Penna Cement Industries Limited IPO

Penna Cement Industries has filed for a Rs 15500 million IPO consisting of Rs 13000 million in fresh equities and Rs 2500 in offer for sale shares. They have been one of the prominent players in cement manufacturing for twenty-five years.

Penna Cement Industries started almost twenty-five years ago and is one of the leading players in integrated cement production. The company has a strong brand recall in southern and western India and Sri Lanka with strategically located manufacturing units and an extended distribution channel.

Penna Cement has four integrated manufacturing and two grinding facilities with an annual aggregated production capacity of 10 million tonnes as of March 31, 2021.

Penna Cement Industries Limited IPO Objective

Here are a few quick reasons why Penna Cement Industries Ltd. is going public.

• The net proceeds will be used to fund various capital expenditures and upgrade manufacturing units. 
• Rs 5500 million from the fresh equity sale will be used towards re-payment and pre-payment of certain borrowings.

Why should you invest in the Penna Cement Industries IPO?

• The company has plans for future expansion in the north and central Indian markets and to promote blended cement sales.
• A plan is underway to increase production capacity from 10 MMTPA to 16.50 MMTPA.
• They have a stable and cost-effective supply chain for acquiring raw materials, including strategically located port-based logistic infrastructure for efficient and reliable distribution.
• They have 3,310 dealers and distributors in India as of March 31, 2021, and established long-term, stable relationships with institutional customers.
• The blended cement segment is expected to grow 8-9% CAGR between 2021 and 2026.

IPO Financials

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Strengths

1. The company enjoys strong brand recall in southern and western Indian States, where it is one of the largest private players.

2. Port-based strategically located manufacturing and distribution units helped establish a cost-effective and steady supply of raw materials and distribution of the finished products.

3. The company has remained profitable since the commencement of operation.

4. The company is well-positioned to harness the growing demand for cement in India, expected to grow at a 6-7% CAGR between 2021 and 2026.

Risks

1. The Indian cement market is seasonal.

2. They have three ongoing proceedings filed against them by the Central Bureau of Investigation.

3. The company has incurred significant indebtedness, and its inability to repay may adversely affect future cash flow.

4. Continuity of future cash flow depends on maintaining an uninterrupted supply of raw materials, a competitive edge, and relationships with distributors and institutional customers.

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