Penna Cement Again Files For Rs 1,550-Crore IPO
Small rock, pumas, and sand, different types of block material, sit in a pile before being mixed into cement during production. (Photographer: Meg Roussos/Bloomberg)

Penna Cement Again Files For Rs 1,550-Crore IPO

In its second attempt to go public, Penna Cement Industries Ltd. has sought the market regulator’s approval to launch its Rs 1,550-crore initial public offering.

The south- and west-focussed cement maker aims to raise Rs 1,300 crore via fresh issue of equity shares and the balance Rs 250 crore through an offer-for-sale by its promoter PR Cement Holdings, according to its draft red herring prospectus. The company in November 2018 had first filed draft papers for an IPO.

Penna Cement, according to a media statement, expects the country’s cement industry to grow at an annualised rate of 6-7% between FY21 and FY26 on account of infrastructure investments, healthy revival of the housing demand and various government initiatives.

Investment Bankers appointed to the issue are Edelweiss Financial Services Ltd., Axis Capital, ICICI Securities, JM Financial and Yes Securities (India).

The company is the second cement maker this year to seek the Securities and Exchange Board of India’s approval to hit the capital market. Earlier this month, Nirma Group’s Nuvoco Vistas Corp. filed for a Rs 5,000-crore maiden offer. This comes at a time a renewed surge in coronavirus cases in the country has kept equity investors on the edge

Objective

Penna Cement plans to use the proceeds from the IPO to:

  • Rs 550 crore: repay or prepay its certain borrowings.

  • Rs 105 crore: fund capital expenditure requirements for its KP (Krishnapatnam) Line II Project.

  • Rs 80 crore: upgrade 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, and general corporate purposes.

Penna At A Glance

  • Penna Cement operates out of four integrated manufacturing facilities and two grinding units across Andhra Pradesh, Telangana and Maharashtra with an aggregate capacity of 10 MMTPA as on March 31, 2021.

  • It’s expected to reach 16.5 MMTPA by FY2024.

  • 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.

  • It has commissioned one of the largest port-based cement terminals in India at Krishnapatnam, with an automated ship loading facility and packing terminals at Cochin, Gopalpur and Karaikal ports.

Financial Performance

  • Penna Cement’s Ebitda margin expanded to 19.4% in FY21 from 15.6% in the preceding fiscal.

  • As on March 31, 2021, the company’s total indebtedness stood at Rs 1,351.9 crore with a debt-to-equity ratio of 1.17. After the IPO, this ratio is set to go down.

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