Nuvoco Vistas Rs 5,000 crore IPO remain undersubscribed so far on the final day of bidding. All pockets of investors remain undersubscribed with the overall subscription reaching just 53% today. The IPO can be subscribed to in the fixed price band of Rs Rs 560-580 per share, in a bid lot of 26 shares. In the unlisted space, shares of Nuvoco Vistas have only managed to garner a weak premium, according to people dealing in the grey market. The Nirma Group company is the fifth largest cement company in India and the largest cement company in East India in terms of capacity. Currently, investors have the option to bid for four IPOs, two of whom close today.
On the third and final day of subscription, retail investors shave subscribed 60% of their portion of Nuvoco Vistas IPO, bidding for 1.86 crore shares. Qualified Institutional Buyers (QIB) have submitted bids for 71% of their portion of the issue or 1.27 crore equity shares. Non-Institutional Investors have placed bids for 12% of the reserved portion. Overall the issue has seen investors bid for 3.29 crore equity shares against the 6.25 crore shares on offer for investors. Half of the issue is reserved for QIBs while 35% is for retail investors, leaving just 15% for NIIs. Post issue the promoter group’s shareholding in the company will drop to 71.03% from 95.24% while that of public shareholders will increase to 28.97% from 4.76%.
Nuvoco Vistas Corporation Ltd is one of the leading domestic players (22mt capacity) and the largest cement company in east India. We believe the company’s strong presence in east India gives us confidence in its future revenue outlook. We expect the near term demand outlook for cement demand to arise from east india market on account of government focus on infrastructure development and Large population base which shall lead to housing demand. At the upper price band of Rs 570, the stock is trading at 18.8x FY21 EV/EBITDA. We assign a Subscribe rating to the issue.
Rating: Not rated
Nuvoco’s leadership in Eastern region places it in a healthy demand environment as the region is expected to grow at faster rate. Further, the cement prices in the Eastern region has witnessed strong uptrend in the recent past. The 2.7 MTPA cement capacity expansion and 0.9MTPA clinker de-bottlenecking is expected to aid in capturing higher demand. Nuvoco Vistas’ IPO is valued at EV/EBITDA of 18.5x its FY2021 earnings at upper end of the price band.
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Nuvoco is eyeing listing in Rs 50bn IPO, with the fund raise primarily addressed towards reduction of Company’s debt (~Rs 15bn – new issue) and promoter’s debt (~Rs 35bn – OFS). The company is seeking a market capitalisation near ~Rs 204bn in the IPO; our Industry interactions suggest that when the DRHP was launched for Nuvoco in May-21, the ask valuation was much higher and the target valuations have significantly tapered down from those levels. The tapered down MCap expectation of ~Rs 200bn implies 18-19x FY21 EV/EBITDA and 9.5- 11.5x FY22-FY23e EV/EBITDA – which appears fairly priced, given the exuberance in the sector peers (Larger names trading at 10.5-18.5x FY23 EV/EBITDA).
Company is bringing the issue at price band of Rs 560-570 per share at post issue EV/EBIDTA multiple of 16 on FY21 EBIDTA basis. Company being largest cement manufacturing company in East India in terms of total capacity with market-leading brands that & experienced individual promoter and professional management team has strong future potential. Hence we recommend “Subscribe” on issue for long term purpose.