JSW Cement
IPO Size: Rs. 3,600 cr
- Fresh Issue of Rs. 1,600 cr for (i) greenfield capex Rs. 800 cr (ii) debt repayment Rs. 520 cr (of Rs. 4,200 cr net debt post CCPS conversion)
- Offer for Sale (OFS) of Rs. 2,000 cr by 3 investors - Apollo Global, Synergy Metal and SBI, reducing 19% combined stake to 7%
Price band: Rs. 139-147 per share
M cap: Rs. 20,041 cr, implying 18% dilution
IPO Date: Thu 7th Aug to Mon 11th Aug 2025, Listing Thu 14th Aug 2025
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
South and East India Cement Manufacturer
JSW Cement, 78.6% subsidiary of Sajjan Jindal Family Trust, had an installed grinding capacity of 20.60 MTPA of cement, mainly in South and East India. It is expanding grinding capacity to 41.85 MTPA, mostly greenfield, in West, North and Central India.
Poor Capacity Utilisation
JSW Cement’s capacity utilization declined to 63% in FY25 from 67.5% in FY24. This is significantly below all-India average cement utilization of 72% in FY25.
Company’s grinding capacity utilization has significantly lagged all-India average for the past 4 fiscals, which is quite worrisome, given swift capacity addition in the sector, with few markets having supply exceeding demand.
Cement business is a volume game, due to high initial capex. With low utilization, operating leverage is extremely difficult, keeping margin outlook bleak, even if new capacities are commissioned.
Lower Realisation
JSW Cement’s FY25 cement realization of Rs 225 per 50 kg bag is ~15% lower than country-average of about Rs. 263 per bag. Smaller capacity and below-average utilization gives zero pricing power, explaining the low realization, when JSW is the ‘price taker’ and not a ‘price maker’.
Moreover, of the 12.6 MT sales volume in FY25, 42% comprised GGBS (ground granulated blast furnace slag) cement, which fetches 15-18% lower realisation than cement. All this classifies JSW Cement as Category B (tier 2) cement player.
Subdued Profitability
Falling cement prices declined FY25 revenue by 4% YoY to Rs. 5,813 cr, with volume flat YoY. Negative operating leverage contracted EBITDA by 21% YoY to Rs. 864 cr, translating into 15% EBITDA margin. EBITDA per ton also dropped 22% YoY to Rs. 684 with a net loss of Rs. 164 cr in FY25.
High Leverage
Post IPO, net debt will stand at Rs. 3,500 cr on expanded equity of Rs. 5,500 cr, leading to net debt to equity ratio of 0.64:1 and a net debt-to-EBITDA ratio of 4x. This highlights pressure on debt-servicing going forward, despite IPO funds retiring some debt. As capex will be needed to keep up with competition, the high debt level is concerning.
Promoter holding will drop to 72% post IPO. The group seems to have spread its wings too wide, getting into ports, paints, automobiles, sports, cement etc. which has led to capital constrain (high-leverage) and possible crunch in management bandwidth.
Expensive Pricing
Enterprise value of Rs.23,600 cr, implies a historic EV/EBITDA multiple 27x and EV/MT of USD 130, both are expensive for a small player with low utilization and a leveraged balance sheet.
Dalmia Bharat, with 60% utilization in FY25, on 49.5 MTPA capacity, clocked 17% EBITDA margin and trades at an EV of USD 98/MT and EV/EBITDA of 18x, on FY25 basis, despite net debt to EBITDA of only 0.3x and being one of the lower cost cement producers.
Even though cement prices have stabilized in Q1FY26 helped by lower input costs, JSW Cement is not the best placed in the sector, and especially not at this IPO price.
5th Aug 2025 at 11:47 am
5th Aug 2025 at 07:32 am