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• The company is a "JSW Group" arm for clicker and cement products manufacturing and supply.
• It has been incurring losses for the reported periods and may take time to turn the corner.
• Based on its recent financial performances, the issue is a costly bet.
• The counter is well managed above RI price by vested interest parties to tempt investors.
• There is no harm in skipping this pricey bet.
ABOUT COMPANY:
Shiva Cement Ltd. (SCL) is a part of the JSW group, an Indian conglomerate with an international portfolio of diversified assets across various sectors, including steel, energy, infrastructure, cement, paints, venture capital and sports. The company was incorporated in 1985 and is engaged in manufacturing of clinker and trading of other allied products. It commenced operations in 1985 and was acquired by the JSW Cement Limited in January 2017, with a view to expand and grow operations and also capitalize on synergies with JSW Cement Limited.
SCL recently completed the Expansion Project and currently operate a clinkerisation unit with a capacity of 4,000 TPD (equivalent to 1.32 MTPA), a waste heat recovery system with a capacity of 8.9 MW, along with a dedicated incoming power line of 132KV and are also in the process of setting up a 4 MTPA limestone crushing plant at its mines at Khatkurbahal, Odisha. Its manufacturing facility is strategically located near the geographical border of three eastern states of India, namely Odisha, Chhattisgarh and Jharkhand, in close proximity to the raw materials that it requires for operations and is well connected to its key markets by road and railways. Prior to the Expansion Project, its Corporate Promoter, JSW Cement Limited used to rely on purchase of either imported or locally produced clinker
to meet its raw material requirements in the eastern region of India, prices of which were not cost efficient and its availability was also uncertain. Post the Expansion Project, its clinker manufacturing facility is acting as a feeder to the eastern grinding units of JSW Cement Limited to meet their requirements. SCL's manufacturing facility is also located in close proximity of approximately 12 kms to its captive limestone mine located in Khatkurbahal in Odisha with a mineral resource volume of 65.50 million MT of limestone as on December 31, 2023. It also acquired a new mine which is located adjacent to its old mine, pursuant to letter of intent dated November 2019, in an auction by the Government of Odisha, with a mineral resource volume of 53.36 million MT of limestone, as on December 31, 2023. As on December 31, 2023, its mines have an aggregate mineral resource volume of 118.86 million MT of limestone.
The new mine being a merchant mine also allows it to sell the mined limestone commercially. The new mine also has reserves of dolomite of approximately 73.04 million MT which, subject to regulatory approval, may be sold to steel plants in the Eastern region. The operations at its manufacturing facility were suspended in the months of May and June of 2021, on account of the COVID-19 pandemic, and subsequently till January 2023 on account of the Expansion Project. From January 2023, it has commenced production on a trial basis at its manufacturing facility and as intimated to BSE on June 30, 2023, it has declared commercial production on June 30, 2023. Pursuant to the Expansion Project, which was approved by a resolution of its Board dated October 20, 2020, the company has set up a 1.32 MTPA clinkerisation unit, a waste heat recovery system with a capacity of 8.9 MW along with a dedicated incoming power line of 132 KV.
Further, as part of the Expansion Project it is also in the process of setting up a 4 MTPA limestone crushing plant at its mines at Khatkurbahal, Odisha. Further, pursuant to a resolution of its Board dated October 20, 2020, as an ancillary part of the upgradation activities, the Company also proposes to, at a later stage, install an approximately 8 km long overland belt conveyor ("OLBC") to transport limestone from its mines to the manufacturing facility along with a railway siding with an approximately 12.5 km long railway track, to ensure seamless transportation of finished goods to the market. The Company is in the process of acquiring additional land for setting up the OLBC and the railway siding. Going forward, it may also set up a cement grinding unit and is in the process of evaluating the most feasible site for this grinding unit.
