Nuvoco Vistas off to a weak start, lists at 17% discount to issue price

Cement manufacturer Corporation made a weak debut on the bourses as the company’s shares listed at Rs 471, 17 per cent below its issue price of Rs 570 per share on the BSE on Monday. On the National Stock Exchange (NSE), the stock opened at Rs 485, 15 per cent down against its issue price, the exchange data shows.

However, the stock rebound from its opening level and moved higher to Rs 538.60 on the BSE in intra-day trade. At 10:04 am, it was trading at Rs 530.90, up 13 per cent over its opening level, but was still down 7 per cent against its issue price on the BSE. In comparison, the S&P BSE Sensex was up 0.47 per cent at 55,587 points.

The initial public offering (IPO) of Corporation had received a tepid response, with the issue garnering 1.71 times subscription. The non-institutional investors and retail investors portion was subscribed by 66 per cent and 73 per cent, respectively, while the portion for Qualified Institutional Buyers (QIBs) was subscribed 4.23 times, data shows.

Nuvoco Vista Corporation (NVCL), a part of Nirma Group Company, is the fifth largest cement company in India and the largest cement company in East India in terms of capacity. It is also one of the leading ready-mix concrete manufacturers with 49 ready-mix concrete (RMC) plants across India. As of March 2021, it has a total installed cement capacity of 22.32 MT with 11 plants (eight in east, three in north). It also has 151.2 MW power plants (105 CPP, 44.7 MW WHRS and 1.5 MW solar), which caters to 50.4 per cent of its power requirements.

In the last five years, the central (Uttar Pradesh, Madhya Pradesh) and eastern (Odisha, Bihar, West Bengal) regions have exhibited strong demand led by a surge in infrastructure construction and rural housing. However, the southern region suffered sluggish growth in demand on account of continued capacity additions in the region, the stalling of construction activities in Amravati and Polavaram in AP-Telangana and sand unavailability in the region post-new sand mining laws.

NVCL’s plants are located at various strategic locations in east and north India. They have three integrated units and five grinding units in East India, and two integrated units and one blending unit in North India. These locations allow them to effectively sell their products in East and North India as well as access to select key in Central India. They are also in the process of enhancing their cement capacity in their existing grinding units in Jojobera Cement Plant and Bhabua Cement Plant in East India. The connectivity to raw materials and their customers allows them to manufacture and sell their cement products in a cost-efficient manner, ICICI Securities noted.

“We like NVCL due to its leadership position in the fast-growing East market, wide premium product portfolio and ability to successfully integrate large acquisitions. The issue is valued at $146 FY21 EV/ton (USD) and 16.6x EV/EBITDA on the post-issue basis, which is a discount to the industry average given slightly weaker financials. As NVCL has a short history of existence, we believe it has the potential to improve its financials in the long run and come at par with its peers as operating leverage kicks in. It is expected to witness strong growth going ahead led by its expansion plans, integration of NU Vista and debt reduction,” Motilal Oswal Securities said.

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