The IPO frenzy is picking pace and the list is becoming exciting by the hour. There is another big one set to add spark to the July line-up. Are you wondering which one?
Well, think about it – What connects the Coastal road in Mumbai, the metro in Bengaluru, the Zuari Cable bridge in Goa and the Paradip Port in Odisha? It is JSW Cement. These are some of the iconic infrastructure projects that the company has been associated with and now it is all set to make big moves in the capital market
JSW Cement has kicked off a roadshow for its IPO last week and the reports indicate that the issue could be launched as early as next month. The latest reports on Bloomberg and a host of other media websites indicates that the company’s top officials including MD, Parth Jindal are in the process of meeting several institutional investors to ascertain the relative demand and valuation metrics.
JSW Cement IPO Details
The JSW Cement IPO size and timing are still being discussed and there is no clarity on the final numbers or the date. However, as per the Draft Red Herring Prospectus filed with SEBI last year, it will be a 100% book-built offer. This will comprise of a fresh issue worth Rs 2,000 crore and offer for sale aggregating Rs 2,000 crore. The total issue size is targeted to be Rs 4,000 crore.
JSW Cement IPO: Who’s selling how much stake
Three key stakeholders would be offloading shares in the JSW Cement Offer for sale. This includes-
1.AP Asia Opportunistic Holding will be offloading shares worth Rs 937.5 crore
2.Synergy Metals Investment Holding will be selling shares worth Rs 937.5 crore
3.State Bank of India, India’s largest public sector bank will also be offloading stake in JSW Cement. This will aggregate to Rs 125 crore.
JSW Cement IPO Objective
The JSW Cement IPO will be partly a fresh issue and partly an offer for sale. As a result, the objective of the IPO has also two parts.
The net proceeds of the fresh issue will be used for
-Part financing the cost of establishing a new integrated cement unit at Nagaur, Rajasthan. The estimated amount for this is about Rs 800 crore. However, this will not be spent in one go. It will be spent in tranches between FY26-FY27.
-The proceeds from the fresh issue would also be used for prepayment or repayment, in full or in part, of all or a portion of certain outstanding borrowings availed by the company. The estimated amount for this is Rs 720 crore.
Some amount of the IPO proceeds would also be used for corporate purposes and meeting the public issue expense.
The proceeds from the offer for sale, will of course go to the independent shareholders. As the DRHP clearly highlights, each of the shareholders selling stake would be entitled to their portion of the proceeds of the Offer for Sale, after deducting a portion of the Offer related expenses and relevant taxes thereon. These would not be accounted for in the net proceeds of the company.
JSW Cement IPO timeline
There is still no official confirmation on the exact timeline for the JSW Cement IPO. However, source based information and a recent Bloomberg report indicates that the IPO is likely in July. The company has already started roadshows in Mumbai and the management is keen on a July launch. All eyes are on the official confirmation of the same.
JSW Cement IPO: Who are the lead managers?
The lead managers of the issue include big names in the Financial world including JM Financial, Axis Capital, Jefferies India, Citigroup Global Markets India, DAM Capital, Goldman Sachs India, Kotak Mahindra Capital Company, SBI Caps.
Kfin Technologies are the registrar to the offer.
JSW Cement: What is the business?
JSW Cement is among the top 10 cement manufacturers in terms of installed capacity and one of the fastest growing cement companies in the country. The company is among the largest manufacturers of ground granulated blast furnace slag. It is manufactured from slag which is a by-product of the steel manufacturing process.
It started operations in 2009 with a single grinding unit in Vijayanagar, Karnataka. However, JSW Cement gradually scaled up presence across southern, western and eastern regions of India and UAE as well.
JSW Cement: Financial performance
How has the business been progressing? Well, a close analysis of financials in the last three fiscals indicate that there has been a sharp decline in the profitability. However, the company has stated that JSW Cement’s operating metrics in FY24 is not strictly comparable to FY23 and FY22. This is because the JSW Cement FZC is no longer a wholly-owned subsidiary.
This change has a distinct implication on revenue and expense reporting. As a result direct year-on-year comparison could be challenging. Overall over the years there has been an increase in revenue from operation, some one-time gains and operating costs have also seen some spike. Moreover, depreciation and amortisation costs have also increased by over 64% if you consider the statement for FY24 and FY23. There has been a 16% YoY increase in raw material cost as well in this period. As a result you see a 40% YoY dip in FY24 profits. The one-time gain due to stake dilution also skewed the PAT number for FY23.
| JSW Cement | FY24 | FY23 | FY22 |
| Net Profit (Rs Cr) | 62 | 104.03 | 232.64 |
| Total Income (Rs CR) | 6,114.59 | 5,982.20 | 4,863.47 |
Higher fuel, power, amortization and depreciation costs also impacted the relative profitability in FY23 as compared to FY22, as a result there is a 50% plus decline YoY.
