Nuvoco Vistas Corporation Limited IPO Analysis4 min read
Objectives of the Issue and its details:
• To repay/prepay/redeem borrowings availed by the firm fully or partially. Rs 1350
• General corporate purposes.
Details about IPO issues as mentioned in slide
Nuvoco Vistas Corp. Ltd, a Nirma Group company, started operations in India in 1999 via acquisitions. Nirma Group forayed into the cement business in 2014 through a greenfield cement plant in Nimble.
Nuvoco Vistas Corp. Ltd, is the fifth-largest cement company in India and the largest cement company in East India, in terms of capacity, with a consolidated capacity of 22.32 MMTPA.
The company have 11 Cement Plants in the states of West Bengal, Bihar, Odisha, Chhattisgarh and Jharkhand in East India and Rajasthan and Haryana in North India comprising five integrated units, five grinding units and one blending unit. Companies Integrated plants are equipped with waste heat recovery systems with a total capacity of 44.7 MW, solar power plants with a total capacity of 1.5 MW and captive power plants with a generation capacity of 105 MW, which generates 47.74% (on a proforma basis) of our total power requirements.
NVCL operates through a range of distribution channels and direct sales to improve their reach to customers. As at March 31, 2021, they have 244 CFAs (162 in East India and 82 in North India) and 16,076 dealers in India (10,091 in East India and 5,985 in North India)
Cement Segment Analysis:
•India is the second largest producer of cement in the world. It accounts for more than 7% of the global installed capacity. India has a lot of potential for development in the infrastructure and construction sector and the cement sector is expected to largely benefit from it
•Cement production reached 329 million tonnes (MT) in FY20 and is projected to reach 381 MT by FY22. However, the consumption stood at 327 MT in FY20 and will reach 379 MT by FY22. The cement production capacity is estimated to touch 550 MT by 2020. As India has a high quantity and quality of limestone deposits through-out the country, the cement industry promises huge potential for growth
•In 2021, working remotely is being adopted at a fast pace and demand for affordable houses with ticket size below Rs. 40-50 lakh is expected to rise in Tier 2 and 3 cities, leading to an increase in demand of cement.
• The eastern states of India are likely to be the newer and untapped markets for cement companies and could contribute to their bottom line in the future. In the next 10 years, India could become the main exporter of clinker and gray cement to the Middle East, Africa, and other developing nations of the world. Cement plants near the ports, for instance, the plants in Gujarat and Visakhapatnam, will have an added advantage for export and will logistically be well armed to face stiff competition from cement plants in the interior of the country. India’s cement production capacity is expected to reach 550 MT by 2025.
Nuvoco Vistas Corporation Ltd. – Company V/s Industry-[INR-Crores]
Companies financials compared with Industry(only 59 companies included ) It shows how much percentage share does Nuvoco has with respect to the industry.
Companies ratios compared with Industry(only 59 companies included ) aggregate It shows how company has performed with respect to the industry
Financial & Valuations
Nuvoco is being compared with peer group where EBIDTA margin is at par with its peer group and rest all comparison and ROCE & ROE is comparatively less.
YoY financial performance of the company described in slide
Key Strengths & Risks
·It is a part of Nirma Group company is the 5th largest cement company in India and the largest cement company in East India in terms of capacity.
· Company has expanded from just 2.5 MTPA( Million Tonne Per Annum) in FY16 to 22 MTPA in FY21 i.e. expanded 8.8x.
The company also plans to expand further i.e. in FY22 1.5 MTPA and in FY23 1.2 MTPAPost that expansion company will have a total installed capacity of 24.7 MTPA. The company’s capacity accounts for 4.2% of Industries’ installed capacity.
· The Company EBITDA Margin has been improving which is the significant ratio for the cement industry ·Company is currently valued at EV/EBITDA of just 12.2 around while the industry average in 20.8.
·Company’s market cap will be above 20000cr thus it’s not a small company and hence will qualify for many mutual funds.
The company has been growing inorganically that is through acquisitions it acquired 11mt Lafarge asset in FY17 at and Emami asset of 8mtpa i.e. out of total capacity currently 85% is due to acquisitions also a significant portion of that acquisitions has been financed from debt.
The company’s Profit ratios are not attractive like ROCE and ROE