Penna Cements gets Nod for Rs.1,550 Crore IPO

Hyderabad based Penna Cements, which had filed DRHP with SEBI for its proposed IPO about 2 months back, has secured IPO approval from SEBI. It can now go ahead with the IPO and can take up the next steps like filing the RHP with the Registrar of Companies (ROC), doing the road shows and fixing the IPO dates as well as the price band for the issue.

The IPO of Penna Cements will be for Rs.1,550 crore. This will comprise of Rs.1,300 crore by way of fresh issue while Rs.250 crore will be way of offer for sale (OFS) wherein the promoters will hive off part of their stake in Penna Cements to the public. PR Cements, the holding company of Penna Cements, will offer its shares in the OFS.

Out of the fresh issue proceeds of Rs.1,300 crore, Penna will use Rs.550 crore for repaying debt. A sum of Rs.105 crore will be allocate for capex at its KP Line 2 project. Penna will invest another Rs.80 crore in upgrading its raw grinding cement plants. Finally, a total of Rs.240 crore will be used to set up waste heat recovery plants at 2 locations.

Penna Cements currently has a total of 4 integrated cement plants and 2 grinding units that are spread across the states of Telangana, AP and Maharashtra. Its current cement making capacity is 10 million tonnes per annum (MTPA) and as per its ongoing expansion plan, the capacity will increase to 16.50 MTPA by the year 2024.

For the Mar-21 quarter, Penna Cements had reported top line revenues of Rs.2,476 crore and net profits of Rs.152 crore implying; net margins of 6.14%. The profits had spurted by over 6-fold yoy due to robust cement prices. This is the second major cement IPO in the year 2021 after Nuvoco Cements of the Nirma Group raised Rs.5,000 crore in Aug-21.

Cement stocks have been in the limelight of late due to robust demand and higher cement prices. Cement demand is expected to grow at 7% CAGR over next 5 years and the key to leveraging this opportunity is capacity and reach. Interestingly, Nuvoco was the first cement company IPO after a gap of almost 14 years. We should hopefully see more of them now.

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