Birla Corp to Double Cement Capacity to 30 MT by 2027
Birla Corp, the cement business of the MP Birla group, plans to undertake a massive expansion plan to double its cement manufacturing capacity to 30 million tonnes per annum (MTPA) by the year 2027. Its current cement capacity is 15.6 MTPA. Birla Corp is headed by Harsh Lodha and that had been a major bone of contention between the Birla family and Harsh Lodha after he claimed that MP Birla had bequeathed the business to him.
The expansion will happen in phases. In the first phase, the cement capacity will be enhanced from 15.6 MTPA to 20 MTPA by the end of the year 2021. This will be boosted by the 3.90 MTPA greenfield cement plant at Mukutban near Nagpur going on stream. Originally, the eventual target was only to reach 25 MTPA by 2025. However, that target has been expanded to 30 MTPA by the year 2027 due to higher demand visibility.
Birla Corp currently operates 10 cement plants across India and some of its recent plant additions have much better efficiency and profitability compared to the legacy plants. For example, the Reliance Cement plant that Birla Corp acquired in the year 2016 is among the most efficient and profitable in India on operating parameters. The idea of this aggressive expansion is to become a more meaningful player in the Indian cement space.
Indian cement companies have seen solid demand and price traction in the last few quarters, which his also evident in the quarterly numbers. However, consolidation and national presence are the key. At 30 MTPA, Birla Corp would still be just one-fourth the size of Ultratech which has a cement capacity of 116 MTPA. Some of the top cement companies in India in terms of manufacturing capacity include Ultratech, Shree Cements, Ambuja/ACC and Dalmia Cements.
Read:- Shree Cements Plans Mega Capacity Expansion
Cement may have perpetual demand but cement companies do well when there is pricing power. Due to a spike in infrastructure spending and a likely turnaround in housing demand, cement demand is likely to take off and prices are expected to be robust. The time is clearly ripe for a massive capacity expansion spree.
Also See:- Sector Update - Cements
Grey Market Premium of Paras Defence & Space Technologies IPO
The Rs.170.78 crore offer for sale of Paras Defence & Space Technologies consisted of a fresh issue of Rs.140.60 crore and an offer for sale of Rs.30.18 crore. The issue had been priced in the band of Rs.165 to Rs.175 per share. The issue had closed for subscription on 23-Sep and the basis of allotment had been finalized on 28-Sep.
With demat credits to eligible shareholders on 30-Sep, Paras Defence is slated to get listed on the bourses on 01-October, Friday. Ahead of listing, one of the key parameters of evaluating the potential listing is the GMP or the grey market price.
It must be remembered that the GMP is not an official price point, just a popular informal price point. However, in most cases, it has proved to be a good informal gauge of demand and supply for the IPO. Hence it also gives a broad idea of how the listing is likely to be and how the post-listing performance would be.
While the GMP is just an informal approximation, it has been generally observed to be a good mirror of the real picture. More than the actual price, it is the GMP trend over time that matters.
One of the key factors that impacts the GMP in most of the cases, is the extent of oversubscription. Now, Paras Defence & Space Technologies IPO was oversubscribed a whopping 304.26 times overall. On a granular basis, it was the HNI segment that led the way with 927.70X subscription while QIBs were 169.65X and Retail was 112.81X. That has surely made the GMP premiums very robust in the informal trading market.
Check:- Paras Defence & Space Technologies IPO Subscription Day 3
As per updates on Thursday, 30-Sep, the Paras Defence & Space Technologies IPO is commanding a premium of Rs.235 over the issue price in the grey market. The GMP has been steady in the range of Rs.200 to Rs.235 over the last 10 days.
The GMP did open at around Rs.160 but soon soared above Rs.200 and has held there ever since. That was expected after the sterling response to the Paras Defence IPO and robust oversubscription that the issue received.
The current GMP translates into a 134.29% premium over the upper band of the issue price of Rs.175. Also, it hints at a listing price of approximately Rs.410 when the stock lists on Friday 01-Oct. Of course, subsequent price performance will depend on HNI selling, since funded applications were quite high.
Lava International Files DRHP for Rs.1,500 crore IPO
One of India’s homegrown mobile phone manufacturers, Lava International, plans to hit the IPO market and has already filed the draft red-herring prospectus with SEBI. The next steps will be undertaken after SEBI approves the DRHP and gives its observations. Lava sells mobiles and other electronic accessories under the brands of LAVA and XOLO.
The IPO will comprise of Rs.500 crore by way of fresh issue. The balance will be an offer for sale of 4.373 crore shares by the existing promoters and some early investors in the company. While three of the promoters will be offering shares in the OFS, there will also be participation in the OFS from Unic Memory Technologies and Tupperware Kitchenware.
The proceeds of Rs.500 crore from the fresh issue component will be utilized for 3 demarcated purposes. Rs.100 crore will be allocated for marketing and brand building while Rs.150 crore will be set aside for inorganic acquisitions and strategic partnerships. The company will use another Rs.150 crore to invest in subsidiaries to fund their working capital.
Lava International manufactures, distributes and services mobile handsets, tablets and other electronic accessories. Despite having a manufacturing capacity of 42.52 million handsets at Noida, Lava is more into marketing products of other originators. For example, Lava has licensing agreements with Lenovo and Nokia to distribute their handsets and also handle the post-sale servicing.
Apart from manufacturing handsets, Lava also offers its mobile handset solutions to other OEM players. These solutions encompass sourcing, design, manufacture, quality testing, embedding of software as well as distribution. This has emerged as the new growth area and Lava wants to be fully prepared for the opportunities opened by the Make in India campaign.
