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$240 million equity infusion, acquisition and IPO plans: Inside JSW Group’s expansion strategy

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Mumbai: The JSW Group has appointed Citibank and O3 Capital as lead investment bankers to raise equity capital for JSW Cement and JSW Paints, respectively, to fund its latest round of expansion before the two businesses go public.

Citibank has a mandate to raise around $200 million and O3 Capital around $40 million by the end of FY 21.

“Currently we are in the market for a capital raise for our paints and cement businesses,” Parth Jindal, managing director of the two companies, told ET. “Citibank has been appointed as the lead banker for JSW Cement and O3 Capital, a boutique investment bank, has been mandated with the fund raise for JSW Paints.”

With the planned investments, the cement company expects to double its capacity of 25 mt to 50 mt by 2026 after the planned initial public offer (IPO) is completed.

“I have made a robust 50 MT strategy for JSW Cement within India. Once we get the IPO out of the way and we have more funds at our disposal, then we can really look at going from 25 mt to 50 mt, which is very much possible,” Jindal said.

JSW Cement’s subsidiary, Shiva Cement Limited, Wednesday announced it would invest more than Rs 1,500 crore in a 1.36 million tonne clinker project to be established in the Sundergarh district of Odisha.

JSW Cement has also planned around 20 million tonnes of expansion in the north and central regions, and aims to become a pan-India player by the end of FY 21.

“JSW Cement is not present in the north and central parts of the country. It is very important for us to set up facilities in Rajasthan, Madhya Pradesh and Chhattisgarh,” Jindal said.

JSW Cement has acquired limestone mines in Rajasthan and Chhattisgarh. The company will be setting up a clinker facility in Rajasthan and Chhattisgarh, with split grinding units in Haryana, Punjab, Bihar and Uttar Pradesh.

“The master plan is to set up a 10 million tonne facility in Rajasthan…so we can also strategically enter the Himachal pradesh market. There is another 10 mt planned for Chhattisgarh,” Jindal said.

JSW Cement is also eyeing Gujarat’s ABG cement for acquisition.

“A lot of companies are already acquired by either UltraTech or Nuvoco…However the only real one which is of size and scale is ABG Cement in Gujarat…We are looking at it as well, but the big daddies are also eyeing it, which makes it more difficult to compete with,” Jindal said.

JSW Paints is likely to turn positive in FY 21 with turnover almost doubling to Rs 500 crore, Jindal said.

“With the new capital we are raising, we would be looking to double the turnover to about Rs 1000 crore in FY 22. Now we are looking at expanding our capacities further,” Jindal said.

On the outlook for FY21, Jindal said that the rural segment continues to remain strong, and urban demand is back in the third quarter.

“Infra projects have picked up and real estate, which was muted for several years, is seeing some greenshoots. Indian cement industry will de-grow only by 7% y-oy- given a 29% degrowth in the first half of FY21; so we are very bullish,” he said.

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