Prior to undertaking the Expansion Project, its product portfolio included Portland Slag Cement ("PSC") and Portland Pozzolana Cement ("PPC"), which were sold under the brand name of 'Mahabal Cement' in Odisha. The company also undertook production of cement for JSW Cement Limited on a contract manufacturing basis, which was sold by JSW Cement Limited under its brand of 'JSW Cement'. With a view to streamline its sales and realizations, its product distribution was undertaken through the ex-factory model of supplies to dealers, wherein prices were worked out accordingly so that the dealers could competitively further sell its products in the primary markets of Odisha like Keonjhar, Sundargarh and Jharsuguda and in select markets of Jharkhand like Ranchi, Bokaro and Dhanbad.
Post the Expansion Project being completed, its product portfolio includes clinker and dolomite (subject to regulatory approval) and in the future, once the grinding unit is set up, may also include various types of cement. It has entered into an agreement dated March 1, 2023 with JSW Cement Limited for supply of clinker ("Clinker Supply Agreement"). This arrangement has been entered into for a period of three years and is effective from the earlier of the date of execution of the Clinker Supply Agreement or commencement of its commercial production.
Under the terms of the Clinker Supply Agreement JSW Cement Limited has agreed to purchase from SCL, on an average, up to 1.00 lakh MT of clinker per month at a price based on the landed price (prevailing market price) and such price is for delivery of clinker at Salboni and Jajpur plants of JSW Cement Limited, excluding all taxes, duties and levies. The Clinker Supply Agreement shall be terminated on completion of the term of its term or by either parties, with a 90 days' prior written notice, on account of failure to comply with the terms and conditions of the Clinker Supply Agreement by the other party. This arrangement with JSW Cement Limited provides a customer base for a substantial portion of its clinker production and allows it to have a strong visibility of future revenue. As of December 31, 2023, it had 220 employees on its payroll and 462 contract labour.
ISSUE DETAILS:
The company is coming out with its Rights Issue (RI) of 100000000 equity shares of Rs. 2 each at a fixed price of Rs. 40 per share to mobilize Rs. 400 cr. The issue opens for subscription on April 22, 2024, and will close on May 06, 2024. The company is offering RI in the ratio of 20 for 39 shares to its eligible stakeholders as of the record date of April 03, 2024. The full amount is to be paid on application for the number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 8.41 cr. for this RI and from the net proceeds, it will utilize Rs. 316.59 cr. for repayment of certain borrowings, and Rs. 75.00 cr. for general corporate purposes.
The issue is solely lead managed by JM Financial Ltd. and KFin Technologies Ltd. is the registrar to the issue.
Post-RI, company's current paid-up equity capital of Rs. 39.00 cr. will stand enhanced to Rs. 59.00 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 1180.00 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total income/net profit/ -(loss) of Rs. 7.27 cr. / Rs. - (25.52) cr. (FY22), and Rs. 3.47 cr. / Rs. - (80.47) cr. (FY23). For 9M of FY2024 ended on December 31, 2023, it posted a loss of Rs. - (56.51) cr. on a total income of Rs. 203.90 cr. Thus the company has been incurring losses for the reported periods.
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects.
SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 532323 (FV Rs. 2).
The scrip last closed on cum-right basis at Rs. 49.78 on April 02, 2024, and opened on an ex-right basis at Rs. 46.00 on April 03, 2024. Since then, it has marked a high/low of Rs. 49.25 / Rs. 38.65. The scrip last closed at Rs. 44.48 as of April 19, 2024. For the last 52 weeks' it has posted a high/low of Rs. 60.46 / Rs. 38.65.
The promoters' holding has been constant at 59.59% for the last three quarters ended with March 31, 2024. The counter is well managed above the RI price by vested interest despite its loss making performance for the reported periods.
Review By Dilip Davda on April 21, 2024
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The Shiva Cement Rights Issue 2024 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Shiva Cement Rights Issue 2024 worth investing. The Shiva Cement Rights Issue 2024 Note sets the Rights Issue expectations in systematic way which tells you if Shiva Cement Rights Issue 2024 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Shiva Cement Rights Issue 2024 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.
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