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market | IST

Nuvoco Vistas IPO to hit Street today; price band at Rs 560-570

Nuvoco Vistas comprises a fresh issuance of shares worth Rs 1,500 crore and an offer for sale (OFS) of shares worth Rs 3,500 crore by promoters.

Nuvoco Vistas Corporation's initial public offer (IPO) to raise Rs 5,000 crore is set to open today. The company has set a price band of Rs 560-570 per share for the IPO.
The IPO comprises a fresh issuance of shares worth Rs 1,500 crore and an offer for sale (OFS) of shares worth Rs 3,500 crore by promoters.
The pricing is on expected lines as Dalal Street had assumed a market capitalisation of about Rs 20,000 crore for the company.
Nuvoco Vistas has become a large cement company in the last five years owing to inorganic growth with the acquisition of the 11-12 million-tonne cement units from LafargeHolcim in 2016 at a valuation of Rs 9,300 crore, and that of the 8.3 million-tonne plant from Emami Cement in 2020 at an enterprise value of Rs 5,500 crore.
The company has an installed manufacturing capacity of 22.32 million tonnes per annum. It has also laid out capacity addition at its Jojobera (Jharkhand) and Bhabua (Bihar) cement plants, which should take its capacity to nearly 24.5- 25 million tonnes per annum. 
Nuvoco is the fifth largest cement company in India, accounting for 4.2 percent of the country's total cement capacity.
Through the public offer, the promoter entity plans to take some money off the table via the offer for sale. Out of the fresh issue, Rs 1,350 crore will be utilised by the company to pare debt.
The company's debt, which has swollen in the past year owing to the Emami acquisition, will come down by one-fifth after the issue.
Valuations 
Earlier reports had indicated that the demanding valuations of Rs 35,000-40,000 crore, would be at a premium to relatively more expensive stocks such as Shree Cement and UltraTech cement.
Those hopes have been tapered down and now the enterprise value should be Rs 25,000 crore approximately after the IPO.
At 10-11 times for a cement asset with a capacity of 25 million tonnes, the valuation appears fairly priced. Given the optimism, it should be lapped up easily.
Financials
The company's EBITDA stood at Rs 1,495 crore in FY21, as against Rs 1,333 crore in FY20, and Rs 971 crore in the previous year. Its net debt was at Rs Rs 6,730 crore in FY21. In FY20 and FY19, it was at Rs 3,952 crore and Rs 4,045 crore respectively. Its net debt-EBITDA ratio came in at 4.5 in FY21.