Key Points to Know Before Applying to Nuvoco Vistas' Public Issue

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  • Aug 7, 2021 - Key Points to Know Before Applying to Nuvoco Vistas' Public Issue

Key Points to Know Before Applying to Nuvoco Vistas' Public Issue

Aug 7, 2021

The initial public offering (IPO) of Nuvoco Vistas Corporation, a Nirma Group Company, will open for subscription on 9 August 2021.

The price band for the same has been fixed at Rs 560-570 per share with a face value of Rs 10 each.

Mumbai-based Nuvoco Vistas is aiming to raise Rs 50 bn through its primary offering.

The issue consists of issuance of fresh equity shares worth Rs 15 bn and offer for sale (OFS) of Rs 35 bn by promoters of the company.

This would be the sixth company to open IPO in the current month, after Devyani International, Windlas Biotech, Exxaro Tiles, Krsnaa Diagnostics, and CarTrade Tech.

ICICI Securities, Axis Capital, HSBC Securities and Capital Markets India, JP Morgan India and SBI Capital Markets are the lead managers to the issue.

Nuvoco Vistas IPO Details

Issue Type Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price Rs 560 to Rs 570 per equity share
Market Lot 1 lot - 26 shares
Issue Size Rs 50 bn
Fresh Issue Rs 15 bn
Offer for Sale Rs 35 bn
Basis of Allotment Date Tuesday, August 17, 2021
IPO Listing Date Monday, August 23, 2021
Data Source: Company's Red Herring Prospectus

After the successful listing of company shares, promoters holding in the company will come down from existing 95.2% to 71%.

Nuvoco is promoted by Dr Karsanbhai K Patel, who is associated with the Nirma Group.

The Nirma Group is a diversified conglomerate that manufactures products ranging from chemicals to detergents, soaps, healthcare products and real estate development.

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Category-wise reserved portion

Up to 50% of the total offer size is reserved for qualified institutional buyers (QIBs), 35% for retail investors, and 15% for non-institutional investors.

The minimum investment by retail investors would be Rs 14,820 per lot and the maximum would be Rs 1,92,660 per 13 lots.

Objects of the issue

The proceeds from the fresh issue of shares will be used for repayment in full or part of certain borrowings availed by the company.

As of March 2021, total borrowings (long-term and short-term) of the company stood at Rs 76.4 bn.

Lastly, a portion of the proceeds will go towards other general corporate expenses.

About Nuvoco Vistas

Incorporated in 1999, Nuvoco Vista Corporation, a part of Nirma Group Company is among one of the largest cement companies and concrete manufacturers in India.

It offers a diversified range of products such as cement, ready-mix concrete (RMX), and modern building materials that is adhesives, wall putty, dry plaster, cover blocks, and more.

The company sells its products in the trade segment (individual home buyers) and non-trade segment (institutional and bulk buyers).

It has a strong distribution network with 15,969 dealers and 225 carrying and forwarding agent (CFAs).

Its cement plants are located in the states of West Bengal, Bihar, Odisha, Chhattisgarh, and Jharkhand in East India and Rajasthan and Haryana in North India with an aggregated installed capacity of 22.3 m metric tonne per annum (MMTPA).

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Competitive strengths

  • Largest cement manufacturer in East India in terms of total capacity.
  • Strategically located cement plants with close proximity to key markets.
  • Strong brand recognition and a large distribution network.
  • Experienced promoters and managers team.

Financial snapshot of the company

For fiscal year 2020, Nuvoco Vistas' revenue from operation stood at Rs 67.9 bn vs Rs 70.5 bn a year ago.

Net profit for the period was at Rs 2.5 bn against a loss of Rs 264.9 m.

For the nine months ended December 2020, the firm reported revenue of Rs 48.6 bn against a net loss of Rs 634.5 m.

On a consolidated basis, Nuvoco Vistas has posted an average earnings per share (EPS) of Rs 2.83 and an average return on net worth (RoNW) of 1.3% for the last three fiscals.

Key Parameters

(Rs m) FY18 FY19 FY20 Dec-20
Revenues 68,555.2 70,521.3 67,932.4 48,572.2
Revenue Growth (%)   2.9% -3.7%  
Expenses 67,496.5 70,892.9 64,431.9 49,939.2
Profit Before Tax (PBT) 1,620.7 166.0 3,867.5 -1,144.9
Net Profit 875.4 -264.9 2,492.6 -634.5
Data Source: Company's Red Herring Prospectus (RHP)

The company has not declared any dividend so far. It will follow a prudent dividend policy post listings based on its financial performance and future prospects.

For more details, check out Nuvoco Vistas' Red Herring Prospectus.

Growth in cement demand for the coming years will boost Nuvoco Vistas operational performance.

Cement demand is expected to face consecutive demand de-growth in fiscal 2021 after a marginal dip in fiscal 2020 as the cement industry witnesses a tumultuous transition between the two fiscal years.

Cement demand is expected to fall by 0 to 2% year on year (YoY) in fiscal 2021 owing to the outbreak of the Covid-19 pandemic in India and strict lockdown measures taken by the Indian government to curb the spread of Covid-19 in the country.

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However, demand decline in the current year is due to the sharp drop in demand in the first quarter brought about by the total lockdown in April.

After falling by 31% YoY in June quarter of 2021, cement demand has recovered sharply, witnessing positive growth over the next two quarters of the same year.

Demand was largely driven by rural housing in the first half, whereas urban housing and the infrastructure segment aided recovery in the third quarter.

A reboot in demand after the festive season in the second half of the fiscal 2021 was led by a continued traction in rural demand, increased government spending on infrastructure and housing segments, and ample labour availability at construction sites.

Additionally, key infrastructure projects like roads, metros and irrigation and the government's drive to revive the housing segment are expected to drive potential cement demand in the near future.

Comparison with listed peers

As per the offer documents, Nuvoco Vistas has shown Ultratech Cement, Shree Cement, Ambuja Cement, and ACC as its listed peers.

Company Revenues Net Profit Return on Net Worth (%)
Ultratech Cement 424.3 57.5 15%
Shree Cement 128.7 15.4 11.7%
Ambuja Cement 245.2 30.9 10.4%
ACC 137.9 14.2 11.3%
Nuvoco Vistas 67.9 2.5 4.7%
Data Source: RHP, Equitymaster
Figures in Rs bn and as on 31 March 2020

Nuvoco Vistas grey market premium

Nuvoco Vistas shares were available yesterday at Rs 40 premium in the grey market.

That means the market is expecting around 7% listing gain from the public issue before it becomes open for subscription on 9th August.

The expected listing price by the grey market in regard to this public issue is Rs 610 (issue price + GMP).

What's the ideal IPO strategy to follow?

In the past few months, a large number of corporate houses have submitted proposals for floating IPO. A number of IPOs are also expected to hit the market soon.

As companies line up to raise funds from the market amid high valuations, investors need to consider numerous factors before investing their money in an IPO.

If you are investing in an IPO, weigh in all the positive and negative factors affecting the company.

Take a close look at the company's financials and valuations. It would give you a clear picture of what's brewing.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more here...

Equitymaster requests your view! Post a comment on "Key Points to Know Before Applying to Nuvoco Vistas' Public Issue". Click here!

1 Responses to "Key Points to Know Before Applying to Nuvoco Vistas' Public Issue"

Purshottam J Patel

Aug 8, 2021

Information about company given here is best for us. Previously i never see such type of Information before IPO.
It is more better in you can add about about Management & Legal risk.

Like 
  
Equitymaster requests your view! Post a comment on "Key Points to Know Before Applying to Nuvoco Vistas' Public Issue". Click here!

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