Details of the Offer
Fresh Issue: ₹2,000 crore
In a significant move to bolster its financial standing and expand operations, JSW Cement has announced a fresh issue of ₹2,000 crore. This capital infusion is aimed at supporting the company’s ambitious growth plans, particularly in establishing new production facilities and enhancing its market presence.
Offer for Sale (OFS): ₹2,000 crore
Alongside the fresh issue, the company is also initiating an Offer for Sale (OFS) of ₹2,000 crore. This dual approach not only allows the company to raise funds but also provides existing shareholders an opportunity to monetize part of their investments.
OFS Participants
The OFS will see participation from notable stakeholders, including AP Asia Opportunistic Holdings, Synergy Metals Investments Holding, and the State Bank of India. These entities will offload a portion of their stakes, contributing to the overall capital raised through the IPO.
Investor Allocation
The allocation of shares in this IPO is structured to cater to a diverse range of investors. Specifically, 50% of the offer is reserved for qualified institutional buyers (QIBs), 15% for non-institutional investors, and 35% for retail investors. This distribution aims to ensure broad participation and support from various segments of the investment community.
Use of IPO Proceeds
According to the Draft Red Herring Prospectus (DRHP), the net proceeds from the IPO will be strategically allocated as follows:
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₹800 crore will be directed towards financing the establishment of a new integrated cement unit in Nagaur, Rajasthan. This facility is expected to significantly enhance production capacity and operational efficiency.
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₹720 crore will be utilized for the repayment of debt, thereby strengthening the company’s balance sheet and reducing financial liabilities.
- The remaining funds will be earmarked for general corporate purposes, providing the company with the flexibility to address various operational needs.
Company Overview and Operations
JSW Cement is a prominent player in the Indian cement manufacturing sector, established in 2009. The company specializes in producing a range of green cementitious products, including blended cement, Portland composite cement, and ground granulated blast furnace slag (GGBS). Additionally, it manufactures ordinary Portland cement, clinker, ready-mix concrete, screened slag, construction chemicals, and waterproofing compounds. With seven plants strategically located across Karnataka, Andhra Pradesh, West Bengal, Odisha, and Maharashtra, JSW Cement has positioned itself as a key contributor to the nation’s infrastructure development.
Market Conditions and Growth
The Indian cement industry is poised for robust growth, with demand projected to increase at a compound annual growth rate (CAGR) of 6.5-7.5% from FY 2025 to FY 2029. The ready-mix concrete (RMC) sector is expected to outpace this growth, with a CAGR of 10-12% during the same period. This surge in demand is anticipated to be driven by the industrial and commercial building sectors, which are projected to grow at a CAGR of 6-7% from fiscal 2024 to fiscal 2029. Despite facing challenges such as rainfall, infrastructure project delays, and labor shortages, the demand for cement is expected to rebound, particularly in the fourth quarter, fueled by institutional demand and the housing and real estate sectors.
Financial Performance
In FY24, JSW Cement reported a revenue from operations of ₹6,028 crore, a slight increase from ₹5,837 crore in the previous fiscal year. However, the company experienced a decline in net profit, which fell to ₹62 crore from ₹104 crore. As of March 31, 2024, JSW Cement’s total debt stood at ₹5,835.76 crore, highlighting the need for strategic financial management as the company embarks on its expansion journey.
Expansion Plans
JSW Cement is committed to expanding its production capacity significantly. The company plans to increase its installed grinding capacity from 20.60 million metric tons per annum (MMTPA) to 40.85 MMTPA and its clinker capacity from 6.44 MMTPA to 13.04 MMTPA, with a long-term goal of reaching a total capacity of 60.00 MMTPA. A key component of this expansion is the establishment of a greenfield integrated cement unit in Nagaur, which will feature a clinker capacity of 3.30 MTPA and a grinding capacity of 2.50 MTPA. Furthermore, JSW Cement has ambitious plans for mega projects in Odisha, including a 10 MTPA cement plant, a 900 MW power plant, a 52 MTPA greenfield jetty port, and a 13.2 MTPA steel plant.
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