Nuvoco Vistas - IPO Research Note

Nuvoco
IPO
09/08/2021

Nuvoco Vistas, the cement company promoted by Karsanbhai Patel of Nirma fame, has a pedigree of 22 years in the cement business. It began by acquiring the cement businesses of Tata Steel, L&T and Raymond and recently added cement plants of Lafarge India and Emami to emerge as the fifth largest cement company in India. With an installed capacity of 22.32 MTPA, Nuvoco ranks after Ultratech, Lafarge Holcim, Shree Cements and Dalmia Cements in terms of installed cement capacity. 

However, Nuvoco is the largest cement company in the East and has 17% of the total capacity in the East and 5% capacity in the North. It ranks among the top-4 ready mix concrete manufacturers in India. Its 11 cement plants are distributed, 8 in the East and 3 in the North while it has 49 RMX plants across India. Nuvoco has seen its installed capacity double in the last 5 years. 

Nuvoco Vistas IPO Details

 

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

09-Aug-2021

Face value of share

Rs.10 per share

Issue Closes on

11-Aug-2021

IPO Price Band

Rs.560 - Rs.570

Basis of Allotment date

17-Aug-2021

Market Lot

26 shares

Refund Initiation date

18-Aug-2021

Retail Investment limit

13 Lots (338 shares)

Credit to Demat

20-Aug-2021

Retail limit - Value

Rs.192,660

IPO Listing date

23-Aug-2021

Fresh Issue Size

Rs.1,500 crore

Pre issue promoter stake

95.24%

Offer for Sale Size

Rs.3,500 crore

Post issue promoters

71.03%

Total IPO Size

Rs.5,000 crore

Indicative valuation

Rs.20,360 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

50%

Retail Quota

35%

Data Source: IPO Filings

Some of the advantages in the business model of Nuvoco Vistas are as under.
•    It is the largest cement producer in the fast-growing East India market
•    Most cement plants are located in close proximity to key markets
•    Wide distribution network of over 16,000 dealers pan India
•    Excluding the COVID months, Nuvoco had capacity utilization of above 90%
•    Its cement enjoys EBITDA/tonne of Rs.966 with a net debt/EBITDA ratio of 4.50

A quick look at the financials of Nuvoco Vistas

Over the last 3 years, Nuvoco Vistas has shown steady revenues while the EBITDA is up more than 50% over last 2 years, improving EBITDA margins by 619 bps. 
 

 

Particulars

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Net Worth

Rs.6,959.45 cr

Rs.5,414.95 cr

Rs.5,126.94 cr

Revenues

Rs.7,488.84 cr

Rs.6,793.24 cr

Rs.7,052.13 cr

EBITDA

Rs.1,494.35 cr

Rs.1,333.85 cr

Rs.971.44 cr

Net Profit / loss

Rs.(25.92) cr

Rs.249.26 cr

Rs.(26.49) cr

ROCE

4.21%

7.66%

4.30%

Data Source: Company RHP

We have considered ROCE instead of ROE as Nuvoco Vistas has made losses in FY21 and FY19. Revenues have been more or less static over the last 3 years, but the impact of increased capacities should show up in the post-COVID scenario. Also, the book value at over Rs.230 acts as a buffer for the value of the stock.

Out of the Rs.1,500 crore raised by way of fresh issue, Rs,1,350 crore will be used for pre-payment of loans and other borrowings. With net debt at Rs.6,730 crore, this debt repayment will help the company reduce leverage and also improve the net debt/EBITDA ratio and ROCE.

Investment Perspective for Nuvoco Vistas

While the company made profits in FY20, it has made small net losses in FY21 and FY19. However, if you look at Nuvoco Vistas as a macro play on cement demand, especially in East India, then the story looks a lot more compelling.

a)    The overall capacity utilization of 77.6% for cement and 83.3% for clinker is almost back to pre-COVID levels. This should facilitate better absorption of fixed costs and higher profits going ahead.

b)    Apart from being best positioned to serve markets in the East and the North, Nuvoco plants in Chhattisgarh and Rajasthan allows the company to easily serve the markets of Uttar Pradesh, Madhya Pradesh and Maharashtra.

c)    The company is gradually moving from cement manufacturing to building solutions. This is evident from their diverse product mix consisting of chemicals, adhesives, wall putty, dry plaster, cover blocks and dry concrete. This also de-risks their portfolio.

d)    Since 1999, when it took over the cement operations of Tata Steel, Nuvoco has a track record of completing and integrating cement acquisitions seamlessly into its model. That is key to future inorganic growth plans.

e)    The ready-mix-concrete business contributes Rs.1,088 crore to the top line which puts Nuvoco in the same league as leaders like Ultratech, ACC and India Cements. 

