Hyderabad-based Penna Cement gets Sebi nod for Rs 1,550 crore IPO

The IPO includes fresh issue of Rs 1,300 crore and anoffer for sale of up to Rs 250 crore by its promoter PR Cement Holdings, which currently holds 33.41% stake in the company

Hyderabad-based Penna Cement Industries has received approval of capital markets regulator Securities and Exchange Board of India (Sebi) to go ahead with its Rs 1,550-crore initial public offering (IPO).

The IPO includes a fresh issue of Rs 1,300 crore and an offer for sale of up to Rs 250 crore by its promoter PR Cement Holdings, which owns a 33.41 per cent stake in the company.

Penna Cements plans to utilise part of the fresh capital raised for repayment of Rs 550 crore of certain borrowings besides funding capital expenditure requirements of Rs 105 crore for its KP Line II Project. The firm will use Rs 80 crore towards upgrading its raw grinding and cement mill in Talaricheruvu, Rs 110 crore and Rs 130 crore towards setting up a waste heat recovery plant in Talaricheruvu and Tandur, respectively, the DRHP said.

Set up in 1991, the Hyderabad-based company is promoted by P Prathap Reddy, Pioneer Builders and P R Cement Holdings Ltd.

Penna Cement, profitable since inception on a standalone basis, has a strong brand recall in the southern and western states of India. It operates out of four integrated manufacturing facilities and two grinding units across Telangana, Andhra Pradesh and Maharashtra with an aggregate capacity of 10 mmtpa as of March 2021, and its capacity is expected to reach 16.5 mmtpa by fiscal 2024. In FY21 it met 53 % of its power requirements from captive sources.

In May 2019, the company acquired Singha Cement, a Sri Lankan Cement Company that operates a packing terminal in Colombo, to augment its focus on having a port-based distribution strategy. Additionally, in March 2018, it has commissioned one of the largest port-based cement terminal in India at Krishnapatnam with an automated ship loading facility and packing terminals at Cochin, Gopalpur and Karaikal ports. Recently Union Minister Sonowal inaugurated a bagging and bulk cement terminal at Syama Prasad Mookerjee Port.

In order to boost its port-based distribution strategy, it acquired a self -discharging cement carrying vessel with a maximum cargo capacity of 25,500 tonnes. Port based logistics infrastructure enables to manage cost efficiencies in the transportation of the cement and clinker products to new markets as well as in the procurement of imported coal through the ports. In FY21, the company’s revenue from operations stood at Rs 2,476.4 crore, while its operating profit was at Rs 479.8 crore.

Axis Capital Limited, ICICI Securities Limited, Edelweiss Financial Services Limited, Yes Securities (India) Limited and JM Financial Limited are the bankers to the IPO.

The cement industry in India is expected to grow at a CAGR of 6-7 per cent between FY21 and FY26, due to heavy infrastructure investments, healthy revival of housing demand, and various government initiatives. The Centre's allocation of Rs 18,000 crore additional outlay for PMAY-U under the Aatma Nirbhar Bharat scheme is expected to drive demand for underlying sectors such as cement. The scheme supports the construction and infrastructure segment by reducing the lock-up capital and the cost of bank guarantee, this supporting infrastructure-dependent segments like cement.