JSW Cement files DRHP with SEBI to raise ₹4,000 crore via IPO

Sajjan Jindal-promoted JSW Cement on Friday filed its Draft Red Herring Prospectus (DRHP) with capital market regulator Securities and Exchange Board of India (SEBI) to raise ₹4,000 crore via an initial public offering (IPO) route. This is going to be the first major public offering in the cement space since Nuvoco Vistas' ₹5,000 crore issue in August 2021. Also, this will become the fourth company of the steel-to-power conglomerate to get listed on the domestic bourses after JSW Infrastructure in October last year.

The IPO of JSW Cement comprises a fresh issue of equity shares worth ₹2,000 crore of face value of ₹10 each and another ₹2,000 crore through an offer for sale (OFS) by existing shareholders.

Under the OFS, AP Asia Opportunistic Holdings Pte. Ltd. and Synergy Metals Investments Holding will offload shares worth ₹937.50 crore each, while State Bank of India (SBI) will pare stock worth ₹125 crore. As of now, both AP Asia Opportunistic Holdings and Synergy Metals Investments own 9.1% stake each in the company, while SBI holds 1.21% shares. The company is majorly owned by Adarsh Advisory Services Pvt Ltd (69.81%), which is fully owned by Sajjan Jindal Family Trust.

Out of the proposed ₹2,000 crore fresh equity capital, the company intends to use ₹800 crore for funding the cost of establishing a new integrated cement unit at Nagaur (Rajasthan), and ₹720 crore to repay debts availed by it. A part of the capital will be utilised to meet general corporate purposes. As of March 31, 2024, the total debt under the various financing arrangements of the company stood at ₹5,835.76 crore.

As per the DRHP, the company plans to set up a greenfield integrated cement unit at Nagaur, consisting of clinker capacity of 3.30 Million tonnes per annum (MTPA) along with grinding capacity of 2.50 MTPA. The Nagaur project will utilise limestone to manufacture clinker which shall further be milled to produce ordinary portland cement (OPC) and portland pozzolana cement (PPC).

Earlier in May this year, Parth Jindal, Managing Director of JSW Cement, had unveiled a plan to invest approximately ₹3,000 crore in establishing a cement plant in Nagaur, to be financed through a mix of equity and long-term debt. Besides, in February this year, the company had announced plans to establish 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. This venture was slated to involve a cumulative investment of ₹65,000 crore.

Currently, JSW Cement has plants in Karnataka's Vijayanagar, Andhra Pradesh's Nandyal, West Bengal's Salboni, Odisha's Jajpur, and Maharashtra's Dolvi.

As per the CRISIL report cited in the DRHP, India’s per capita cement consumption stands at 280-330 kg, substantially low from the world average of 470-520 kg, led by China with 1,400-1,500 kg. “There is significant potential for the Indian cement industry to grow because of the country’s low per capita consumption. Also, despite a low per capita cement consumption, the country is the second largest cement consumer in the world,” the report noted.

The report highlighted that cement Industry in India witnessed an investment of ₹1.13 lakh crore in past five years (fiscals 2020-2024E), with regards to adding new capacities, brownfield expansions, debottlenecking and maintenance of existing plants. With demand recovering in the past three fiscals and increased competitive intensity, the players especially the large ones are implementing sizable capex over the next five years to capture the market share.

CRISIL report estimates that 210-220 MTPA grinding capacities will be onboarded in next five years (fiscals 2025-2029) with investment quantum to be around 1.4x of capital expenditure of previous five years. Industry is expected to infuse ₹1.5-1.6 lakh crore over a five year period, with most of this capital expenditure incurring by the large players. Given their strong balance sheets and high liquidity, a large part of this capital expenditure is expected to be funded from internal accruals.

JM Financial, Kotak Mahindra Capital, Jefferies, Axis Capital, DAM Capital, Citi, Goldman Sachs and SBI Capital are the investment banks managing the share sale, while KFin Technologies is the registrar to the offer.