The issue price values Nuvoco at 50X FY20 earnings. That places the valuation even higher than Shree and Ultratech, the two leaders in India. However, that may not be very representative since the model of Nuvoco is still work-in-progress. Also, the gains of premium products will be evident in the coming years. Investors can look at Nuvoco IPO for its East India domination and as a macro play in infrastructure in India.

Next Article

Devyani International IPO Allotment - How to Check the Allotment Status?

Devyani
IPO
09/08/2021

The Rs.1,838 crore IPO of Devyani International, consisting of Rs.440 crore fresh issue and Rs1,398 crore OFS, was subscribed 116.70X overall at the close of bidding on 06 August. The basis of allotment will be finalized on 11 August. If you have applied for the IPO, you can check your allotment status online. 


What exactly is the allotment status of an IPO?

Allotment status indicates the number of shares allocated against number of shares applied for in an IPO. Allotment is categorised as:

IPO Allotted: when full shares allotted against applied.
IPO Partly/ partially allotted: This means less number of shares allotted against applied.
IPO Non- Allotment: No shares allotted. 

 

What could be the reasons for non-allotment of an IPO?

•    The issue price is more i.e. higher than the bid price
•    The application was not selected in the lottery process
•    Error in some of the details like pan card number, Demat Account number
•    More than one application has been submitted via the same pan card number

 

Also Read: How to Increase the Chances of IPO Allotment


You can either check your allotment status on the BSE website or the IPO registrar, Link Intime. Here are the steps.

 

Checking the allotment status of Devyani International IPO on BSE website

Visit the BSE link for the IPO allotment by clicking on the link below

https://www.bseindia.com/investors/appli_check.aspx 


Once you reach the page, here are the steps to follow.

•  Under Issue Type – Select Equity Option
•  Under Issue Name – Select Devyani International IPO from the drop down box
•  Enter the Application Number exactly as in the acknowledge slip
•  Enter the PAN (10-digit alphanumeric) number
•  Once this is done, you need to click on the Captcha to verity that you are not a robot
•  Finally click on the Search Button

The allotment status will be displayed on the screen in front of you informing about the number of stocks of Devyani International allotted to you.

 

Checking the allotment status of Devyani International on Link Intime (Registrar to IPO)

Visit the Link Intime registrar website for IPO status by clicking on the link below:

https://linkintime.co.in/MIPO/Ipoallotment.html

This dropdown will only show the active IPOs, so once the allotment status is finalized, you can select Devyani International from the drop down box.

•  There are 3 options. You can either access the allotment status based on PAN, Application Number or DPID-Client ID combination.

•  Select the appropriate option you want to use and enter the details (PAN / Application Number / DPID-Client ID)

•  Finally, click on the Search button


The IPO status with number of shares allotted will be displayed on the screen.

 

Must Read: Know About IPO Application Process

 

Next Article

Exxaro Tiles IPO Allotment - How to check the allotment status?

Exxaro
IPO
09/08/2021

The Rs.161.09 crore IPO of Exxaro Tiles, consisting of Rs.134.23 crore fresh issue and Rs26.86 crore OFS, was subscribed 22.58X overall at the close of bidding on 06 August. The basis of allotment will be finalized on 11 August. If you have applied for the IPO, you can check your allotment status online.

Allotment status of an IPO - What is it?
Allotment status means the number of shares allocated against number of shares applied for in an IPO. Allotment is categorised as:
IPO Allotted: when full shares allotted against applied.
IPO Partly/ partially allotted: This means less number of shares allotted against applied.
IPO Non- Allotment: No shares allotted.

What could be the reason for non-allotment are?

•    The issue price is more i.e. higher than the bid price
•    The application was not selected in the lottery process
•    Error in some of the details like pan card number, Demat Account number
•    More than one application has been submitted via the same pan card number

Also Read: How to increase the chances of IPO allotment

 

You can either check your allotment status on the BSE website or the IPO registrar, Link Intime. Here are the steps.

