New Delhi: Nuvoco Vistas Corporation, erstwhile Lafarge India, is all set to hit the market on Monday with its Rs 5,000 crore initial public offering (IPO). The IPO by India’s fifth largest cement company would compete with CarTrade Tech's Rs 2,999 crore issue, which is opening on the same day, and also two others -- Aptus Value Housing Finance and Chemplast Sanmar -- which kick off on Tuesday.Analysts are bullish on the Nuvoco IPO, as they find it fairly priced and see good prospects for the cement sector going ahead. On Saturday, the Nirmal Group company raised Rs 1,500 crore by allotting 30 per cent of the issue to 40 anchor investors. Over 90 per cent of the allotment was made to long-only funds.The Nirma Group company's issue comprises Rs 1,500 crore worth of fresh shares and Rs 3,500 crore offer for sale (OFS) by promoters. It will be sold in the Rs 560-570 price band.Antique Stock Broking said the cement maker is seeking a market capitalisation of Rs 20,400 crore and that its interactions with industry suggest Nuvoco's asking valuations at the time of filing of the draft IPO papers in May was much higher."The target valuations have significantly tapered down from those levels. The tapered down market-cap implies 18-19 times FY21 EV/Ebitda and 9.5-11.5 times FY22-FY23 EV/Ebitda, which appears fairly priced, given the exuberance in the sectoral peers. Larger peers are trading at 10.5-18.5 times at FY23 EV/Ebitda," it said.A key risk for Nuvoco would be a cement price correction in the eastern region, a key exposure area for Nuvoco, Antique said. East accounts for 78 per cent of Nuvoco's capacity. The cement maker also has a presence in North India.The company reported Rs 25.91 crore loss for FY21 compared with a Rs 249.25 crore profit in FY20 and Rs 26.48 crore loss in FY19. In FY22, there was a slowdown in construction activity due to the second wave of Covid, which impacted Nuvoco's sales volumes in April and May. Demand revived in June, the company said."Nuvoco is looking for an organic expansion of 2.7 mtpa (12 per cent addition) in eastern India over FY22 and FY23. We understand at the upper band, Nuvoco IPO is priced at EV/tonne of $131. That valuation is at a discount to its largecap peers at 12-19 times FY23 EV/Ebitda. This discount, however, partially factors a high debt on its books -- net debt / Ebitda of 4.5 times FY21, and also a low ROCE," said IDBI Capital."But given the upcycle in the cement industry and expectation of margin improvement and balance sheet deleveraging over FY21-23, we recommend a 'subscribe' rating to the issue," the brokerage said.Nuvoco has increased its cement capacity 22 million tonne per annum (mmtpa) in FY21 from 2.5 mtpa in FY16 and analysts said 85 per cent of this was inorganic addition. Anand Rathi cited the planned expansion, lowering of debt and other cost control measures, and felt that the company may maintain the prevailing growth levels and that is what is mirroring in the IPO price, it said. This brokerage has a 'subscribe for long term' rating on the issue.Nuvoco has 11 cement plants in West Bengal, Bihar, Odisha, Chhattisgarh and Jharkhand in eastern India and Rajasthan and Haryana in north India. It has 49 RMX (ready mix concrete) plants across India. The company plans to strengthen its position in eastern, north and central India while it also intends to increase its portfolio of premium products."The financial performance has been tepid for the company. However, with a strong focus on improving margins and positive industry growth prospects, we have a positive view for the long term," Religare Securities said.
from Economic Times https://ift.tt/3fMSPc6
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