PremiumNuvoco Vistas Corporation made a lacklustre debut on the exchanges on Monday. The cement maker listed at Rs485 apiece on the National Stock Exchange, a steep discount to the upper band of its issue price of Rs570. This despite Indian benchmark indices and broader markets trading higher.
Nuvoco's weak debut is on expected lines though, considering that the euphoria in the primary markets has now fizzled out after the poor listing of recent initial public offerings (IPOs). Also, according to market experts, Nuvoco shares were available at a discount of Rs2 in the grey market.
It has been nearly 14 years since a cement stock made its debut on Indian exchanges. That said, the company's high regional exposure remains a key risk, which may have weighed on investor sentiment. Nuvoco derives more than 70% of its total volumes from eastern India and has some exposure to in the northern markets. Capacity-wise, the company is the fifth largest cement manufacturer in the country.
Eastern India has seen significant capacity addition in recent years with key cement makers expanding their footprint in this market. Also, recent dealers channel check reports suggest that seasonal correction in cement prices has begun in August with most regions including eastern India, seeing a steep decline in prices. This is likely to impact the company's realisations growth and thereby overall earnings performance.
Nuvoco, part of the Nirma Group, launched its three-day IPO on 9 August which concluded on 11 August with the issue price set at Rs560-570 a share. The initial share sale of the company was subscribed 1.71 times on the the closing day of bidding. The portion for qualified institutional buyers was subscribed 4.23 times, non-institutional investors 66% and retail individual investors 73%.
Meanwhile, Nucovo’s net debt nearly doubled year-on-year in FY21 to Rs6,730 crore after the acquisition of Emami India in 2020. In 2014, it bought cement assets of Lafarge India. With these, Nuvoco is now the fifth largest cement maker by capacity. The management will use Rs1,350 crore of the proceeds from the fresh issue of Rs3,500 crore to pare debt.