Checking the allotment status of Exxaro Tiles IPO on BSE website

Visit the BSE link for the IPO allotment by clicking on the link below

https://www.bseindia.com/investors/appli_check.aspx 

Once you reach the page, here are the steps to follow - 

• Under Issue Type – Select Equity Option

• Under Issue Name – Select Exxaro Tiles IPO from the drop down box

• Enter the Application Number exactly as in the acknowledge slip

• Enter the PAN (10-digit alphanumeric) number

• Once this is done, you need to click on the Captcha to verity that you are not a robot

• Finally click on the Search Button

 

The allotment status will be displayed on the screen in front of you informing about the number of stocks of Exxaro Tiles allotted to you.

Checking the allotment status of Exxaro Tiles IPO on Link Intime (Registrar to IPO)

Visit the Link Intime registrar website for IPO status by clicking on the link below:

https://linkintime.co.in/MIPO/Ipoallotment.html

This dropdown will only show the active IPOs, so once the allotment status is finalized, you can select Exxaro tiles from the drop down box.
• There are 3 options. You can either access the allotment status based on PAN, Application Number or DPID-Client ID combination.

• Select the appropriate option you want to use and enter the details (PAN / Application Number / DPID-Client ID)

• Finally, click on the Search button

 

The IPO status with number of shares allotted will be displayed on the screen.

 

Must Read: Know About IPO Application Process

 

Next Article

Chemplast Sanmar - IPO Research Note

Chemplast Sanmar
IPO
09/08/2021

Chemplast Sanmar, a specialty chemicals manufacturer, has been in existence for last 36 years. The company is in the limelight with the global focus shifting towards India as a focal point for specialty chemicals due to export curbs in China. Globally renowned PE investor, Prem Watsa, has a stake in Chemplast Sanmar via Fairfax Holdings. 

Chemplast has a diversified specialty chemicals portfolio. The focus is largely on specialty paste PVC resin and custom manufacturing intermediates for pharma and agrochemicals. Chemplast is the dominant manufacturer of specialty paste PVC resin, with the only Indian competitor being Finolex Industries. Chemplast Sanmar is the largest producer of Hydrogen Peroxide and the third largest producer of caustic soda in South India. Chemplast is India’s oldest manufacturers of chloromethanes. Its manufacturing capacity is spread across 4 units, with 3 in Tamil Nadu and 1 in Puducherry. 

Chemplast Sanmar IPO Details
 

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

10-Aug-2021

Face value of share

Rs.5 per share

Issue Closes on

12-Aug-2021

IPO Price Band

Rs.530 - Rs.541

Basis of Allotment date

18-Aug-2021

Market Lot

27 shares

Refund Initiation date

20-Aug-2021

Retail Investment limit

13 Lots (351 shares)

Credit to Demat

23-Aug-2021

Retail limit - Value

Rs.189,891

IPO Listing date

24-Aug-2021

Fresh Issue Size

Rs.1,300 crore

Pre issue promoter stake

100%

Offer for Sale Size

Rs.2,550 crore

Post issue promoters

54.99%

Total IPO Size

Rs.3,850 crore

Indicative valuation

Rs.8,554 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

75%

Retail Quota

10%

Data Source: IPO Filings

Some of the advantages in the business model of Chemplast are as under.
•    A vertically integrated business model makes it cost effective
•    Leadership in specialty paste PVC resin, caustic soda and hydrogen peroxide
•    Revenue growth of 200% in the last one year
•    EBITDA on rising trend and above 29% in FY21
•    High entry barriers and limited competition in niche segments
•    Custom manufacturing growing at 12% and projected to sustain in future

A quick look at the financials of Chemplast Sanmar

The company took a hit due to the pandemic last year. However, operations have resumed and the manufacturing capacity utilization is back at peak levels. In FY21, Chemplast Sanmar increased its utilization of the hydrogen peroxide capacity from 21% to 42% while other products have been stable to lower. 
 

Financial Parameter

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Net Worth

Rs.(1,865.68) cr

Rs.846.03 cr

Rs.1411.53 cr

Revenues

Rs.3,798.73 cr

Rs.1,257.66 cr

Rs.1,254.34 cr

EBITDA

Rs.1,127.22 cr

Rs.254.52 cr

Rs.298.05 cr

Net Profit / loss

410.24 cr

Rs.46.13 cr

Rs.118.46 cr

Data Source: Company RHP

The profits and revenues got a boost in the latest fiscal, from revival of production and from inorganic growth. The negative net worth is due to the absorption of losses post the CCVL acquisition. Hence, RONW is not exactly comparable on sequential basis. 

