JSW Cement, a key player in the Indian cement industry and part of the Sajjan Jindal-led JSW Group, has taken a significant step towards raising capital by filing preliminary papers with the Securities and Exchange Board of India (SEBI) for an initial public offering (IPO). The JSW Cement IPO aims to raise Rs 4,000 crore, with the funds being raised through a combination of fresh issuance of equity shares worth Rs 2,000 crore and an offer-for-sale (OFS) of Rs 2,000 crore by existing shareholders. This move marks a notable event in the cement sector, as it is the largest public issue in the industry since the Nuvoco Vistas Corporation’s Rs 5,000 crore IPO in August 2021.
The upcoming JSW Cement IPO has generated significant interest in the market, and Moneycontrol was among the first to report on the company’s listing plans on January 10. The media outlet also confirmed the filing of the Draft Red Herring Prospectus (DRHP) on August 16, making it clear that JSW Cement is on track for its public offering. The IPO is poised to offer an opportunity for investors to gain exposure to one of India’s leading cement manufacturers, known for its robust growth and expansion plans.
Shareholding Structure and the Offer-for-Sale
The JSW Cement IPO will include an OFS, where shares will be sold by prominent investors such as AP Asia Opportunistic Holdings Pte, Synergy Metals Investments Holding, and State Bank of India (SBI). AP Asia Opportunistic Holdings Pte and Synergy Metals Investments Holding will each offload shares worth Rs 937.5 crore, while SBI will sell shares valued at Rs 125 crore. The weighted average acquisition cost for these investors is Rs 65.19 per equity share, indicating the potential for significant gains.
As of now, the promoters of JSW Cement hold a 78% stake in the company, assuming full conversion of convertible securities. Public shareholders own 19.43% of the company, while Employee Trusts hold the remaining 2.57%. The selling shareholders, including AP Asia Opportunistic Holdings Pte, Synergy Metals Investments Holding, and SBI, currently hold 16 crore compulsory convertible preference shares (CCPS). These CCPS will be converted into 24.54 crore equity shares before the filing of the Red Herring Prospectus (RHP) with the Registrar of Companies (ROC). Post-conversion, AP Asia Opportunistic Holdings Pte and Synergy Metals Investments Holding will each hold a 9.1% stake, while SBI will own 1.21% of the equity.
The company is also considering raising an additional Rs 400 crore through a preferential offer or other methods before filing the RHP with the ROC. If this pre-IPO placement is completed, the fresh issue size will be reduced accordingly. This strategic move could further bolster the company’s financial standing ahead of the IPO and offer additional value to its investors.
Expansion Plans and Financial Performance of JSW Cement
JSW Cement has ambitious expansion plans that align with its vision of becoming a major player in the Indian cement industry. As of March 2024, the company boasts an installed grinding capacity of 20.60 million metric tonnes per annum (MMTPA) and a clinker capacity of 6.44 MMTPA. With the funds raised through the JSW Cement IPO, the company plans to significantly increase its production capacity. The goal is to expand the installed grinding capacity to 40.85 MMTPA and the clinker capacity to 13.04 MMTPA. Ultimately, JSW Cement aims to achieve a total capacity of 60.00 MMTPA, which would position it as a leading player in the sector.
A portion of the fresh issue proceeds, amounting to Rs 800 crore, will be allocated towards establishing a new integrated cement unit in Nagaur, Rajasthan. This strategic investment is expected to strengthen JSW Cement’s presence in the northern region of India and contribute to its long-term growth. Additionally, Rs 720 crore from the fresh issue will be used to repay debt, helping the company reduce its financial liabilities and improve its balance sheet. As of March 2024, JSW Cement had a total indebtedness of Rs 5,835.76 crore under various financing arrangements. The remaining funds from the fresh issue will be utilized for general corporate purposes.
Despite facing challenges in the fiscal year 2024, JSW Cement demonstrated resilience and achieved a revenue growth of 3.3% year-on-year, reaching Rs 6,028.1 crore. However, the company’s restated profit for fiscal 2024 declined to Rs 62 crore, down from Rs 104 crore in the previous fiscal year. The decline in profit was primarily attributed to a drop in other income, which decreased from Rs 145.5 crore to Rs 86.5 crore during the same period. Despite the decrease in profit, JSW Cement’s EBITDA (earnings before interest, tax, depreciation, and amortization) saw a significant increase of 36.9%, reaching Rs 932.9 crore. The EBITDA margin also expanded by 380 basis points to 15.5%, reflecting the company’s strong operational performance.
JSW Cement’s journey began in 2009 in the southern region of India, and since then, the company has expanded its operations across the country. Today, it operates seven plants in India, with plans to further increase its capacity and geographical presence. In 2017, JSW Cement acquired Shiva Cement, which operates a clinker unit, further strengthening its production capabilities.
The JSW Cement IPO is expected to attract significant attention from investors, given the company’s growth trajectory, robust expansion plans, and the overall positive outlook for the cement industry in India. The IPO follows the successful launch of the JSW Infrastructure IPO in October 2023, which was the first public issue from the JSW Group in 13 years. This momentum underscores the JSW Group’s commitment to unlocking value for its stakeholders and driving growth across its business verticals.
The JSW Cement IPO will be managed by a consortium of leading merchant bankers, including JM Financial, Axis Capital, Citigroup Global Markets India, DAM Capital Advisors, Goldman Sachs (India) Securities, Jefferies India, Kotak Mahindra Capital Company, and SBI Capital Markets. Their involvement is expected to ensure a successful and well-subscribed offering, further cementing JSW Cement’s position as a key player in the Indian cement industry.
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