25% CAGR growth is something that for this industry in this country is something should be on the cards.
Right. And there won't be more competition which will kick in in the long run because of the long-term agreements sort of?
See, it's an industry which is under-served so there will always be competition from technology service providers. So we are seeing in the past like each truck had some 3 or 4 laborers. Now because of better technologically equipped vehicles, we are seeing each vehicle being helped by 2 laborers. So it's becoming less labor centric, but more technology centric. So it's going to be driven by companies who are able to efficiently set out its assets and have more able-machined equipment. So certain countries and certain players definitely have an edge. But in India the working conditions are different, the roads are different. You don't have a single road of 16 feet long.
So each city, each state, even zones of a city are very different. So it's going to be very difficult for somebody to come and start becoming -- like even for Antony. I mean the city of Mumbai and the city of Nazi Mumbai and the city of Varanasi, though they are cities within the same county, they are all different. Characterization of each city is different and even part of the cities are different. It is difficult for competition from abroad to come in and strike roots in our country in the current scenario. But the local players need to be groomed up, they need to scale up to their expectation. That is a demanding task.
Right. And sir, on the long term and on the debt front, right now we have a gross debt of INR 170-odd crores and net debt of roughly INR 100 crores. So what is our plans to get debt free or...
So it will not be debt free today. The reason is once the TCMC plan is completely functional, we will be incurring another additional INR 170-odd crores so that will take our debt to 0.5x or 0.6x my equity. The day I stop growing, the day I stop bagging new contracts, the day I say I don't want to bag any new contracts; from that time onwards within 4 years, I will be completely debt free after taking this INR 170 crore of debt that is.
Okay. And sir, what would be our target ROCE level? So maybe you can give rough numbers.
We are very comfortable with the rates that we are and we like to hold on to it.
20% sort of levels, right?
Yes.
The next question is from the line of Ankit Shah from JHP Securities.
I just have one question. Many contracts in collection and transportation are funded by municipalities. So any ROCE guidance for the next 2 years?
Sorry. Repeat that question, please?
Yes. Many contracts in collection and transportation are funded by municipalities so any ROCE guidance for the next 2 years and what would be the operating margin that can be achieved from those contracts?
So normally when we bag a contract -- I'm still not able to get your question. When you say about ROC, return on capital you're talking about or...
See, return on capital employed.
ROIC. Okay. So yes, the contracts are normally always funded by the municipal corporations and the CapEx is always upfront for collection and transportation and/or waste processing contracts. So as and when we target contracts, you will see a significant spike or a spike up as deemed required for that particular project. So you will see a spike coming in, but that also in case of collection and transportation, the revenue also gets -- starts kicking in in the same quarter or maybe the beginning of the next quarter onwards. It's only in case of waste processing where the mobilization and the construction time is anywhere between 18 to 24 months where you set up an entire client from if it's a green plant -- greenfield plant.
So that takes around 2 years and the CapEx is also gradual over the 2 years' time. So ROIC currently the rate is, it will be slightly softer going forward in FY '23 because of my waste-to-energy plant being commissioned. But that gets slightly offset by increased revenue from my NDMC and Jhansi kind of revenue generating points. But normally it will not be swinging very badly because unless and until I bag 5 or 6 processing contracts, I will be having a higher capital employed in that sense. But the revenue will then kick in after 2, 3 years. So the mix is always going to be a judicious mix of collection and transportation and waste processing.
The next question is from the line of [ Kedar S. ], individual investor.
Regarding the TCMC project, I wanted to know what will be the plant load factor when we start the project and what would be the peak PLA that we intend to achieve and what will be the time frame that the plant has to reach that peak capacity?
So the TCMC waste energy, initially we will start with a PLA of around 60% to 65% and within 4 months, we will be ramped up to around 80% to 85%. This is what has been committed by our vendors and this is what the contractual deal has been signed between the company and Hitachi Zosen in this case. The current calibrated value of the waste that is being collected is very high, it's in the range of around 2,800 kilocal to 3,300 kilocal and our plant is designed to take in anywhere between 1,200 kilocal to 1,800 kilocal waste. So we feel that we will be able to ramp up our plant load factor to 80% to 85% within a period of 4 to 5 months after the project gets inaugurated if not earlier.
Okay. So which means by Q2 of the next financial year, we should hit 80%, 85%?
We should be targeting it because Q2 of FY '24 is when we should be seeing any creeping problems or anything to be sorted out by that time.
Right. The other question is on the future growth plans, it was very interesting to hear when you responded to another question that we are looking at adjacent areas like electronic waste, biowaste, hazardous waste, et cetera. And you also mentioned that a 25-year CAGR growth should be on the cards for the players in this industry. So I mean again it would be fair to assume that even Antony aims to grow at that rate in the next decade also like 25% plus?
That is an internal target that is what we have taken for ourselves and that is something that we work hard to a stretch.
Okay. And last question, if I may, regarding the tenders that you have submitted. So from all the tenders that you have submitted already, would you be able to tell me that how many tenders we have already technically qualified and we are waiting for the financial bids to be opened?
As mentioned, we have submitted for 5 tenders. We have qualified in all the 5 tenders. But it would be too early for us to give you details on the same.
Okay. And just a follow-up on this, sir. What will be the typical potential of the revenue of these -- hoping if you win all of these, what will be the potential revenue that we're looking at?
So it's still in design phase because they have asked for letters for technology and everything. So till the time the tender contours are confirmed, it will be very difficult to assign a number to that area. Because they right now wanted to know the list of players who are willing and who have executed similar projects. So in that line we are particularly qualified because they have invited us to bid for the same. So once they provide the details of the tender whether the entire city or part of the city is given, only then we'll be able to give you a truer picture to the question that you're asking.
No. So what I meant to ask was for the tenders where like we have submitted our firm bids and where we have got technically qualified for those bids and we are awaiting the financial bids to be opened because I understand that once the firm tender documents are released, we will be evaluating the tenders. We'll probably do our due diligence on the city and things like that. We submit our tenders and then there is a technical qualification that will happen first and maybe some clarifications after that, they do the shortlisting of companies who are technically qualified, and they move on to the next stage of opening the financial bids of those technically qualified. So I was asking from that respect that wherever firm tenders have been submitted from our end and we've technically qualified not expressing the letter of intent or intention of participating from our end?
We got that thing. The issue is the numbers are too large for us to even consider it internally. So it's not that we will be going in with all the 5 tenders that we have bid for. It's a strike rate that we're looking at. But having said that, each of them would be to the tune of around INR 1,000 crores to INR 1,200 crores over the project life.
That was the last question for today. I now hand the conference over to Mr. Jose Jacob for closing comments.
I take the opportunity to thank everyone for joining the call. I hope we have been able to address all your queries. For any further information, kindly contact me or Strategic Growth Advisers, our Investor Relations advisor. Thank you once again.
Thank you. On behalf of Antony Waste Handling Cell Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.