The fresh issue of Rs.1,300 crore will entirely be used for early redemption of NCDs worth Rs.1,238 crore, which will reduce the leverage and improve coverage ratios of the company. However, one area to observe is the sharp reduction in promoter stake from 100% to 55%.

Investment Perspective for Chemplast Sanmar

The company surely finds itself in the right place at the right time. With a vertically integrated model and leadership in most chemicals, the company is poised to benefit from the global boom in demand for specialty chemicals.

a)    Realization per tonne in terms of revenues, in its two core chemicals of specialty paste PVR resin and suspension PVC resin, increased over the last 3 years while the realization has been falling for other chemicals during the same period.

b)    Currently, 45% of India’s demand for specialty paste PVC resins is met through imports. That leaves a huge market opportunity for Chemplast, with its virtual leadership position in specialty paste PVC resins. Custom manufacturing is growing at 12%, with India’s skilled workforce at low rates.

c)    Another key product where there is a huge 50% demand-supply gap in India is suspension PVC resin. With low per capita consumption and big growth in user industries like irrigation and urban infrastructure, this is a big opportunity.

d)    The vertically integrated model gives Chemplast better control over costs and reduces reliance on external suppliers. In situations like today, it helps them to keep input prices in check and protect margins.

e)    The IPO price discounts the latest year earnings at around 17.7X, which is lower than the peer group. However, the company must show evidence of sustaining profits in the coming years with lower volatility.

IPO Investors can look at Chemplast Sanmar as a play on the fast growing specialty chemicals space. The vertically integrated model and reasonable valuations are an added advantage. However, the sharp lowering of promoter stake may be a red flag for investors.

Next Article

Aptus Value Housing Finance - IPO Note

Aptus Value
IPO
09/08/2021

Aptus Value Housing, as the name suggests, is a 12 year old housing finance company with focus on lower and middle-income groups. The focus is largely on self employed persons in semi-urban and rural areas, without access to the traditional banking channels for home loans. Aptus only offers loans directly to the retail customers and does not have any builder funding in its books.

The company is essentially South-based and predominant in the non-urban centres of Tamil Nadu, Andhra Pradesh, Karnataka and Telangana. Despite being in the business of lending to vulnerable segments, Aptus has managed to keep its NPAs in check and has not resorted to any loan restructuring. It counts among its shareholders, prominent names like Westbridge, Madison, Malabar Investments and Steadview Capital. In the OFS, promoters will be selling part of their stake and institutional investors will also participate. 

Aptus Value Home Finance IPO Details
 

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

10-Aug-2021

Face value of share

Rs.2 per share

Issue Closes on

12-Aug-2021

IPO Price Band

Rs.346 - Rs.353

Basis of Allotment date

18-Aug-2021

Market Lot

42 shares

Refund Initiation date

20-Aug-2021

Retail Investment limit

13 Lots (546 shares)

Credit to Demat

23-Aug-2021

Retail limit - Value

Rs.192,378

IPO Listing date

24-Aug-2021

Fresh Issue Size

Rs.500 crore

Pre issue promoter stake

74.87%

Offer for Sale Size

Rs.2,280 crore

Post issue promoters

72.23

Total IPO Size

Rs.2,780 crore

Indicative valuation

Rs.17,495 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

50%

Retail Quota

35%

Data Source: IPO Filings

Here are some of the key merits of the business model
•    Avoiding builder loans keeps their loans to small ticket sizes
•    Major exposure to South India, where default rates have traditionally been low
•    Most small borrowers cannot afford credit downgrades, ensuring timely payments 
•    Aggressive growth strategy as is evident in doubling of AUM in 2 years
•    Maximum loan ticket size Rs.25 lakhs and average ticket Rs.7.5 lakhs

A quick look at the financials of Aptus Value Housing Finance

A quick glance at the financials of Aptus tells the story of a company that has not only shown aggressive growth but has also managed risk in the midst of this growth. Over the last two years, revenues and AUM have doubled while the profits have grown at a much faster pace. Net margins of Aptus have expanded from 34.5% in FY19 to 41.9% in FY21.
 