For the fiscal year ended March 2021, Lava announced total revenues of Rs.5,513 crore and net profits of Rs.173 crore. In the outsourcing business 2-3% net margin is the norm. Profits were up almost 66% on a YoY basis for FY21.
List of Upcoming IPOs in October 2021
Waaree Energies Files DRHP for Rs.1,350 Crore Fresh Issue
Waaree Energies, which specializes in solar PV (photovoltaic) module manufacturing, is planning to come out with a fresh issue of Rs.1,350 crore. In addition, the company will also undertake an offer for sale (OFS) of 40.08 lakh shares by the existing holders. Hence the actual size of the issue will be much bigger, if the OFS component is also added.
The proceeds of the fresh issue component will be predominantly used for financing the cost of setting up a 2 GW per annum of solar cells manufacturing capacity. In addition, the company will also invest in 1 GW per annum of solar PV modules manufacturing. Both, the solar cell manufacturing facility and the solar PV manufacturing facility will be located in Degam Village in Gujarat.
Currently, Waaree Energies is predominantly into solar PV manufacturing with an installed capacity of 2 GW capacity. If the new expansion plan is factored in, then Waaree Energies will have an enhanced capacity of 3 GW of PV modules. Currently, Waaree Energies has 3 manufacturing plants located at Surat, Tumb and Nandigram.
The above will be part of a continuous capacity expansion program for Waaree Energies. It is now estimated that 3 GW solar PV manufacturing facility will be fully operational by the end of financial year 2022 and the 4 GW solar cells manufacturing capacity will be fully operational and on stream by the end of fiscal year 2023.
The company is an existing profit making company. For the Financial year ended March 2021, Waaree Energies reported net revenues of Rs.1,953 crore and net profits of Rs.48.19 crore. This compares favourably with the profits of Rs.39 crore in the previous year but the top line was slightly lower on a YoY basis. However, this was more an outcome of the pandemic and the resultant lockdowns with things expected to normalize.
The issue will be lead managed by Axis Securities, HSBC Securities and ICICI Securities. The dates will be finalized after SEBI approves the DRHP.
NCLT Instructs Zee Entertainment Board to Call for EGM
In its preliminary hearing on 30th September, the National Company Law Tribunal (NCLT) has instructed Zee Entertainment board to consider the EGM requisition put forth by Invesco Fund. Incidentally, Invesco Fund holds 17.88% stake in Zee Entertainment and is the single largest shareholder in Zee. The case is slated for its next hearing on 04-October.
After listening to the arguments put forth by both the counsels, the NCLT bench observed that holding of the EGM was not at the discretion of the board of the company. On the contrary, under Section 100 of the Companies Act, 2013, the board was obliged to call the AGM if shareholders with more than 10% of the paid-up capital demanded an EGM.
Check:- Invesco Approaches NCLT to Call EGM for Change of Zee Board
Invesco has not objected to the merger of Zee Entertainment with Sony Pictures. However, it has a problem, with the board composition. On 11-Sep, Invesco had called for the resignation of CEO Punit Goenka as well as directors; Manish Chokhani and Ashok Kurien. On 13-Sep, Zee announced that Kurien and Chokhani had resigned. However, Punit Goenka was appointed CEO of the merged entity for another five years.
Invesco has called for the AGM on two grounds. It wants Punit Goenka removed from the post of CEO and MD of Zee Entertainment. Secondly, it wants to nominate 6 directors to the board of Zee. Invesco is of the view that the Subhash Chandra family was exercising clout that was much larger than their pre-merger holding of 3.44%.
Also Read:- Invesco wants EGM to Replace Punit Goenka from the Post of MD & CEO
Invesco has demanded that the new board that is appointed based on the EGM voting should reconsider the merger proposal with Sony from ground zero. One objection that Invesco has is that the merger gives 53% stake in the combined entity to Sony and only 47% to Zee. This will substantially dilute the holding of Invesco from 18% to 8.4%. Ironically, the Subhash Chandra family will hike its stake in the combined entity from 3.44% to 4%.
Normally, any appointment or removal of directors of media companies requires the prior approval of the Ministry of Information and Broadcasting.
Maruti Suzuki to Cut Car Production by 40% in October 2021
In a move that is significant, and also surprising, Maruti Suzuki has decided to cut its production of passenger cars by 40% for the month of October. This decision has been triggered by the tremendous shortage of microchips in the global market. Microchips are intelligent pieces of silicon that enable systematic and computerized processes to run efficiently in equipment.
The decision is rather surprising because the 3 months beginning in October are the peak festive season. Normally, auto companies report nearly 30-35% of their full year sales only during the festive season. The festive season begins with Navaratri and concludes with Christmas shopping towards the end of the year.
Without getting into specific numbers, Maruti announced that it would operate at 60% capacity at its car manufacturing plants. This is actually better than the month of September when Maruti had operated at just 40% of capacity. Microchips demand has surged in the last 2 years and auto companies have struggled to ensure regular supply commitments.
The production at its Haryana plant as well as its outsourcing plant in Gujarat are likely to be adversely impacted by this production cut. Apparently, the problem is not about sales falling but of sales failing to pick up to the extent expected. As a result, Maruti will be selling out of its inventories and the production cut will ensure that demand and supply are matched.
Both the Haryana plant and the Gujarat plant have worked lesser shifts in August due to the microchips shortage. Suzuki Motor Gujarat is wholly owned by Suzuki of Japan and it makes fully built Baleno and Swift cars on behalf of Maruti. The lower production only means that the car manufacturer is not keen on building inventory during the festive season.
However, other car manufacturers are not cutting production. Some of the major auto players in India like Hyundai, Tata Motors and Mahindra & Mahindra are maintaining current levels of output. On the other hand, a number of smaller players like Volkswagen, Skoda and MG Motors are even looking to boost their production cycles during this period.