India is the second-largest cement-producing country. India’s cement industry is likely to witness a healthy growth trend in the coming years’ on-demand revival in the post-Covid-19 era. Infrastructure development with new roads, highways, and freight corridors and the boost to affordable housing in the recent budget.
Against this backdrop, Penna Cements, a Hyderabad-based cement manufacturing company, has filed a draft red herring prospectus (DRHP) with SEBI to come up with an Initial Public Offering (IPO). It is one of the largest cement companies in India that are held privately.
As the rally in the equity markets continues amid the second wave of the Covid-19 pandemic, IPOs continue to attract investors. Here is all you need to know about the Penna Cement IPO launch date, the Penna Cement IPO price and how to apply for the Penna Cement IPO.
Penna Cements has filed papers with SEBI for an initial share offering amounting to Rs. 1,550 Crores in a second attempt to go public. The company had first attempted to go public in November 2018 and also received SEBI’s approval. However, the company decided not to launch the IPO.
Penna Cements IPO worth Rs. 1,550 Crores includes fresh issue of equity shares worth Rs. 1,300 Crores and promoter stake sale through offer sale amounting to Rs. 250 Crores.
The capital infusion is required for the following purposes:
|Purpose of Utilization||Details||Amount in Crores|
|Repayment of Borrowings||Repayment/ pre-payment in full or part of borrowings||550|
|Capital Expenditure||A KP Line II project||105|
|A cement mill in Talaricheruvu||80|
|Waste heat recovery plants in Tandur||130|
|Waste heat recovery plants in Talaricheruvu||110|
|General Corporate Purposes||Not specified||Not Specified|
Edelweiss Financial Services Limited, Axis Capital Limited, JM Financial Limited, ICICI Securities Limited, and YES Securities (India) Limited are the lead merchant bankers of the IPO. The registrar of the IPO is KFin Technologies Private Limited.
One of the promoters, P R Cement Holdings Limited, is selling a part of their stake as an offer for sale to the public amounting to Rs. 550 Crores. The pre-offer stake of P R Cement Holdings Limited was 33.41%, with approximately 4.47 crore shares.
The proportion of the IPO available for retail investors is expected to be 35%. Qualified Institutional Bankers (QIBs) are expected to have a share of 50%, and the balance of 15% would be for Non-Institutional investors (NII).
Penna Cements IPO shall be listed on both the National Stock Exchange and the Bombay Stock Exchange.
Established in 1991, Penna Cements Industries Limited manufactures cement at four integrated facilities and has two grinding units across Telangana, Andhra Pradesh, and Maharashtra with an aggregate capacity of 10mtpa. The Company has a 32MW waste heat recovery system and a 77MW coal-based captive power generation plant.
The company has a strong presence in India’s Southern and Western states, and their 25 years of operation helps them leverage their brand to build an extensive distribution network. They have also expanded to East Indian markets and Sri Lanka and continue strengthening their presence in these locations.
The products of the company include Ordinary Portland Cement, Blended Cement, and Slag Cement.
The cement industry is capital intensive. The company would require substantial money to build its facilities, purchase equipment, and develop and implement new technologies in the new and existing facilities.
The financial indicators that highlight the performance of the company are as follows:
|Particulars as on March 31, 2021||Amount (INR)|
|Net Worth||11,571.51 Mn|
|Profit After Tax||1,520.73 Mn|
|Net Cash Flow from Operations||5,627.96 Mn|
|Earnings per Share||11.36|
|Net Asset Value||86.48|
There are no auditor qualifications to the restated financial statements filed with the regulator.
In the last financial year, Penna Cements commissioned line II of their Boyareddypalli facility, which increased their clinker production capacity from 1.50 MMPTA to 4.00 MMPTA in July 2020. They also set up the Waste Heat Recovery unit at line II of their Boyareddypalli facility with a capacity of 15.00 MW in March 2021. They also set up a packing terminal of 0.50 MTPA capacity at Karaikal in Tamil Nadu in March 2021.
The grinding unit, set up by the company, near the Krishnapatnam port in Andhra Pradesh, helps in strategically catering to the nearby catchment areas and other coastal regions. The company has purchased a vessel with a capacity of 25,000 metric tonnes to transport the cement to the packing units.
Penna Cements has a comfortable liquidity profile and is supported by the positive cash flow from operations generated by the business.
The management appreciates the fact that their business is not free from risk. Penna Cements operates in a highly competitive market. The Indian Cement industry is fragmented, with only a few prominent players and numerous medium and small cement manufacturers. The competitors of Penna Cements may have a better relationship with distributors, larger manufacturing plants, better cost-efficient techniques, and the benefit of government subsidies. As a result, Penna Cements must improve efficiencies and reduce logistics, marketing, and manufacturing costs to have competitive pricing for their products. The cement industry is expected to also see consolidation, with prominent players acquiring smaller companies with greater access to capital. Thus, the risk of lower margins may adversely affect the operations of the company.
However, the company’s promoters, namely P R Cement Holdings Limited, P. Prathap Reddy, and Pioneer Builders, have an established track record of efficient management and completion of projects. They have the requisite industry knowledge and long-standing experience. With access to good quality coal and other raw materials and strategically located facilities, Penna Cements is well-positioned to benefit from the growth in the Cement Industry. The company’s solid operational and financial results put the company on the trajectory of growth and expansion.
Penna Cements IPO Launch Date
Penna Cements IPO launch date or open and close dates are yet to be announced. The exact date for retail and institutional investors to participate in the initial public offering is not confirmed.
Penna Cements IPO Price
The face value of the issue is Rs. 10/ share; however, the price band for the IPO is yet to be disclosed.
The company’s peers have a Price to Earnings ratio (P/E) in the range of approx. 130x to 14x.
The Penna cements IPO expected share price will be decided in consultation with the merchant bankers by the Company.
How To Apply For Penna Cements IPO with TradeSmart
For someone who already invests in stock markets, the most convenient way to apply for Penna Cements IPO is through the Demat account. However, for new investors/ someone who does not have a Demat account, using the TradeSmart application may be an intelligent choice. The application ensures that the user has a smooth and hassle-free IPO application experience.
Here are the steps that will help you complete your IPO application procedure on the TradeSmart app:
Step 1: Register to the TradeSmart platform and use their ‘Box‘ interface to apply for Penna Cements IPO. After logging into Box, select the “IPO” option from the ‘Portfolio’ menu in your TradeSmart Box account and search for the Penna Cements IPO from the list of current and upcoming IPOs.
All the relevant IPO information, such as the open and close date, minimum order quantity, price range, and issue size, will be visible next to the IPO name.
Step 2: After locating the Penna cements IPO in the list, click on the ‘Bid’ button next to participate in the IPO offer. TradeSmart allows you to bid for an IPO and pay through your UPI ID.
Step 3: Submit your bid at the cut-off price or at a price that matches the value you assign to the company’s share. However, you will have to at least purchase a quantity equal to the minimum lot size.
After finalizing the quantity and price for one or multiple bids, you can confirm that you have read the RHP (Red Herring Prospectus or IPO Draft Prospectus) and accept the UPI mandate on your UPI app to block the IPO application amount.
You shall receive an SMS from the relevant exchange confirming your application. You can also check the status of your application in the ‘My Application’ tab on the TradeSmart app.
With this, your application for the Penna Cements IPO will be confirmed in a few easy steps through the TradeSmart application.