JSW Cement to Raise Rs 4,000 Cr Through IPO for Growth and Debt Repayment

JSW Cement, a part of the diversified JSW Group led by Sajjan Jindal, has submitted a draft red herring prospectus (DRHP) to the Securities and Exchange Board of India (Sebi) to raise Rs 4,000 crore through an initial public offering (IPO). The IPO includes a fresh issue of equity shares worth Rs 2,000 crore and an offer for sale (OFS) of Rs 2,000 crore by investor shareholders.

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Utilisation of IPO Proceeds

The company plans to use Rs 800 crore from the IPO proceeds to partially finance the establishment of a new integrated cement unit in Nagaur, Rajasthan. Additionally, Rs 720 crore will be allocated for prepayment or repayment of outstanding borrowings. The remaining funds will be used for general corporate purposes, with a cap of 25% of the gross proceeds.

As per the DRHP, AP Asia Opportunistic Holdings Pte Ltd and Synergy Metals Investments Holding Ltd will each sell shares worth Rs 937.5 crore as part of the OFS. State Bank of India (SBI) will divest shares valued at Rs 125 crore. JSW Cement's total liabilities stood at Rs 8,933.42 crore as of March 31, 2024.

Financial Performance and Capacity

For FY24, JSW Cement reported revenue from operations amounting to Rs 6,028.10 crore, up from Rs 5,836.72 crore in FY23 and Rs 4,668.57 crore in FY22. The company's profit for FY24 was Rs 62 crore compared to Rs 104 crore in FY23. As of March 31, 2024, JSW Cement had an installed grinding capacity of 20.60 million tonnes per annum (MTPA) and aims to reach a total capacity of 60 MTPA.

JSW Cement operates manufacturing units in Vijayanagar (Karnataka), Nandyal (Andhra Pradesh), Salboni (West Bengal), Jajpur (Odisha), and Dolvi (Maharashtra). Through its subsidiary Shiva Cement, it also runs a clinker unit in Odisha.

Market Position and Competitors

JSW Cement is currently the sixth-largest player in the Indian cement sector, which is dominated by UltraTech Cement from the Aditya Birla Group. The top five companies—UltraTech Cement, Shree Cement, Ambuja Cement including ACC Ltd., Dalmia Bharath, and Nuvoco Vistas—held around 54% market share in FY24.

UltraTech Cement is expanding its capacity through acquisitions and brownfield projects. It aims to surpass a total cement capacity of 200 MTPA by FY27 from its current capacity exceeding 150 MTPA. The Adani Group entered the cement sector in September 2022 by acquiring Ambuja Cement from Holcim for USD 6.4 billion (approximately Rs 51,000 crore). The group aims to achieve a capacity of 140 MTPA by FY28.

Gautam Adani's group owns ACC Ltd and has acquired Sanghi Industries and ACCPL. It announced the acquisition of Penna Cement in June at an enterprise value of Rs 10,422 crore, increasing its capacity to 93 MTPA.

IPO Management

The IPO process for JSW Cement is being managed by JM Financial Ltd., Axis Capital Ltd., Citigroup Global Markets India Private Ltd., DAM Capital Advisors Ltd., Goldman Sachs India Securities Private Ltd., Jefferies India Private Ltd., Kotak Mahindra Capital Company Ltd., and SBI Capital Markets Ltd.

JSW Cement's financial liabilities include borrowings amounting to Rs 1,678.90 crore and dues to creditors other than micro and small enterprises totalling Rs 1,184.40 crore. Other financial liabilities stand at Rs 842.02 crore as of March 31, 2024.

The Indian cement sector is undergoing consolidation with major players like UltraTech Cement and Adani Group's Ambuja Cement expanding their capacities through acquisitions and brownfield expansions. This trend is expected to continue as companies strive to increase their market share.

The funds raised through the IPO will help JSW Cement strengthen its financial position and support its expansion plans. The company's strategic investments in new units and repayment of debts are aimed at enhancing its operational efficiency and market presence.

JSW Cement's growth trajectory reflects its commitment to becoming a significant player in the Indian cement industry while maintaining financial stability through prudent management of resources and strategic investments.