Interview: ‘JSW Cement in talks to raise $200 m by March 2021, to list by December 2022’

Parth Jindal, MD of JSW Cement, spoke to Vikas Srivastava about the company’s proposed IPO and plans to raise equity capital of $200 million to fund a Rs 3,600-crore expansion. The company has undertaken simultaneous expansion of projects at Shiva Cement in Odisha, where it hold 59% stake, and for group-level projects at JSW Cement. Edited excerpts:

Despite the Covid restrictions and other supply chain bottlenecks, the company has undertaken a two-phased expansion over the next two years. What is your outlook for the company in terms of volumes and revenues?
For the first half of FY21, the cement demand de-grew 29% year on year but in the second half we expect the demand to grow at 10%, so for the full year the demand is likely to de-grow by around 7%. As far as JSW Cement is concerned, we were also affected by the slowdown and our volumes de-grew 17% on year in the first half. However, for full FY21 we are targeting to see a 20% (YoY) growth in volumes and revenues. For FY20, our revenues stood at Rs 3,000 crore, which we expect to grow to Rs 3,600 crore in FY21. We have surplus volumes from March that we are selling now.

Can you elaborate on your Rs 3,600-crore expansion, including that of Shiva Cement in Odisha?
We have kicked off expansion for most of our projects simultaneously for clinker and grinding units at Shiva Cement plants in Odisha and in JSW Cement at the group level. The planned outlay for Shiva Cement is Rs 1,500 crore, while at the group level, we are investing another Rs 2,100 crore in the next two to three years. We are expanding the grinding unit at Dolvi, which is a Rs 500-crore investment; another Rs 400 crore is invested in Nandayal in Andhra Pradesh; and two grinding units are being added in Tamil Nadu’s Salem for Rs 100 crore. There is one more investment in Salboni, West Bengal.

How do you plan to fund the expansion?
We plan to fund the entire expansion through debt of Rs 1000 crore, internal accruals of Rs 1,000 crore and an equity infusion of Rs 1,500 crore. For equity, we are in advance talks with private equity players both in India and abroad to raise around $200 million by the end of FY21. Citi has been appointed as banker for raising the fund. This will help us reach around 25-million tonne per annum (mtpa) capacity in the next two years from 14 mtpa at present. We will also do a preferential allotment of shares to promoters worth Rs 150 crore and come out with rights issue later on. However, during the process, we will not exceed our debt target of Rs 2,800 crore, as we will continue to repay Rs 1,000 crore in debt every year.

What is the strategic fit of Shiva Cement for JSW Cement? Can you run us through the purpose of acquisition in 2017 and now the planned expansions?

This is a large part of our East India strategy that was geared towards being a low-cost producer of cement. We have 3.6 million tonne grinding capacity in the East, where Salboni in West Bengal has 2.4 mtpa capacity and Jajpur in Odisha has 1.2 mtpa. Currently, these plants use low-cost clinker from Andhra Pradesh. However, with the current expansion of Shiva Cement, it will provide clinker to the two units at a lot more aggressive rate. This will help us bring down our cost curve and compete with the likes of Dalmia Cement and UltraTech, who dominate the market.
The expansion in Odsha will see a 4,000 tonne per day kiln that will provide about 1.36 million tonne clinker, and will be good to have 4.5 million tonne of cement every year.

With 1 million tonne grinding unit at Shiva and all the infrastructure at site, including the railway siding, over-head conveyor belts, waste to heat recovery and a power plant inside the complex, it is going to be the largest investment by JSW Cement since the 2009 investment in Nandayal. The equipment has been contracted to Thyssenkrupp, while the civil and construction contract was awarded to L&T. Keeping in mind the Atmanirbhar Bharat plan in mind, the entire investments will have no Chinese participation.

By when can we expect the company to come out with its IPO and what will be the size of it?
We wanted the IPO to happen in calendar year 2020, but demand de-growth in 2019 and Covid restrictions in 2020 impacted our IPO plans. Going ahead, we expect demand recovery in the coming quarters and hope to list our company by December 2022. We plan to raise around Rs 2,500 crore to Rs 2700 crore, which is 10% dilution of our equity value of Rs 27,000 crore.