JSW Cement's growth plans

This week ICR reported on JSW Cement's project to construct a new 1.2Mta grinding plant in Kalinganagar Industrial Complex in Jajpur, Odisha, India. The Indian cement company has been expanding rapidly in recent years from its start-up in 2009 and this summer it also announced that it will be setting up its first overseas grinding unit in Fujairah, UAE. Both these projects are scheduled to be completed by the end of 2019, by which time the Portland slag cement producer aims to have a cement capacity of 20Mta. 

JSW Cement has plants at Vijayanagar in Karnataka, Nandyal in Andhra Pradesh, Salboni in West Bengal and Dolvi in Maharashtra. The commissioning of the 2.4Mta Salboni grinding plant earlier this year took the company's cement capacity up to 10.3Mta and the company has already indicated that it plans to further expand the facility to 3.6Mta. At Dolvi, the company has completed the first stage of a two-stage investment plan. The first phase has seen the unit's capacity increase from 1Mta to 2.2Mta in February 2018, taking overall company capacity to 12.5Mta. The second stage of the INR15bn (US$206.6m) programme will lead to a further increase to 4.5Mta next year. The Vijanagar works will also benefit from a 2.4Mta expansion. 

IPO targeted for 2020
Following the commissioning of these projects, JSW's medium-term plan is to make an initial public offering (IPO) at the end of 2019. "End of 2019 or early 2020 is what we are targeting for the IPO," said Parth Jindal, JSW Cement's managing director.

The longer-term plan is for the company to expand further to 30Mta by 2025 and 50Mta by 2030 with both organic and inorganic growth. Post-IPO the company will look for more capacity in central and eastern India. "Our strategy is to acquire limestone blocks in these areas, after which we have a reason to enter these regions," Mr Jindal added.

Organic or inorganic growth?
JSW Cement had preferred to grow largely through building greenfield projects but it did acquire a stake of 54.4 per cent in Shiva Cement in 2017. "It does not make sense for a company like ours to go for any inorganic growth," claims Jindal. "We are strong in execution, so the greenfield capacity is our strength and that’s what we are trying to leverage."

However, JSW Cement does not completely rule out acquiring other cement producers as it was initially the highest bidder for Binani Cement’s 11.25Mta of capacity in January 2018, until Dalmia and UltraTech Cement targeted the Binani assets.

"We looked at several acquisition opportunities,’ said Mr Jindall in August 2018. "At one point we were considering Lafarge Cement very seriously."

JSW has been a bidder for most of the cement assets up for sale in the last four years in India, but did not land any of them. Industry analysts believe that JSW Cement and others can still pick up some existing capacity, even if the consolidation spree is largely over in India for the time being. 

In March 2018 Nitin Bhasin from Ambit Capital said, "For inorganic growth options, smaller assets and half-complete ones will still be looked at and pursued. There would be another 10-20Mt of cement capacities (shut or operating inefficiently) which are regional in nature, out there for acquisition."

JSW Cement is part of a powerful US$13bn conglomerate that earns 85 per cent of its revenues from the steel sector and 10 per cent from energy. The cement and infrastructure segment currently provide five per cent of the conglomerate’s revenue share.

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