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About the Company

Nuvoco Vistas Corporation Ltd. (Nuvoco), part of Nirma group, is India’s fifth-largest cement player in India and the largest in East India in terms of capacity. It offers a range of over 50 products across cement, RMX and modern building materials. Nuvoco distributes its products through the trade segment, which mainly caters to individual home buyers (Trade Segment), and the non-trade segment, which is mainly via direct sales to institutional and bulk buyers. Its sales from the trade segment of the market constitute 73% of total cement sales volume, whilst sales from the Non-trade Segment constituted 27% of total cement sales volume. It has 11 cement plants in the states of West Bengal, Bihar, Odisha, Chhattisgarh and Jharkhand in East India and Rajasthan and Haryana in North India, while its RMX Plants are located across India. Its cement plants have an installed capacity of 22.32 MMTPA. It has captive power plants with generation capacity of 105 MWAs and generates 50.4% of its total power requirements.

Objects of the Issue

Valuation

Cement demand is expected to witness consecutive demand de-growth in FY21 after a marginal dip in FY20. However, it is expected that the cement demand could register a CAGR of 6 to 7% from FY21 to FY26 driven by a raft of infrastructure investments and healthy revival in housing demand as compared to a CAGR of 4.5% to 5.5% witnessed during FY15 to FY20. With the government pushing for infrastructure projects over the next few years, the share of cement demand of the infrastructure segment is expected to increase from 23-25% in FY21 to 25-27% in FY26.

Nuvoco stands to benefit from high-growing regions where the company has a strong presence (East India). Its established record of strong performance and reputation for quality products in cement, RMX and modern building materials has helped the company build reputable brands in the building materials industry in India. Its strategically located plants allow the company to sell and market its products across nearby regions. Moreover, it has a wide distribution network and a diversified product portfolio. Going forward, the company plans to strengthen its position in East, North and Central India. Further, it intends to increase its portfolio of premium products which would aid margins. It also plans to increase operational efficiencies and strengthen its brand presence and distribution network. The financial performance has been tepid for the company. However, with a strong focus on improving margins and positive industry growth prospects, we have a positive view for the long term.

Key Risks:

i) Continued slowdown in the construction industry.

ii) Competitive intensity is high.

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