JSW Cement mulls pre-IPO placement of up to ₹400 crore

New Delhi: JSW Cement is considering raising its capital ₹400 crore before going public, according to the company’s initial public offering (IPO) filing on Friday.

The $23 billion JSW Group cement company said in its preliminary red herring prospectus (DRHP) that the company will raise this funding through a fresh issue in a pre-IPO placement offer. However, it said, the pre-IPO offer does not guarantee that it will proceed to public listing.

The Sajjan Jindal-led firm on Friday filed preliminary documents with capital markets regulator Sebi to raise funds. ₹4,000 crore via an initial public offering. Mint first reported on the company’s plan for an IPO on August 31, 2023.

The IPO will be a combination of a fresh issue of equity shares and an offer for sale (OFS) by existing investors, both worth ₹2,000 crore each. The amount raised in the pre-IPO placement (capped at 20% of the fresh issue) will be reduced from the total fresh issue, the company said.

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The new shares will be issued through a preferential offer or any other permitted method, the DRHP said.

The manufacturer of green cement, made from industrial by-products, plans to invest ₹800 crore of net proceeds from new issue Setting up a new integrated cement unit at Nagaur, Rajasthanand ₹720 crore to reduce debt. The remaining funds will be used for general corporate purposes.

As of March 2024, the company’s debt amounted to ₹5,835.76 crore under various financial arrangements.

The executive book-running lead managers for the IPO are JM Financials, Axis Capital, Citigroup Global Markets India, DAM Capital Advisors, Goldman Sachs (India), Jefferies India, Kotak Mahindra Capital and SBI Capital Markets.

This is the group’s second major listing after a 13-year hiatus and will be the first major public offering in the cement industry since that of Nuvoco Vistas Corporation. ₹5,000 crore IPO in August 2021.

JSW Cement operates seven plants across the country and is expected to increase its installed grinding capacity from 20.60 million metric tonnes per annum (mmtpa) to 40.85 mmtpa and its installed clinker capacity from 6.44 mmtpa to 13.04 mmtpa. It also intends to increase the total capacity to 60 mmtpa.

Industry Outlook

The Indian cement industry is highly fragmented and competitive due to the presence of a few large players who have been consolidating through organic and inorganic avenues.

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Excessive competition in the industry has put pressure on product prices, which declined 5% year-on-year in the first quarter of fiscal year 2025. Analysts, based on the current price trend, anticipate an impact ₹200-250 per tonne in Q2FY25 realizations.

Domestic demand for cement has grown at a compound annual growth rate (CAGR) of 6% between fiscal 2019 and 2024. However, election-related factors, extreme weather conditions and labour shortages weighed on consumption in the first quarter ended June.

“Demand remained subdued in April and May 2024 before recovering in June 2024, albeit at a slower pace,” Axis Securities said in its Q1 earnings report for the sector. “We expect demand to strengthen post-monsoon and non-commercial demand to pick up due to government project allocations.”

The government also continues to inject capital into the country’s infrastructure. According to revised estimates, support for budgetary capital expenditure increased by 17% to ₹11.11 trillion in fiscal year 25.

Over the next five years, from fiscal year 2025 to 2029, Crisil MI&A Research expects cement demand to register a healthy compound annual growth rate (CAGR) of 6.5-7.5 per cent, compared with 6 per cent in the previous five years. It will be driven by a series of infrastructure investments and healthy momentum from the housing segment, the JSW DRHP said.