Nuvoco Vistas Corp. Ltd - IPO Note

Cement & Construction Materials

Nuvoco Vistas Corp. Ltd - IPO Note

Cement & Construction Materials

Price range
Rs. 560-570
Issue Period:
Aug 09, 2021
Aug 11, 2021
August 09, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 5000 cr.
Public Issue
87,719,297 cr. shares
Market cap post IPO
20358 cr.
Equity Pre - IPO
330.84 cr.
Equity Post - IPO
357.16 cr.
Issue type
Fresh issue and Offer for sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Capacity expansion and balance sheet deleveraging play

Largest cement manufacturing company in East India:
NVCL has increased its capacity by 9x in the last 5 years led by two acquisitions. NVCL acquired 11 mtpa Lafarge asset in FY17 and an Emami asset of 8mtpa in FY21. With these acquisitions, NVCL has strengthened its market leadership in the East region. NVCL has capacity share of approximately 17% in terms of consolidated capacity in East India. In FY21, NVCL sold 17.26 mtpa of cement with 78% of the volumes sold in East India, 15% in North India and 7% in Central India.

Vast distribution network with diversified product portfolio:
NVCL operates through a range of distribution channels and direct sales to improve their reach to customers. They have strong sales, marketing and distribution capabilities in East and North India, and strategic access to some key markets in Central India. As of 31st March, 2021, they have 244 CFAs (162 in East India and 82 in North India) and 16,076 dealers in India (10,091 in East India and 5,985 in North India). This distribution network allows them to effectively target and drive sales within the Trade Segment (73% of total cement sales volume in FY21). Their extensive network of warehouses, logistics partners and dealers in East and North India gives them a competitive advantage in their operating regions. NVCL offers a range of over 50 products across cement, RMX and modern building materials.

Comprehensive suite of brands across all segments:
NVCL has a comprehensive suite of brands across all its segments. Their brands have differentiated characteristics and qualities which fulfill diverse customer needs and thereby attracting new customers as well as retaining and increasing demand from existing customers. Company’s modern building material products are a key differentiator for them. The suite of products under this category include a range of construction chemicals, adhesives, wall putty, dry plaster, cover blocks and dry concrete. MBM products and brands are an important value-added business for NVCL. RMX & MBM segments accounted for ~16% of revenues in FY20.

Focus on operational efficiencies and synergies to improve returns, whilst expanding manufacturing capabilities:
The company is focused on the reduction of power consumption in their clinker and grinding units, as well as heat consumption in integrated units. They have installed waste heat recovery systems across all their integrated Cement Plants. They are also setting up captive power plants at some of their units to further help in cost reduction and operational efficiency of their units by ensuring uninterrupted electricity supply. The company is in the process of implementing clinker debottlenecking at their integrated cement units located at Risda, Nimbol and Sonadih. Additionally, they are undertaking capacity expansion exercises at their Jojobera Cement Plant, to increase its capacity to 6.45 MTPA from 4.95 MTPA and at their Bhabua Cement Plant, to increase its capacity to 2 MTPA from 0.8 MTPA.


Inability to source raw materials and coal at reasonable price:
The cost competitiveness and profitability depend, in part, on the ability of NVCL to source and maintain a stable and sufficient supply of raw materials (limestone, gypsum, slag, water and fly ash) and fuel (including coal and pet coke) at acceptable prices. Any increase in costs of raw materials or coal could impact profit margins. Fluctuations in the quality of coal and pet coke can also have an impact on the operational efficiencies.

Cyclicality of end-user industry:
The demand for cement comes from various sectors such as infrastructure, housing and commercial real estate.  Any downturn in the major cement consuming sectors or the real estate industry could have an adverse impact on NVCL’s business operations.

Concentration of revenue profile in the east region:
Most of NVCL’s Cement Plants and mines are located in the eastern region of India and any adverse development affecting this region, could affect the potential ability of the company to operate and grow its business.

