Kotak Special Situations Fund holds the key in the immediate run!
|
NUVOCO VISTAS OFFER AT A GLANCE |
|
| Offer Type | Book Built |
| Platform | Main Frame |
| Fresh Issue | Rs 1,500 Cr (263.15 lakh shares) |
| Offer for Sale | Rs 3,500 Cr (614.04 lakh shares) |
| Face Value | Rs 10 |
| Price Band | Rs 560 – 570 |
| Mkt/Bid Lot | 26 Nos. |
| Implied M-Cap | Rs 20,358 Cr |
| Implied Equity Cap | Rs 357.163 Cr |
| Free Float | 28.97% |
| Lead Manager | ICICI Securities, Axis Capital, HSBC Securities, J P Morgan and SBI Capital |
| Registrar | Link Intime |
| Listing At | BSE, NSE |
|
INDICATIVE ISSUE SCHEDULE |
|
| Opening :9-Aug-2021 | Closing :11-Aug-2021 |
| Allotment :17-Aug-2021 | Refunding :18-Aug-2021 |
| Demat Credit :20-Aug-2021 | Trading :23-Aug-2021 |
The Offer
Nine years after withdrawing from the secondary market, Karsanbhai Patel’s Nirma group is returning to the capital market. Group cement company Nuvoco Vistas Corporation Ltd (NVCL) is floating an IPO of Rs 5,000 cr. The issue consists of a fresh issue of Rs 1,500 cr from the company and an offer for sale (OFS) of Rs 3,500 Cr from the holding company. The offer is being made through the book-building route with a price band of Rs 560-570 for Rs 10 paid-up share. The quantum of offer would be about 877 lakh shares which work out to 24.56% of the company’s proposed equity capital of Rs 357 Cr.
Applicants should bid for a minimum lot of 26 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE & NSE on August 23, 2021. ICICI Securities, Axis Capital, HSBC Securities, J P Morgan and SBI Capital are acting as managers to the offer and Link Intime has been roped in as registrar to the issue. The bidding opens on Monday, August 9 and closes on Wednesday, August 11, 2021.
Out of the fresh issue proceeds, the company proposes to utilize Rs 1,350 Cr to repay a portion of its debts. The balance issue amount is earmarked for general corporate purposes. Incidentally, the repayment of loan is being made to the affiliates of the three book running lead managers.
Lineage
Promoter Karsanbhai Patel is not new to the investing public. His flagship Nirma, incorporated in February 1980, went public in 1994 and rewarded investors reasonably well. The shares were delisted in March 2012 after the promoters made an open offer to the public investors.
NVCL’s offer document presents Niyogi Enterprise P Ltd and Karsanbhai Patel as its promoters. In fact, Niyogi and Karsanbhai were not the original promoters of NVCL. The company was incorporated in February 1999 under the name Infra Cement India P Ltd by the erstwhile shareholders. The name was changed to Lafarge India when the French cement major took control of the company.
In 2016, pursuant to the divestment by Lafarge group, Nirchem Cement Ltd (NCL), an erstwhile wholly-owned subsidiary of Nirma Ltd acquired the cement and other related business of Lafarge group by way of acquiring all the equity shares of Lafarge India and the name of the company was changed to the present one. Pursuant to divestment by the Lafarge group Nirma’s subsidiary NCL was merged with NVCL in the year 2017. The cement undertaking of Nirma Limited located at Nimbol, Rajasthan was amalgamated with NVCL in 2020.
NVCL was initially a wholly owned subsidiary of Nirma but in Fiscal 2020 under a scheme of arrangement, Nirma transferred its 100% holding in NVCL to Niyogi Enterprise Pvt Ltd (an entity in which majority shareholding is held by Karsanbhai Patel). Under the 2020 scheme, Karsanbhai Patel was also allotted 24,984,351 shares by NVCL. Thus Niyogi and Karsanbhai became the promoters of NVCL.
NVCL completed acquisition of Emami Cement Ltd (8.3 MMTPA at an enterprise value of Rs 5,500 Cr) in July 2020. This subsidiary was later renamed as NU Vista Ltd.
Key Management
Promoter Karsanbhai’s son, Hiren Patel (48), is the Chairman and Non-Executive Director of NVCL. He holds a bachelor’s degree in engineering from Stevens Institute of Technology, New Jersey and a master’s degree in business administration from Drexel University, Pennsylvania. He has been associated with the Nirma group since the year 1997 and is presently the managing director of Nirma. He has been on the Board NVCL since November 11, 2017.
Jayakumar Krishnaswamy (55) is the Managing Director of NVCL. He has been on the Board since September 17, 2018 and is responsible for the cement, RMX and modern building materials divisions. He holds a bachelor’s degree in engineering (mechanical) from University of Delhi. He has experience across FMCG and paint and coating industry. He has previously been associated with Hindustan Unilever and Akzo Nobel India.
