JSW Cement IPO review

•    The company is a JSW group’s cement manufacturing arm, and is one of the top three fastest growing company in India.
•    After profitable performance for FY23 and FY24, it marked heavy loss for FY25, that raises major concern.
•    It is setting up a new unit at Nagaur-Rajasthan that will add to its top and bottom lines going forward.
•    Based on its recent financial data, the issue appears aggressively priced.
•    Only will-informed/cash surplus investors may park moderate funds for long term.

ABOUT COMPANY:
JSW Cement Ltd. (JCL) is among the top three fastest growing cement manufacturing companies in India in terms of increase in installed grinding capacity and sales volume from Fiscal 2015 to Fiscal 2025 (among the peers in terms of installed capacity and sales volume), according to the CRISIL Report. It is among the top 10 cement companies in India in terms of installed capacity and sales volume as of March 31 2025, according to CRISIL Report. For the period from Fiscal 2023 to Fiscal 2025, its installed grinding capacity grew at a compound annual growth rate (“CAGR”) of 12.42% and sales volume (excluding JSW Cement FZC) grew at a CAGR of 15.05%, which is faster than the industry average CAGR of 6.23% for installed capacity and 8.12% for sales volume during the said period according to the CRISIL Report.

As of March 31, 2025, it had Installed Grinding Capacity (defined below) of 20.60 MMTPA consisting of 11.00 MMTPA, 4.50 MMTPA and 5.10 MMTPA in the southern, western and eastern regions of India, respectively. As of March 31, 2025, the company had an Installed Clinker Capacity of 6.44 MMTPA which includes the Installed Clinker Capacity of JSW Cement FZC. Majority of its capacity has been developed organically by in-house project management team, demonstrating strong project execution capabilities. It is currently undertaking greenfield and brownfield expansion plans across India, including in the north and central regions, to increase Installed Grinding Capacity to 41.85 MMTPA and Installed Clinker Capacity to 13.04 MMTPA, and create a pan-India footprint.

JCL is India’s largest manufacturer of ground granulated blast furnace slag (“GGBS”), an eco-friendly product produced entirely from blast furnace slag (a by-product of the steel manufacturing process), with a market share in terms of GGBS sales of 84.00% in Fiscal 2025, according to the CRISIL Report. Its green cementitious products which include (i) products with GGBS, (ii) Portland slag cement (“PSC”), (iii) Portland composite cement (“PCC”) and (iv) others constituted 77.41% of its sales volume in Fiscal 2025. JCL’s focus on manufacturing green cementitious products gives it the distinction of having a Clinker to Cement Ratio (which it defines as clinker consumed during a year divided by Cement Saleable Production) of 50.13%, in Fiscal 2025 and 46.60% in Fiscal 2024, which were lower than Peer Average of 66.43% in Fiscal 2024, according to the CRISIL Report.

It started operations in 2009 in the southern region of India through its single grinding unit in Vijayanagar, Karnataka. Since then, it has expanded presence across the southern, western and eastern regions of India and UAE. Its product portfolio consists of blended cement (including PSC, PCC and PPC), GGBS, ordinary Portland cement (“OPC”), clinker and a range of allied cementitious products such as ready-mix concrete (“RMC”), screened slag, construction chemicals and waterproofing compounds. As of March 31, 2025, the company operated seven plants in India, which comprise one integrated unit, one clinker unit and five grinding units across the states of Andhra Pradesh (Nandyal plant), Karnataka (Vijayanagar plant), Tamil Nadu (Salem plant), Maharashtra (Dolvi plant), West Bengal (Salboni plant), Odisha (Jajpur plant and its majority owned Shiva Cement Limited clinker unit). JSW Cement FZC also operates one clinker unit in the UAE that supplies clinker to the Dolvi grinding unit in western India and to third-party customers.

To ensure consistent supply of limestone, which is a key raw material for cement production, it has the right to mine across 11 limestone mines in India, with an aggregate limestone residual reserve of 1089.09 million metric tonnes (“MMT”) as of March 31, 2025. Of the limestone mines in India, four limestone mines in India are operational (the JSW Nandyal mine in Andhra Pradesh; two Khatkurbahal mines in Odisha; and the Kolkarhiya mine in Madhya Pradesh). In addition, the company has the right to operate two limestone mines which will be operationalized in due course (Mudhvay D mine in Kutch, Gujarat; and 3B2 mine in Nagaur, Rajasthan). It also has letters of intent in relation to five limestone mines (3D1, 3C1 and 3C2 mines in Nagaur, Rajasthan, Pipariya Dyandas mine in Madhya Pradesh; and Satunur mine based on a composite license in Gulbarga, Karnataka) for which JCL is in the process of obtaining mining licenses. Further, JSW Cement FZC has the right to mine one limestone mine in the UAE with a limestone residual reserve of 193.58 MMT as of March 31, 2025 which is currently operational. JCL has the lowest carbon dioxide emission intensity among peer cement manufacturing companies in India and globally, according to the CRISIL Report.