Overall however, JSW Cement has however showcased growth in terms of revenue from operation, sales volume. The decline in profitability is seen more as a function of structural changes, changes in fair value financial instruments, operating cost and deconsolidation of business arrangement.
JSW Cement: Parent Company and group details
JSW Cement is part of the JSW Group. It is a multinational conglomerate and has presence across a range of businesses from steel, energy, infrastructure, defence to automotive, e-commerce, realty, paints, sports and venture capital.
The Group synergies help the businesses. For example, JSW Cement sources key raw materials such as blast furnace slag from JSW Steel and power from JSW Energy.
JSW Cement IPO: Key risks
As with any business, there are some risk factors that also need to be considered. The JSW Cement DRHP lists out some risks. These include
1.Adequate limestone mining: Limestone is the principal raw material for manufacturing clinker which is a key component for cement. The business depends on mining and procuring sufficient limestone for operations. Inadequate supply of limestone can have an adverse impact on the business, financial condition, and results of operations.
2.Blast furnace slag supply: The blast furnace slag is another key raw material. This is the key additive raw material used for manufacturing green cementitious products. It is sourced from JSW Steel and its subsidiaries. The loss of one or more such suppliers could adversely affect business. This is because green cementitious products constitute a majority of the product portfolio.
3.Need for adequate and uninterrupted power supply: The cement industry is power-intensive, and requires adequate and uninterrupted supply of power and fuel for our operations. JSW Cement largely sources power from thermal power plants, waste heat recovery system (“WHRS”) power generation units, solar power plants and state electricity boards.
4. Maintaining utlisation levels: The capacity utilisation of our plants is affected by various factors, including the availability of raw materials, demand from our customers, our ability to manage inventory and implement our growth strategy of improving operational efficiency and industry and market conditions. Failure to maintain or increase the utilisation levels of plants, business, future prospects and financial performance could be materially and adversely affected.
5. SEBI showcause notice: The Securities and Exchange Board of India has issued a show cause notice to one of the promoters, Sajjan Jindal and certain members of Promoter Group, among others, under the provisions of the Securities and Exchange Board of India Act, 1992, and the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, and the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021. Any adverse outcome may impact reputation and ability to raise adequate funds from capital market.
6. Does not own JSW Trade mark: JSW Cement does not own the JSW trademark, and its 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 financials.
7. Outstanding legal proceedings: The company, subsidiaries, promoters, directors and Group Companies are involved in outstanding legal proceedings and any adverse outcome may impact business.
8. Expanding losses by JVs: Certain subsidiaries and joint ventures have incurred losses in the past. Iif the losses continue, it may need JSW Cement to provide financial support to them and this could impact the financial results of the company.
9. Payment delays: There have been certain instances of delays in payment of dues by JSW Cement in the past. Any delay in payment of statutory dues b in future, may result in the imposition of penalties and impact cashflows.
10. Dependance on distribution network, rail and road: Any disruption in the distribution network could adversely affect operations. Moreover, the efficiency of the Indian road and railway network is crucial. Any delays may have an adverse effect on business
11. Debt on the books: JSW Cement has substantial indebtedness which requires significant cash flows to service and limits ability to operate freely.
JSW Cement: The green push
JSW Group has been quite vociferous about pushing forth green initiatives and JSW Cement too takes forward this aspect too. The company claims that it has the lowest carbon dioxide emission intensity among cement manufacturing peers in India and the top global cement manufacturing companies. The FY24 carbon dioxide emission intensity was 53% lower than that of top Global Cement Companies in CY2023, according to the CRISIL Report.
JSW Cement: Iconic projects
As per JSW Cement, the GGBS or Ground Granulated Blast Furnace Slag is eco-friendly and enhances durability. The company has been associated with a wide range of iconic infrastructure projects across the country.
The projects include highways such as the Mumbai Coastal Road Project, Mumbai-Vadodara Expressway, the Mumbai Trans-Harbour Sea Link. Bridges such as the Zuari Cable Stayed Bridge Project in Goa, airports such as the Bengaluru International Airport, metros and railways such as the Mumbai Metro, Chennai Metro (phase 2), the Bangalore Metro and many others too have been associated with JSW Cement.