Financial Parameters

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Net Worth

Rs.1,979.45 cr

Rs.1,709.01 cr

Rs.698.29 cr

AUM

Rs.4,067.76 cr

Rs.3,178.69 cr

Rs.2,247.23 cr

Revenues

Rs.636.62 cr

Rs.500.33 cr

Rs.323.85 cr

Net Profit / loss

Rs.266.94 cr

Rs.211.01 cr

Rs.111.56 cr

Net Profit Margins

41.93%

42.17%

34.45%

Data Source: Company RHP


The business model addresses a very emotional need for most Indian households; of having their own home. Having an own home is considered the ultimate form of security for the family. This sentiment is more prevalent in the rural and semi-urban areas. It also provides a form of long-term social security for people in business who do not have access to any other form of social security.

Aptus will use the IPO funds to boost its capital base. Aptus already has healthy capital adequacy of 73% and the IPO will boost it further. That would be essential to grow the loan book aggressively.

Investment Perspective for Aptus Value Housing Finance

The company has grown aggressively while keeping quality of assets intact. That is the challenge in the lending business and risk management has been of a high order. However, the current pricing values the stock at around 65X FY21 earnings. Here are some key pointers.

a)    While Home loans constitute 50% of the book, the balance 50% is accounted for by loans against property and business loans. The company tries to keep LTV at the optimum level so as to minimize risk on a per unit basis.

b)    The gross NPA ratio stays at around 0.68% in FY21 with net NPAs of around 0.49%. This is an extremely low level of bad loans in the housing business. With a 73% capital adequacy, Aptus has the buffers to absorb any shocks in the market.

c)    Some of the financials are flattering. For example, the average gross yield on the loan book has been above 17% while the average cost of borrowing has been under 10%. With NIMs of 10.10% and operating expenses ratio of just 21%, it has room for profits.

There have been some concerns on valuation of around 65X P/E ratio. However, the company has been growing at over 35% and with its expanding footprint, they have an important niche to cater. Over a 2-year perspective, this stock can still provide attractive returns. However, one cannot overlook the regulatory risk inherent in this business.
 

 

Next Article

How to place your capital across 4 IPOs for week starting 09 August

4 IPo
IPO
09/08/2021

In the current week, CarTrade Tech and Nuvoco Vistas IPOs will open for subscription on 09 August and close on 11 August. The IPOs of Aptus Value Housing Finance and Chemplast Sanmar will open on 10 August and close on 12 August.

Gist of the 4 IPOs opening for subscription this week

 

CarTrade Tech Ltd IPO

CarTrade, a multi-channel auto platform offers an online facility to buy, sell and trade in used and new cars with rich content support. It is looking to raise Rs.2,999 crore, entirely via offer for sale (OFS). The IPO is priced in the range of Rs.1,585-1,618. CarTrade has raised Rs.900 crore from anchor investors including Nomura, HSBC, Goldman, Jupiter, Elara, Birla Sun Life MF, Axis MF, Kotak MF, HDFC MF etc; at the upper end of the band

 

Nuvoco Vistas Corporation Ltd IPO

Nuvoco Vistas is part of the Nirma group and India’s fifth largest cement manufacturer with capacity of 22.3 MTPA. Nuvoco is looking to raise Rs.5,000 crore, which includes Rs.1,500 crore via fresh issue and Rs,3,500 crore via offer for sale (OFS). The IPO is priced in the range of Rs.560-570. Nuvoco Vistas has raised Rs.1,500 crore from anchor investors including APG, CI Funds, TT International, Carmignac, Wells Capital, SBI MF, SBI Life, ICICI Pru MF, Nippon MF, Azim Premji Fintech etc; at the upper end of the band

 

Chemplast Sanmar Ltd IPO

Chemplast Sanmar, is a specialty chemical company with a South footprint and having niche product positioning. Chemplast is looking to raise Rs.3,850 crore, which includes Rs.1,300 crore via fresh issue and Rs.2,550 crore via offer for sale (OFS). The IPO is priced in the range of Rs.530-541. Chemplast Sanmar anchor placement is scheduled for 09 August.

 

Aptus Value Housing Finance Ltd IPO

Aptus Value Housing Finance is a retail focused housing finance company catering to the lower and middle income groups. It has backing of marquee investors like Westbridge and Madison. Aptus is looking to raise Rs.2,780 crore, which includes Rs.500 crore via fresh issue and Rs.2,280 crore via offer for sale (OFS). The IPO is priced in the range of Rs.346-353. Aptus anchor placement is scheduled for 09 August.


The IPOs this week are bigger in size than last week, so appetite could be tested. All the four companies represent the fast growing sectors of infrastructure, specialty chemicals, digital and consumer finance. Investors can look to spread their risk across themes.