JSW Cement IPO in 2021 should mop up Rs 3,500 crore: Parth Jindal

Parth Jindal is also preparing for a retail launch of its paints business'

JSW Cement is busy chalking out plans to add another 8 million tonne in time for its initial public offering planned for 2021. Not just cement, Parth Jindal, managing director for JSW Cement is also preparing for a retail launch of its paints business in April and have a turnaround for Delhi Capitals, the Indian Premier League team for Delhi. In an interview with Amritha Pillay, Jindal shares more details:

What is the timeline for the planned IPO for the cement business?

It should be the first half of calendar year 2021. We plan to dilute 15 per cent stake in the first round and then the mandatory 25 per cent has to be met in the next three years. We look to raise around Rs 3,500 crore, to fund our expansion plan to reach 30 million tonne capacity.

What is the future expansion plan for cement?

Our Odisha project, which is in the final stage, will take us to 14 million tonne per annum (MTPA) from the current 12.6 MTPA. In the next 18 to 24 months, I am planning to take the company to 20 million tonne, through brown-field adding capacity in east, south and north markets. This will involve an investment of Rs 1,500 crore, of this Rs 500 crore will be internal accruals and the remaining Rs 1,000 crore will be raised through debt.

What keeps you away from the North India market?

We took limestone mines in recent auctions, but land remains to be acquired. The JSW group does not have a presence in the north other than in the power sector. But post the IPO, we will look at the north market. Our current strategy is based on the ability to source fly ash and slag from our group companies, which is also our biggest advantage. With Bhushan Power and Steel coming into the group, slag availability is possible in the east India market.

What gives you the confidence to expand, when cement prices are still weak?

Our growth rate has been at 54 per cent last year, against the industry average of 15 to 20 per cent, so we are clearly eating into somebody else’s market share. We also have a significant cost advantage over fly ash and slag and also save on raw material transportation costs. The steel sales network also helps sell cement and with the paint launch, we will become a one-stop solution. That adds to our confidence.

Take us through your plans for the paint business?

We are looking at the first city launch around April and will start with South India and gradually add more cities for decorative paint. The city launch is for Bangalore, Hyderabad, Kerala and Tamil Nadu, and is expected to be pre-monsoon. The total investment outlay for this business is Rs 1000 crore, of which Rs 600 crore has already been spent. The remaining Rs 400 crore will be invested in the next 18 months time.

Is there more development on the sports business side?

For the sports business, ours hands are full with Delhi Capitals and the focus is to turnaround that at the moment.
 

How much is the cement business expected to contribute to the group’s revenue once the expansion is complete?

At 20 MTPA, we are looking at Rs 10,000 crore topline. By that time, the group will be larger, and may be our contribution would be 8 to 10 per cent. However fast I (JSW Cement) grow, steel is growing faster.

Industry experts few years back were apprehensive about the clinker import plan. Where does it stand?

Clinker import continues for our west and east India operations. Our clinker unit in the UAE is under construction, the import from third-party will move to captive imports once that is complete in March 2020. Industry and analysts were apprehensive, when we started this and I am happy we were private then, giving us time to prove the strategy. It gives us the ability to have a low capital employed business, as we do not need to set up clinker units. Our strategy was to first set up grinding units and then backward integrate it.

Your cement expansion is expected to be brown-field. Is the company shying away from acquisitions?

The valuation became very steep. We used the group’s support to bid for Lafarge and Binani, but the valuations went way higher than what we thought was fair value. Looking at how efficiently we can add 6 million tonne, inorganic looks inefficient, post-IPO surely this will change.