Ind-Ra upgrades JSW Cement's long-term issuer rating to 'IND A+'

Ind-Ra continues to take a consolidated view of JSW Cement Limited (JSWCL) and its subsidiaries - Shiva Cement Limited (Shiva, 59.3% stake); JSW Cement FZE (100%), JSW Green Cement Pvt Ltd (100%) and Utkarsh Transport Private Limited (100%) because of the strong operational and strategic linkages between the entities.

Ind-Ra has referred to the consolidated profile of JSWCL throughout the rating action commentary.

Furthermore, Ind-Ra has also considered the operational synergies between JSWCL and the JSW group and the likelihood of availability of financial support from the group, if needed.  

The upgrade reflects the significant improvement in JSWCL’s business profile, owing to strengthening of market position and operating performance, as well as the financial profile over the near term.

JSWCL, a major cement manufacturer with a capacity of 14 million tonnes (mnt), is poised to become a leading player in the country by FYE24, with its plans to increase its cement capacity to 25mnt, said the ratings agency.

From its incorporation in 2009, the company has grown organically and inorganicallly, adding capacities in the south, east and western regions of India, increasing the capacity by 1.2x over the past five years (FY16: 6.4mnt).

At present, JSWCL is among the top 10 players in all its regions of operations and the expansion is likely to strengthen its market position further. The company has limestone reserves of around 140mnt in Nandyal and 80mnt at its subsidiary, Shiva. In addition, it won limestone reserves of around 125mnt and 205mnt in Gujarat and Rajasthan, respectively, while Shiva won 47mnt of limestone reserve in Odisha, which will aid the company's growth over the medium term.

JSWCL is a part of the JSW group, which has presence in various core sectors, including steel, energy and infrastructure in addition to cement.

The company is owned by Adarsh Advisory Services Pvt Ltd, which is wholly owned by Sajjan Jindal Family Trust.  It sources a large part of its key raw material (slag) from its group company, JSW Steel Limited, under a long-term contract at competitive rates.

As a result, 30 percent-40 percent of the total sales volumes is contributed by high-margin Ground-granulated blast-furnace slag. The overall proportion of blended cement in total sales is high at 85 percent-90 percent, indicating lower dependency on limestone and clinker imports, which is beneficial for the company. It expects to further optimise procurement costs by increased sourcing within the group (through Bhushan Power and Steel Limited).

In addition, the company has locked in the majority of its power purchase from JSW Energy Limited, under a long-term agreement for its plants in Dolvi and Vijaynagar, while it purchased an 18 MW thermal power plant from JSW Energy in FY21 (set up to meet the power requirement at JSWCL's Salboni plant).

The company also receives port logistics support from JSW Infrastructure in addition to centralised procurement of coal and other consumables. JSWCL shares the group’s brand name and the group's concerted efforts towards brand building are likely to benefit the company too.

Furthermore, being a part of the JSW group enhances its financial flexibility to raise funds from the banking system/private investors. While an immediate need is not envisaged, the management has confirmed that timely support will be available from the JSW group if required.