To reduce its dependence on coal and petroleum coke as sources of fuel, the company co-process industrial waste as alternate fuel sources. As a result, in Fiscal 2025, its thermal substitution rate, which represents the amount of alternate fuel consumed as a percentage of total fuel consumed was 16.39%. It has installed alternate fuel handling systems at Nandyal plant, the Shiva Cement Limited clinker unit and at the JSW Cement FZC clinker unit to enable it to process and utilize alternate fuels. In addition, the company utilizes green power such as power generated from solar panels and waste heat recovery system (“WHRS”) to fulfil a part of its power requirements at some of its plants and intend to expand dependence on green power across all plants. Its dependency on green power is up to 21.48% for FY25 against 3.80% for FY22. As of March 31, 2025, it had 1618 employees on its payroll and additional 2508 contract workers in various departments in India, while its FZC operations it had 277 employees in UAE.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO worth Rs. 3600.00 cr. for 244897959 equity shares at the upper cap. The issue consists fresh issue worth Rs. 1600.00 cr. (approx. 108843537 equity shares at the upper cap), and an Offer for sale (OFS)worth Rs. 2000.00 cr. (approx. 136054422 equity shares at the upper cap). The company has announced a price band of Rs. 139 – Rs. 147 per equity shares of Rs. 10 each. The issue opens for subscription on August 07, 2025, and will close on August 11, 2025. The minimum application to be made is for 102 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 17.96% of the post-IPO paid-up equity capital. From the net proceeds of the fresh equity issue, the company will utilize Rs. 800.00 cr. for capex towards part financing establishing a new integrated cement unit at Nagaur – Rajasthan, Rs. 520.00 cr. for repayment/prepayment of certain borrowings, and the rest for general corporate purposes.

The company has allocated not more than 50% for QIBs, not less than 15% for HNIs and not less than 35% for Retail investors.

The joint Book Running Lead Managers (BRLMs) to this issue are JM Financial Ltd., Axis Capital Ltd., Citigroup Global Markets India Pvt. Ltd., DAM Capital Advisors Ltd., Goldman Sachs (India) Securities Pvt. Ltd., Jefferies India Pvt. Ltd., Kotak Mahindra Capital Co. Ltd., and SBI Capital Markets Ltd., while KFin Technologies Ltd. is the registrar to the issue. JM Financial Services Ltd., SBICAP Securities Ltd., Investec Capital Services (India) Pvt. Ltd., Sharekhan Ltd., and Kotak Securities Ltd. are the syndicate members.

The company has issued initial equity shares at par value. It has also issued further shares in the price range of Rs. 50.58 – Rs. 68.31 per share between July 2024, and July 2025. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 10.60, Rs. 34.00, Rs. 65.45, Rs. 67.82, and Rs. 68.31 per share. 

Post-IPO, its current paid-up equity capital of Rs. 1254.52 cr. will stand enhanced to Rs. 1363.37 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 20041.47 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (On a consolidated basis) posted a total income/net profit, of Rs. 5982.21 cr. / Rs. 104.04 cr. (FY23), Rs. 6114.60 cr. / Rs. 62.01 cr. (FY24), Rs. 5914.67 cr. / Rs. – (163.77) cr. (FY25). It posted declining trends for its bottom lines for the reported periods. Sudden higher losses for FY25 raises concern.  It had a borrowing of Rs. 4203.78 cr. as of March 31, 2025.

For the last three fiscals, the company has posted an average negative EPS of Rs. – (0.04) and an average negative RoNW of – (0.22) %. The issue is priced at a P/BV of 6.16 based on its NAV of Rs. 23.85 as of March 31, 2025, and at a P/BV of 3.43 based on its post-IPO NAV of Rs. 42.91 per share (at the upper cap).

If we attribute FY25 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a negative P/E. Based on FY24 earnings, the P/E stands at 319.57. Thus, the issue appears aggressively priced. 

The company has posted PAT margins of 1.74% (FY23), 1.01% (FY24), - (2.77) % (FY25), its RoCE margins of 6.46%, 11.01%, 7.05%, respectively for the referred periods.

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It has already adopted a dividend policy in July 2024, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Ultra Tech Cement, Ambuja Cement, Shree Cement, Dalmia Bharat, JK Cement, The Ramco Cements, India Cements, as their listed peers. They are trading at a P/E of 52.3, 34.4, 74.2, 45.2, 57.5, 272.0, and NA (as of August 04, 2025). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
The eight BRLMs associated with this offer have handled 110 issued in the last three fiscals, out of which 27 issues closed below the issue price on listing date.