JSW Cement Files DRHP With SEBI For Rs 4,000 Crore IPO Via OFS & Fresh Issue; Check All Details Here

JSW Cement, a player in the Indian cement industry and a subsidiary of the Sajjan Jindal-led JSW Group, has taken a step towards going public. The company has filed preliminary papers with the Securities and Exchange Board of India (SEBI) to raise Rs 4,000 crore through an initial public offering (IPO).

The IPO will be a combination of fresh equity shares and an offer for sale (OFS) by existing shareholders, each contributing Rs 2,000 crore. The fresh issue of shares will bring in new capital, while the OFS will allow current investors to partially exit their investments. Major shareholders, including AP Asia Opportunistic Holdings Pte, Synergy Metals Investments Holding, and the State Bank of India (SBI), are set to participate in the OFS.

AP Asia Opportunistic Holdings Pte and Synergy Metals Investments Holding will each sell shares worth Rs 937.5 crore, while SBI will offload shares valued at Rs 125 crore. The weighted average cost of acquisition for these shares stands at Rs 65.19 per equity share, indicating a potential return for these investors.

Promoters currently hold a 78% shareholding in JSW Cement, assuming full conversion of convertible securities as a percentage of diluted share capital. Public shareholders own 19.43% of the company, while the remaining 2.57% stake is held by Employee Trusts. The selling shareholders-AP Asia Opportunistic Holdings Pte, Synergy Metals Investments Holding, and SBI-collectively hold 16 crore compulsory convertible preference shares (CCPS). These will be converted into 24.54 crore equity shares before the company files its Red Herring Prospectus (RHP) with the Registrar of Companies (ROC).

Following the conversion, AP Asia Opportunistic Holdings Pte and Synergy Metals Investments Holding will each hold a 9.1% stake, while SBI's ownership will stand at 1.21%. This restructuring of shareholding will be a key factor in determining the post-IPO equity distribution.

JSW Cement plans to utilize the net proceeds from the fresh issue of shares for several strategic purposes. A portion, Rs 800 crore, will be allocated for the establishment of a new integrated cement unit in Nagaur, Rajasthan. This facility is expected to boost the company's production capacity and strengthen its position market.

Additionally, Rs 720 crore will be used to repay existing debt, a move that will help reduce the company's financial leverage 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 remainder of the fresh issue proceeds will be directed towards general corporate purposes.

JSW Cement has plans to expand its production capacity in the coming years. As of March 2024, the company had an installed grinding capacity of 20.60 million metric tonnes per annum (MMTPA) and an installed clinker capacity of 6.44 MMTPA. The company is now aiming to nearly double its grinding capacity to 40.85 MMTPA and its clinker capacity to 13.04 MMTPA. Furthermore, JSW Cement has set its sights on increasing its total capacity to 60.00 MMTPA in the long term.

These expansion plans are expected to enhance JSW Cement's market share and enable it to meet the growing demand for cement in India. The company, which started operations in 2009 in the southern region of India, now operates seven plants across the country. Its acquisition of Shiva Cement in 2017, which operates a clinker unit, was a strategic move to secure raw material supply and support its expansion plans.

Despite its strong operating performance, JSW Cement faced challenges in FY24. The company reported a restated profit of Rs 62 crore for the fiscal year, down from Rs 104 crore in the previous year. This decline in profitability can be attributed to a decrease in other income, which fell from Rs 145.5 crore to Rs 86.5 crore during the same period.

However, revenue from operations grew by 3.3% on a year-on-year basis, reaching Rs 6,028.1 crore in FY24. The company's EBITDA (earnings before interest, tax, depreciation, and amortization) saw an increase of 36.9%, rising to Rs 932.9 crore. This growth in EBITDA was accompanied by a 380 basis point expansion in the EBITDA margin, which stood at 15.5% compared to the previous fiscal year.

JSW Cement's performance is compared to that of its listed peers, such as UltraTech Cement, Ambuja Cements, Shree Cement, Dalmia Bharat, and JK Cement. While JSW Cement's profitability faced some headwinds in FY24, its operational growth and expansion plans position it well to compete with these established players.

The upcoming IPO of JSW Cement comes on the back of the successful IPO of JSW Infrastructure in October 2023, which marked the first public issue from the JSW Group in 13 years. The IPO is expected to generate significant interest among investors, given the strong brand value of the JSW Group and the growth prospects of the cement industry in India.

The company has appointed a consortium of leading financial institutions, 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, as the merchant bankers for the issue.