IPO-bound JSW Cement’s managing director Parth Jindal said the company may put its pursuit of inorganic opportunities on the backburner for the time being – while it remains interested - given the heft of the top two players, Aditya Birla-backed UltraTech and Adani Cement-owned Ambuja Cements and ACC after recent merger and acquisitions (M&A).
"Right now, I would say that we don't have the 'aukaat' to challenge them in any acquisition," Parth Jindal said, referring to the big-ticket deals by UltraTech, ACC and Ambuja Cements, Dalmia Bharat, Shree Cement, and others over the past two years. Jindal was speaking ahead of the launch of JSW Cement’s Rs 3,600 crore initial public offering, which is slated to open on August 7.
Jindal said JSW Cement would focus on greenfield projects as well as brownfield expansion, to reach its near-term target of 41.85 million tonne per annum (MTPA) capacity, which is double the present capacity as of FY25. Jindal said given the relatively strong balance sheets of top cement players in India, JSW does not want to get into a ‘bidding war’ with existing players.
"We will definitely evaluate any asset that becomes available. Looking at the organic roadmap that we have presented to investors, it is far more exciting, as we can pick and choose which geography we want to enter. If any high quality or low value asset becomes available in the geographic footprint that we want to be in, then we will look at it. However, if any asset is interesting to us, it is also interesting to the bigger players, and I don't want to go into a bidding war with a bigger or stronger player," said Jindal.
Parth Jindal said his cement company can carry out capital expenditure at much lower costs per tonne compared to industry peers, be it in greenfield or brownfield projects, or potential acquisitions, once it gets to its near-term capacity goals. Most of JSW Cement’s cement grinding and clinker units are in southern, eastern, and western India, and the company plans to make cement and clinker in the northern markets as well, especially in Rajasthan.
Strength in ‘Green’ GGBS
JSW Cement’s ground granulated blast furnace slag (GGBS) product differentiation is one of its key strengths, said Jindal, which requires relatively lower capital expenditure as producing GGBS does not require clinker. Major infrastructure providers are also using GGBS, as it is considered more energy efficient compared to clinker-based cement.
JSW Cement buys slag from group flagship JSW Steel for southern and western plants, and also has slag linkages with Tata Steel and Jindal Stainless for facilities in the east.
As much as 42 percent of JSW Cement’s production capacity is dedicated to the production of GGBS, which is expected to decline as the firm expands to northern India, where it does not have linkages of slag, but is backed by limestone reserves and upcoming clinker capacity. JSW Cement has limestone reserves worth 1.3 billion tonne, after a series of acquisitions of the blocks over the past few years.
No BPSL Risk
Parth Jindal clarified that JSW Cement does not see any major impact from the Supreme Court's liquidation order for Bhushan Power and Steel (BPSL), which a subsidiary of JSW Steel, as the apex court has subsequently recalled that order and is reviewing the matter.
JSW Cement is planning a grinding unit at Sambalpur in Odisha, the site of BPSL's steel plant. The new cement plant will be co-located at the BPSL site and is also slated to purchase slag and fly ash from BPSL.
"We have a binding contract with BPSL at an arm's length for the supply of slag, as well as fly ash. We see no material risk in terms of any ruling that may happen for or against JSW Steel. It should not impact our contract with the company, as we are buying slag and fly ash at the same price that they are offering to third parties," Jindal added.
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