JSW doesn't have 'aukaat' to take on Adanis, Birlas; will grow cement business organically: MD Parth Jindal

Mumbai: JSW Group does not have the 'aukaat' or financial muscle to take on powerful competitors like Adanis and Birlas to acquire cement assets, and will concentrate on growing its portfolio by itself, a top official said on Monday.

JSW Cement has set a price band of Rs 139-147 per share, valuing the 17-year-old company at Rs 20,000 crore at the upper end of the price band. The issue, which includes a fresh issue of Rs 1,600 crore of shares and Rs 2,000 crore of shares to be sold by current shareholders through Offer for Sale, will be open between August 7-11.

Parth Jindal, the managing director of the IPO-bound JSW Cement, told reporters that entrenched competitors have very strong balance sheets, with low or no debt and a lot of cash.

"...if an Ultratech or an Adani or a Dalmia or a Shree wants to acquire anything, they can outmuscle JSW Cement very easily. Right now we don't have the 'aukaat', I would say, to challenge them in any acquisition," Jindal said, answering a specific question on inorganic growth and why the company has not been focusing on acquisitions.

Making it clear that he does not wish to go to his father - group chairman Sajjan Jindal - for money to make an acquisition, Parth said JSW Cement does not want to get into a bidding war of any kind with bigger and more powerful competition and will restrict to studying the assets for now.

He reiterated that the company, which is intending to raise Rs 3,600 crore through its maiden share sale to the public this month, does not have the financial muscle to take on the "big boys" and added that he has asked the management not to get "distracted" by such opportunities which come up on the horizon.

It can be noted that both the Aditya Birla Group-owned Ultratech and more recently the Gautam Adani group have relied on big-ticket acquisitions to grow business.

Making it clear that he has "deep admiration and respect" for competition, Parth Jindal said the acquisition proposals right now are either subscale or not in the right geography, and conceded that if they are good, the bigger rivals will move aggressively to acquire them.

Therefore, JSW Cements will look at growing its business organically, at least till it implements the medium term plan of doubling capacity to 42 million tonnes an annum, he said, adding that there may be more serious consideration to acquisition as it moves towards its ambition of being a 60 MTPA capacity player which will help it break into the top-5 in the country.

A 60 MTPA capacity in the next seven-odd years will give the company a market share of up to 8 per cent in the cement industry, he said, adding that the ambition there is to have a 10 per cent market share in the same timeline.

He also said that competition has behaved "irrationally" last year to book revenues by lowering prices last year, but some semblance of better behavior has set in lately. However, being a smaller player, JSW Cement continues to be dictated by what the bigger companies have to decide.

The company wishes to expand in North, Central and Northeast India, and has drawn a plan of setting up assets including a Rs 800-crore unit in Punjab's Talwandi.

At present, a higher contribution of Ground Granulated Blast Furnace Slag (GGBS) in the capacity makes JSW Cement's cost of capacity addition 40 per cent cheaper than competition but going ahead, as it enters newer markets, the competitive advantage will be off, Jindal said.

He explained that for GGBS, it depends on residues from JSW group's assets in south India but the same will not be available up north or other markets.

When asked about the reasons for scaling down the IPO size from Rs 4,000 crore to Rs 3,600 crore, Jindal said it is led by business requirements in current times and also to make future dilutions possible. At the time of announcing the IPO, the cement industry's condition was not as good, necessitating a higher sum of money, he added.

Jindal said the company plans to repay Rs 520 crore of debt through the IPO proceeds and use the remaining money for capacity expansion. The debt, which stands t 3.2 times of pre-tax profit of Rs 865 crore in FY25-end, is aimed to be reduced to 2.5 times over the medium-term, he said.