JSW Cement Eyes ₹400 Crore Pre-IPO Boost for Rajasthan Unit – Will Sajjan Jindal’s Giant Cement IPO Make History?

JSW Cement is planning to raise ₹400 crore before going public, as mentioned in its IPO filing. The company, part of the $23-billion JSW Group, will raise this amount through a fresh issue in a pre-IPO offer, according to its draft red herring prospectus (DRHP). However, it’s not guaranteed that the company will proceed with the IPO.

The firm filed documents with SEBI on Friday to raise ₹4,000 crore through an IPO. This will include fresh shares worth ₹2,000 crore and an offer for sale (OFS) by current investors, also valued at ₹2,000 crore. The funds raised from the pre-IPO offer, which can be up to 20% of the fresh issue, will be deducted from the total fresh issue.

JSW Cement plans to use ₹800 crore of the fresh issue to set up a new cement unit in Nagaur, Rajasthan, and ₹720 crore to pay off some of its debt. The remaining funds will be used for general corporate needs. As of March 2024, the company had ₹5,835.76 crore in debt.

The IPO will be managed by major financial institutions like JM Financials, Axis Capital, and Goldman Sachs. This will be the second major listing from the JSW Group after a 13-year gap and will mark the first big IPO in the cement sector since Nuvoco Vistas Corporation’s ₹5,000-crore IPO in August 2021.

JSW Cement currently operates seven plants across India and is working to double its cement production capacity from 20.60 million tonnes to 40.85 million tonnes per year. The company also plans to increase its clinker capacity and eventually reach a total capacity of 60 million tonnes annually.

Industry Overview

The Indian cement industry is competitive, with several big players trying to expand both organically and through acquisitions. High competition has led to a drop in product prices, with prices falling by 5% in the first quarter of FY25. Analysts expect further impact on earnings in the second quarter.

Despite challenges, demand for cement in India has grown by 6% annually from FY19 to FY24. After some initial slowdown, demand picked up in June 2024, and it’s expected to improve after the monsoon season, especially with increased government infrastructure projects.

Cement demand is expected to grow at a rate of 6.5-7.5% annually over the next five years, supported by infrastructure development and a strong housing market.