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Penna Cement Industries has received approval from Securities and Exchange Board of India (Sebi) to proceed with its ₹1,550-crore initial public offering (IPO).
The IPO of the Hyderabad-based company includes a fresh issue of ₹1,300 crore and an offer for sale of up to ₹250 crore by its promoter PR Cement Holdings. Currently, P R Cement Holdings holds a 33.41 pc stake in the company.
Penna Cements plans to utilise part of the fresh capital raised for repayment of ₹550 crore of certain borrowings besides funding capital expenditure requirements of ₹105 crore for its KP Line II Project. The firm will use ₹80 crore towards upgrading its raw grinding and cement mill in Talaricheruvu, ₹110 crore and ₹130 crore towards setting up a waste heat recovery plant in Talaricheruvu and Tandur, respectively, the DRHP said.
Set up in 1991, the Hyderabad-based company is promoted by P. Prathap Reddy, Pioneer Builders and P R Cement Holdings Ltd.
It operates out of four integrated manufacturing facilities and two grinding units across Telangana, Andhra Pradesh and Maharashtra with an aggregate capacity of 10 mmtpa as of March 2021, and its capacity is expected to reach 16.5 mmtpa by fiscal 2024. In FY 21 it met 53 % of its power requirements from captive sources.
Port-based distribution strategy
In May 2019, the company acquired Singha Cement, a Sri Lankan Cement Company that operates a packing terminal in Colombo, to augment its port-based distribution strategy. Additionally, in March 2018, it commissioned one of India’s largest port-based cement terminals at Krishnapatnam with an automated ship loading facility and packing terminals at Cochin, Gopalpur and Karaikal ports. Recently Union Minister Sonowal inaugurated a bagging and bulk cement terminal at Syama Prasad Mookerjee Port.
To boost its port-based distribution strategy, it acquired a self -discharging cement carrying vessel with a maximum cargo capacity of 25,500 tonnes. Port-based logistics infrastructure enables to manage cost efficiencies in the transportation of cement and clinker products to new markets as well as in the procurement of imported coal through the ports.
In FY21, the company’s revenue from operations stood at ₹2,476.4 crore, while its operating profit was at ₹479.8 crore.
Axis Capital Limited, ICICI Securities Limited, Edelweiss Financial Services Limited, Yes Securities (India) Limited and JM Financial Limited are the bankers to the IPO, according to a release.
The cement industry in India is expected to grow at a CAGR of 6-7 pc between FY21 and FY26 on nfrastructure investments, healthy revival of the housing demand and various Government initiatives.