Kaushikbhai Patel (65), a qualified chartered accountant associated with Nirma since 2002, is designated as a Non-executive Director. He is also currently associated with The Kalupur Commercial Co-operative Bank as a director.
Stakeholders
NVCL’s present equity capital of Rs 331 Cr is held by 11 shareholders of whom 10 belong to the promoter group. Of the promoter group stake of 95.24%, corporate promoter Niyogi holds the major chunk of 82.43% followed by Kasanbhai Patel 7.55%, Hiren Patel 2.55% and Rakesh Patel 2.51%. The only `public’ shareholder is Kotak Special Situations Fund, a registered category II AIF, which acquired 4.76% only in July 2021.
Post-IPO, on the enlarged equity of Rs 357 cr, promoter group will control 71.03%. Niyogi will have 59.17%, Karsanbhai will hold 7%, Hiren Patel and Rakesh Patel will have 2.37% and 2.33% respectively. Under public category, Kotak Special will have the largest portion of 4.41% without any lock-in.
Business Track
NVCL is reportedly the fifth largest cement manufacturer in India and the largest cement company in East India, with a consolidated capacity of 22.32 MMTPA. The company and its subsidiary together have 11 Cement Plants, comprising five integrated units, five grinding units and one blending unit. They also operate in the RMX business with 49 RMX Plants across India.
At the end of December 2020, their cement production capacity constituted approximately 4.2% of total cement capacity in the country, 17% of total cement capacity in East India making it the largest player in that region, and 5% of total cement capacity in North India.
Financial Track
NVCL’s performance on a standalone basis, though showed an uptrend during three fiscals between 2018 and 2020, suffered a setback in fiscal 2021. The company’s revenue dropped by nearly Rs 1000 Cr over the previous year and net profit slumped from Rs 249 Cr to just Rs 11 Cr. Nevertheless, its operating margin inched up from 19.1% to 19.3%. Interest liability shot up nearly 25% and crossed Rs 500 Cr-mark.
|
Nuvoco Vistas Standalone Financials (in Cr) |
|||||
| Year Ended | Mar-21 | Mar-20 | Mar-19 | Mar-18 | Mar-17 |
| Months |
12 |
12 | 12 | 12 |
12 |
| Revenue |
5805 |
6793 | 6560 | 6297 |
5832 |
| Operating Profit |
1120 |
1297 | 902 | 989 |
711 |
| OPM% |
19.3 |
19.1 | 13.8 | 15.7 |
12.2 |
| Other Income |
83 |
37 | 52 | 54 |
29 |
| EBIDTA |
1204 |
1334 | 954 | 1043 |
740 |
| EBIDTA % |
20.4 |
19.5 | 14.4 | 16.4 |
12.6 |
| Interest |
517 |
419 | 391 | 425 |
231 |
| Depreciation |
587 |
528 | 399 | 392 |
313 |
| Net Profit |
11 |
249 | 106 | 114 |
72 |
| Equity (Implied) |
357 |
242 | 200 | 150 |
150 |
| Reserves (Implied) |
8531 |
5037 | 4062 | 3967 |
3799 |
| Borrowing |
3894 |
4463 | 3989 | 4369 |
4314 |
| Fixed Assets |
6953 |
6868 | 5376 | 5050 |
5215 |
On a consolidated basis, the top line showed a mixed trend in last three years. It improved in fiscal 2019 but dropped in 2020. Unlike the standalone performance, consolidated revenue increased more than 10% in fiscal 2021. Nonetheless, the company’s bottom line ended in red as interest and depreciation surged more than 50% to a hefty Rs 664Cr and Rs 794 Cr respectively. Though the company has already collected a share premium of nearly Rs 3,700 Cr, it is yet join the dividend list.
|
Nuvoco Vistas Consolidated Financials (in Cr) |
||||
| Period Ended | 3/31/2021 | 3/31/2020 | 3/31/2019 | 3/31/2018 |
| Months |
12 |
12 | 12 |
12 |
| Revenue |
7489 |
6793 | 7052 |
6856 |
| Operating Profit |
1461 |
1297 | 918 |
1066 |
| OPM% |
19.5 |
19.1 | 13 |
15.6 |
| Other Income |
34 |
37 | 54 |
56 |
| EBIDTA |
1494 |
1334 | 971 |
1123 |
| EBIDTA % |
19.9 |
19.5 | 13.7 |
16.2 |
| Interest |
664 |
419 | 457 |
476 |
| Depreciation |
794 |
528 | 498 |
485 |
| Net Profit |
-37 |
249 | -46 |
43 |
| Equity (Implied) |
357 |
242 | 200 |
150 |
| Reserves (Implied) |
9536 |
5037 | 4788 |
4674 |
| Borrowing |
5759 |
3593 | 3318 |
3798 |
| Fixed Assets |
10560 |
6868 | 6669 |
6399 |
Valuation
The average cost of acquisition of 272,727,274 shares of the corporate promoter (Niyogi) is Rs 212.30 which will come down to Rs 108 post offer for sale. Only few days ago (on July 24, 2021) 15,751,303 shares were allotted to Kotak Special Situations Fund on conversion of CCDs at a price of Rs 317.43 per share. Yet, the company has fixed a price band of Rs 560 -570 for the IPO. Though NVCL’s fundamentals may justify the offer price in the long run, the short term prospects of the stock largely depends on Kotak Special Situations Fund as its entire holding of more than 1.57 crore shares are free from lock-in from the date of Allotment!
