Can the green foray assure gains for JSW Cement or is the buzz around its IPO already losing steam? The Rs 3,600 crore IPO from JSW Cement is officially hitting the market today, August 7. But just as the doors opened for investors, the stock’s grey market premium (GMP) seems to be cooling off sharply
Can a cement company backed by the JSW Group still deliver solid gains, even as its GMP tumbles just before bidding opens? Here’s what is really going on and the 3 big red flags you need to know before investing –
JSW Cement IPO: GMP slips on IPO day
The grey market had high hopes for JSW Cement just a few days ago. On August 5, the GMP was around Rs 19 per share, a decent premium over the upper end of the price band. But by August 7, just as bidding opened, the GMP cooled off to just Rs 6.
This means the listing price is now expected to be around Rs 153, which is barely 4% higher than the issue price of Rs 147. While GMP is not an official measure, it does give a sense of market sentiment.
JSW Cement IPO: Brokerages take
Bajaj Broking has flagged valuation as a key concern. In its note, the brokerage stated, “JSW Cement has shown inconsistent profitability. Based on FY25 annualised earnings, the IPO price is at a negative P/E. Even based on FY24 numbers, the P/E is 319.57 -which looks expensive.”
Another brokerage firm Deven Choksey Research in its IPO report noted, “Its initial issue is priced at 36.6x TTM EV/EBITDA, much higher than its comparable peer average of 26.6x TTM EV/EBITDA. We believe the missue is fully priced in, and thus we assign a “NEUTRAL“ rating to the issue, on the backdrop of headroom for improvement in its financial metrics with early signs of rebound observed in cement realizations.”
JSW Cement IPO: Snapshot of the issue
JSW Cement opens for subscription from August 7 to August 11. Investors can bid between 10:00 AM and 5:00 PM on the three trading days. The company has fixed a price band of Rs 139 to Rs 147 per share for the offer.
This public issue is a combination of fresh issue and offer-for-sale (OFS). The company plans to raise Rs 3,600 crore, of which Rs 2,000 crore will go through the OFS route, offering an exit to some of the existing shareholders.
JSW Cement’s shares are expected to list on the BSE and NSE, most likely on August 14. The share allotment will likely be finalised a day earlier on August 12.
The IPO follows the book-building process, with allocations divided across investor categories. 50% for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and 35% for Retail Investors.
KFin Technologies is handling the registrar work for the IPO. The issue is being managed by a strong team of lead managers, including JM Financial, Axis Capital, Kotak Mahindra Capital, Jefferies India, Citigroup, SBI Capital, DAM Capital, and Goldman Sachs India.
JSW Cement IPO: Key risks you should know
Before jumping into the IPO, it is important to understand the potential red flags the company itself has highlighted in its draft papers (DRHP). Here are some of the key risks mentioned by the company in the filing
Dependence on Limestone: “Our business depends on our ability to mine and procure sufficient limestone for our operations. Our inability to do so on reasonable terms, or at all, could have an adverse impact on our business, financial condition, and results of operations.”
Power and fuel availability: “We depend on adequate and uninterrupted availability of power and fuel for our operations, and any failure to do so may have an adverse impact on our operations.”
Low plant utilisation risk: “If we fail to maintain or increase the utilisation levels of our plants, our business, future prospects and financial performance could be materially and adversely affected.”
Brand and trademark dependency: “We do not own the JSW trademark, and our ability to use the trademark, name and logo may be impaired. Any reputational damage to this trademark or the JSW Group, name or logo could have an adverse effect on our financial condition, cash flows and results of operations.”