Nuvoco Vistas shares are trading at a discount of 17% to the issue price of Rs 570.
Nuvoco Vistas IPO: The grey market had already indicated the downward trend due to weak market conditions in the previous week.
The shares of India’s fifth largest cement maker, Nuvoco Vistas Corporation, began trading on August 23 at a 17.37 percent discount to the issue price of Rs 570. On the BSE, the stock opened at Rs 471 while on the National Stock Exchange, it opened at Rs 485.
Due to the previous week’s dismal market conditions, the grey market had already signalled a negative trend. Despite robust subscription, the impact was clearly visible in Friday’s CarTrade Tech offering, which was down 7.3 percent at close in debut trade.
During the week of August 9-11, the cement maker’s Rs 5,000-crore initial public offering had a lukewarm reaction from investors, with only 1.71 times subscriptions mostly driven by qualified institutional purchasers (QIBs). The IPO size was set at 6.25 crore equity shares, however the issue got bids for 10.7 crore equity shares.
The portion reserved for QIBs was 4.23 times subscried, whereas the portions reserved for non-institutional investors and retail investors were only 66 percent and 73 percent subscribed, respectively.
The offer included a fresh issue of Rs 1,500 crore to be utilised for debt repayment and a Rs 3,500 crore offer for sale by promoter Niyogi Enterprise.
All brokerages advocated long-term subscriptions, noting the sector’s confidence, the government’s push for infrastructure and affordable housing, the issue’s robust balance sheet, leadership in the Eastern Region, and a debt-to-equity ratio below the industry average.
Nuvoco Vistas is the 5th largest cement company in India and the largest cement company in East India in terms of capacity. As of December 2020, cement plants have an installed capacity of 22.32 million tonnes per annum.
“Considering the growth prospects in light of affordable housing push to meet PMAY (Pradhan Mantri Awas Yojna) for all by 2022, planned expansion, integration of NU Vista, lowering debt and other cost control measures, we recommend to “subscribe” the issue for long term perspective,” said Ashika Stock Broking.
With its highly-diversified product portfolio and concentration on premiumisation, Nuvoco stands well to get the favourable and supporting industry growth to create sustainable business as well as profitable growth in the medium to long-term, according to the brokerage.
“The ratio of net debt to EBITDA is currently at 4.5x, but this will decrease as they pursue their goal of repaying debt using IPO proceeds. On the EV/EBITDA front, it is still selling at a discount to most of its large cap rivals, at 15x-19x FY22E EV/EBITDA, and on the operational front, it is better, with 19% margins vs industry margins of 14-16% “KRChoksey went on to say.
In 2014, the Nirma Group entered the cement market with a greenfield cement factory in Nimbol. It has been able to successfully increase the cement business through acquisitions such as the acquisition of LafargeHolcim’s Indian cement division in 2016 and the acquisition of NU Vista in 2020.
“The smart acquisition of NU Vista from Emami group would remain our focus to rerate our view on the company,” said KRChoksey.
“NU Vista deal has brought in lot of synergies to the company and should augur well in the future. The inclusion of its brand ‘Double Bull Cement’ and its variants in their brand portfolio has supported Nuvoco’s growth. On operational front NU Vista has also been EBITDA positive,” the brokerage explained.
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