By Ashwin Mohan
Billionaire industrialist Karsanbhai Patel founded Nirma Group is betting big on the cement sector and is gearing up for a mega IPO as part of its next major move in the segment after the $1.4bn buyout of Lafarge India's assets in 2016, three individuals familiar with ongoing negotiations told ET NOW on the condition of anonymity.
" The parent Nirma group is planning an IPO of its cement arm Nuvoco Vistas Ltd ( formerly called Lafarge India) which houses the Lafarge assets. They are looking at raising Rs 4000 crores via the proposed listing and preliminary discussions have been held with i-bankers like Kotak, Axis, BofAML and ICICI Securities amongst others," said one of the three sources cited above.
In July 2016, the Ahmedabad-based detergents and chemicals maker stunned India Inc by outbidding rivals JSW Cement & Piramal Enterprises and acquiring the Lafarge India business which has a total capacity of about 11 million tonnes per annum.
" They are looking to mainly reduce debt via the proposed IPO & also raise growth capital and are targeting a listing before March 2019. Prior to the proposed IPO of Nuvoco Vistas, the Rajasthan cement plant may be transferred to Nuvoco Vistas so that all domestic cement assets are housed under the same umbrella," added a second source.
Nuvoco has six plants in Chhattisgarh, Rajasthan, Jharkhand and Bengal and Haryana running at 95 per cent capacity utilization. In addition to the six plants, the standalone cement unit in Rajasthan has a capacity of around 2 million tonnes per annum.
" Cement companies have been trading at high valuations in the past few years and it makes sense for a big group like Nirma to list their operations. It will also give them currency to expand further," says Rakesh Arora, MD, Go India Advisors.
According to a cement sector update by Care Ratings released earlier in May, "with two major states (Rajasthan and Madhya Pradesh) going into Assembly elections followed by General Elections in Q1-Q2 CY2019, the demand from infrastructure and construction is expected to peak in central, eastern and western region. Utilization in cement capacity across regions is expected to improve during the year to around 67%. Housing and real estate segment demand is expected to grow by around 6-7% whereas demand from Infrastructure segment is expected to grow by 8-10%."
ICICI Securities declined to comment on a query from ET NOW while responses are awaited from Nirma & the other investment banks.