Company Description

Incorporated in 1999, Nuvoco Vista Corporation Ltd (NVCL), a part of Nirma Group Company is the 5th largest cement manufacturer in India with an installed capacity of ~22.3 mtpa. It offers a diversified range of products such as cement, Ready-mix Concrete (RMX), and modern building materials (MBM) i.e. adhesives, wall putty, dry plaster, cover blocks, construction chemicals and dry concrete. It has a strong distribution network with 16076 dealers and 244 clearing and forwarding agents (CFAs). NVCL has 11 cement plants (8 in East India and 3 in North India). Company’s Cement Plants are in the states of West Bengal, Bihar, Odisha, Chhattisgarh and Jharkhand in East India and Rajasthan and Haryana in North India. NVCL operates 49 RMX plants which are in key states in India, enhancing their pan-India presence. Their cement production capacity constituted approximately 4.2% of total cement capacity in India, 17% of total cement capacity in East India and 5% of total cement capacity in North India.


The company intends to leverage their existing manufacturing facilities and distribution network to capitalise on the expected demand for cement products from their customers. Further, with the acquisition of NU Vista and the merger of Nimbol Cement Plant in East and North India respectively, they now have access to high-growth markets like Uttar Pradesh, Maharashtra and Gujarat. They aim to continue to undertake brand awareness and brand building measures targeted in key geographies to increase their market share and revenues from sales of their products.

At the upper price demand of Rs 570, the IPO is valued at 18x FY21 EV/EBITDA, which looks fairly priced when compared to its peers (Ultratech, Ramco Cement, Dalmia Cement). However, considering the up-cycle in the cement industry and expectation of improvement in margins & balance sheet deleveraging, we recommend SUBSCRIBE to the IPO for long term perspective.

Peer comparison (Rs crore) FY19 FY20 FY21  
Company Revenues EPS ROE (%) Revenues EPS ROE (%) Revenues EPS ROE (%) EV/EBITDA
Nuvoco Vista 7052 -1 - 6793 10 5% 7489 -1 - 18
Ultratech Cement 41609 84 9% 42430 200 17% 44726 190 13% 18
Ramco Cement 5146 21 12% 5368 25 13% 5268 32 15% 16
Dalmia Bharat 9484 16 5% 9674 12 2% 10100 66 11% 14

Key Information

Use of Proceeds:
The total issue size is of Rs 5000 crores comprising of fresh issue of Rs 1500 crores & an OFS of Rs 3500 crore.  Out of the fresh Issue of Rs 1500 crores, Rs 1350 crores is proposed to be utilized for debt repayment/prepayment and the balance Rs 150 crores is to be used for general corporate purposes. The balance ~Rs 3500 crores of the issue would be through offer for sale by the shareholders and proceeds would go to such selling shareholders.

Book running lead managers:
Axis cap, ICICI Securities, HSBC Securities, JP Morgan India, SBI Capital Markets

NVCL is promoted by Dr. Karsanbhai K. Patel, who is a successful entrepreneur and is associated with the Nirma Group. The managing team is led by Jayakumar Krishnaswamy, Managing Director of the company. He has been on the Board since September 17, 2018. He is responsible for the cement, RMX and modern building materials divisions of the company. He has experience across FMCG and paint and coating industry.

Financial Statement

Profit & Loss Statement:- (Consolidated)

Yr End March (Rs Cr) FY19 FY20 FY21
Net Sales 7052.00 6793.00 7489.00
Material Cost 1445.00 1231.00 1207.00
Employee Cost 381.00 405.00 482.00
Other Expenses 4308.00 3862.00 4340.00
EBITDA 918.00 1295.00 1460.00
EBITDA Margin 13.00% 19.00% 19.00%
Depreciation & Amortization 498.00 528.00 794.00
EBIT 420.00 767.00 666.00
Other Income 54.00 37.00 34.00
Interest & Finance Charges 457.00 419.00 664.00
Profit Before Tax - Before Exceptional 17.00 385.00 36.00
Tax Expense 43.00 136.00 62.00
Effective Tax rate 253.00% 35.00% 172.00%
Net Profit -26.00 249.00 -26.00
Net Profit Margin - 4.00% -