Citing the deepening slowdown and the resultant fall in demand, JSW Group has pushed its plans to take its cement unit public with an IPO by a year to 2021.
JSW Cement had initially planned to hit the market with an initial public offer on reaching the 20 mt annual capacity by 2020, which it now says will take a year to achieve due to the falling demand.
“Due to the ongoing slowdown, we had to revise our capacity target by 12 months to 2021. Once we reach that level, we will go for the IPO,” managing director Parth Jindal told reporters on Wednesday.
The company also announced its plans to invest over Rs 2,800 crore over the next three-four years to ramp up its capacity to 25 million tonne per annum by 2023.
The company has annual capacity of 14 mt now, which it plans to expand to 20 mt by 2021 and further to 25 mt by 2023.
“We will be investing around Rs 2,875 crore over the next few years as we aim to increase our capacity to 25 mt by 2023,” Jindal said.
He said the funding will be done partly through debt and internal accruals, of which nearly Rs 1,500 crore will come from free cash and the rest will be borrowed.
With the addition of the new capacities, the company plans to service the growing demand in the East, South and West regions.
“On achieving 25 mt capacity target, we will be amongst the top 5 producers in the country,” he said, adding the key enablers for achieving the target is the acquisition of Shiva Cement in 2017.
The company, which now owns 54 percent in Shiva Cement, plans to invest Rs 800 crore into this to ramp up the capacity to 1 mt from the current 0.12 mt.
JSW Cement purchased majority stake in Shiva Cement in March 2017 from former promoters and acquired the balance through open market purchases from ACC.
“Since Shiva Cement is located in a limestone-rich area, its mines will support our growth in the Eastern region. In the past three years, we’ve made substantial progress in acquiring land for a plant and mining and have got government approvals,” Jindal said, adding recently the company got the approval for expanding its mines from 0.12 mt to 0.345 mt.
The company, which supplies cement to various infrastructure projects, including the Mumbai Metro, Kolkata Metro, Coal India, and AP State Housing, among others, is sensing growth opportunity in the Portland slag cement.
“Growth opportunity for Portland slag cement is visible in the number of infrastructure projects that now uses our product across the country,” he said adding it is becoming a preferred green cement supplier for most of these projects.
In the South, the company plans to add 3.6 mt to take its overall green capacity to 11.6 mt, while in the West, it will add 2.4 mt taking its overall capacity to 4.6 mt.
In the East, it is adding the largest chunk of capacities of over 5 mt taking its capacity to 9 mt.
“The capacity ramp up will be at manufacturing units at Salboni in Bengal where we will add 2.4 mt; Jajpur in Odisha with an addition of 1.8 mt along with 1 mt capacity addition at Shiva Cement,” Jindal said.
If they are looking at inorganic options for expanding its capacities, Jindal said, “we always look for growth opportunities. We are now focusing on these plans as growing organically is interesting. If at all we would go for inorganic expansion, it would me mostly in the Central and Western regions.”
According to the Cement Manufacturers Association, the cement industry has an installed capacity of 502 mt comprising about 250 large cement plants, lead by Aditya Birla group’s flagship UltraTech with 117.35 mt per annum.