|
HOW NUVOCO COMPARES WITH CEMENT PEERS |
||||||
|
Financials |
||||||
| (Amount in Cr) |
Nuvoco |
Ultratech | Shree | JK Cem | Ramco |
Birla Cor |
| Market Cap |
20358 |
221035 | 104500 | 25983 | 25320 |
10687 |
| Borrowing |
5759 |
17784 | 1840 | 3143 | 3102 |
3635 |
| Fixed Assets |
10560 |
43972 | 6711 | 6018 | 9102 |
8476 |
| Revenue |
7489 |
44726 | 13476 | 6606 | 5189 |
6785 |
| Other Income |
34 |
734 | 466 | 113 | 30 |
100 |
| EBIDTA |
1494 |
12186 | 4518 | 1652 | 1608 |
1380 |
| Interest |
664 |
1486 | 251 | 253 | 88 |
296 |
| Net Profit |
-37 |
5462 | 2279 | 725 | 802 |
580 |
| Equity Cap |
357 |
289 | 36 | 77 | 24 |
77 |
| Reserves |
9536 |
43886 | 15361 | 3659 | 5708 |
5409 |
|
Stock Features |
||||||
| Current Price (Rs) |
570 |
7658 | 28964 | 3363 | 1073 |
1388 |
| Face Value (Rs) |
10 |
10 | 10 | 10 | 1 |
10 |
| Book Value |
277 |
1530 | 4268 | 484 | 243 |
712 |
| Promoter Stake % |
71.03 |
59.96 | 62.55 | 57.65 | 42.54 |
62.9 |
| Debt/Equity |
0.58 |
0.4 | 0.12 | 0.84 | 0.54 |
0.66 |
|
Profitability |
||||||
| OPM % |
19.5 |
25.6 | 30.1 | 23.3 | 30.4 |
18.9 |
| Net Margin % |
-0.5 |
12 | 16.3 | 10.8 | 15.4 |
8.4 |
| Cash EPS |
21.18 |
282.83 | 980.98 | 134.18 | 49.06 |
123.48 |
| Earnings Per Share |
-1.04 |
189.28 | 631.1 | 94.55 | 33.95 |
75.33 |
|
Growth |
||||||
| CAGR 3Yr Sales % |
2.8 |
11.3 | 9.9 | 9.6 | 4.8 |
4.5 |
| CAGR 3Yr EBIDTA % |
10.0 |
24.1 | 16.4 | 22.5 | 12.0 |
16.6 |
|
Return |
||||||
| RONW % |
0 |
12.4 | 14.8 | 19.4 | 14.0 |
10.6 |
| ROCE % |
5.4 |
15.3 | 18.9 | 19.6 | 14.2 |
11.1 |
|
Discounting |
||||||
| Price/Earnings |
– |
40.5 | 45.9 | 35.6 | 31.6 |
18.4 |
| Price/Cash EPS |
26.9 |
27.1 | 29.5 | 25.1 | 21.9 |
11.2 |
| Price/Book Value |
2.1 |
5.0 | 6.8 | 7.0 | 4.4 |
2.0 |
| Price/EBIDTA |
13.6 |
18.1 | 23.1 | 15.7 | 15.7 |
7.8 |
| Price/Revenue |
2.7 |
4.9 | 7.8 | 3.9 | 4.9 |
1.6 |
| Price/Fixed Assets |
1.9 |
5.0 | 15.6 | 4.3 | 2.8 |
1.3 |
|
Distribution |
||||||
| Dividend % |
0 |
370 | 600 | 150 | 300 |
100 |
| Yield % |
0 |
0.5 | 0.2 | 0.5 | 0.3 |
0.7 |
| Pay-out % |
0.0 |
19.6 | 9.5 | 16.0 | 8.8 |
13.3 |
Concern
NVCL has to confront a huge contingent liability of Rs 630 cr with regard to direct and indirect tax proceedings.