Nuvoco Vistas Corporation's initial public offering (IPO) opened for subscription on Monday, and will close on Wednesday, August 11. The Rs 5,000-crore IPO of Mumbai-based Nuvoco -- a Nirma group company -- comprises fresh issuance of 263.16 lakh shares, worth Rs 1,500 crore, and an offer for sale (OFS) of 614.04 lakh shares, worth Rs 3,500 crore.

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The company has set a price band of Rs 560-570 apiece for the issue. Investors can bid for shares in the multiples of 26 units. At the upper end of the price band, one lot will cost investors Rs 14,820.

While 50 percent of the issue is reserved for qualified institutional buyers (QIBs), 15 percent is reserved for non-institutional investors and 35 percent for retail investors.

The company aims to use the proceeds from the IPO towards the repayment, prepayment or redemption of certain borrowings, and for general corporate purposes.

Here's what brokerages say about the Nuvoco IPO:

Religare Broking

The brokerage has a positive view on the IPO for the long term.

"Nuvoco stands to benefit from high-growing regions where the company has a strong presence (East India). Its established record of strong performance and reputation for quality products in cement, RMX and modern building materials has helped the company build reputable brands in the building materials industry in India. Its strategically located plants allow the company to sell and market its products across nearby regions," Religare said in a note.

The brokerage has highlighted the continued slowdown in the construction industry and high competitive intensity as key risks for the company.

ICICI Direct

NVCL’s plants are located at various strategic locations in the eastern and northern parts of the country, with three integrated units and five grinding units in the East, and two integrated units and one blending unit in the North, according to the brokerage.

"These locations allow them to effectively sell their products in East and North India as well as access to select key markets in Central India. They are also in the process of enhancing their cement capacity in their existing grinding units in Jojobera Cement Plant and Bhabua Cement Plant in East India. The connectivity to raw materials and their customers allows them to manufacture and sell their cement products in a cost-efficient manner," said ICICI Direct.

The brokerage has not assigned a rating to the IPO.

Anand Rathi

The brokerage recommends subscribing to the issue from a long-term perspective.

"At the upper end of the IPO price band, NVCL is offered at an enterprise value/tonne of Rs 15,300 which we believe is reasonably priced as compared to its listed peers. On the financial front, NVCL is backed by a sound balance sheet and steady cash flows, which makes the company

embark on next round of growth," Anand Rathi said in a note.

"With the planned expansion, lowering debt and other cost control measures, we are also confident that company will maintain the growth levels which is mirroring in the pricing of the IPO," it added.

IDBI Capital

The brokerage has a 'subscribe' rating on the issue.

"We understand NVCL IPO at the upper band is priced at 10x FY23E EV/EBITDA or EV/t of USD131 (exhibit 5). Valuation is at a discount to its large cap peers at 12x-19x FY23E EV/EBITDA. Discount partially factors high debt in its books (FY21 Net Debt / EBITDA of 4.5x) and low ROCE (exhibit 11, 12)," the brokerage said in a note.

IDBI Capital is positive on the upcycle in the cement industry, and the expectations of an improvement in margin and balance sheet deleveraging over FY21-23E.

"NVCL's outlook is tied up with economic activity in Eastern Region. On balance sheet, due to acquisitions, FY21 Net Debt/EBITDA is high at 4.5x (net debt at Rs 68 bn) and NVCL has guided to reduce it to 1.2x in the next 2 years. Debt reduction will be driven by proceed of IPO (Rs14bn) and internal accruals," it said.

First Published:Aug 9, 2021 9:32 AM IST