Nuvoco Vistas Corporation IPO Financial Analysis (Avoid)

Brief Business Highlights

Nuvoco Vistas Corp. Ltd, a Nirma Group company, started operations in India in 1999 via acquisitions. Nirma Group entered the cement business in 2014 through a greenfield cement plant in Nimbol. Thereafter, the company has grown the cement business, through the acquisition of the Indian cement business of LafargeHolcim in 2016 and NU Vista (formerly Emami Cement Limited) in 2020.
The Issuer operates in three business segments namely cement, ready mix concrete (RMX), and modern building materials. Modern building material products are a key differentiator for the company. The company offers a range of over 50 products across cement, RMX, and modern building materials.
The Cement plants are in the states of West Bengal, Bihar, Odisha, Chhattisgarh, and Jharkhand in East India and Rajasthan and Haryana in North India, while RMX Plants are located across India.

Nuvoco Vistas IPO Financial Review

The topline of the Issuer has remained volatile for the last three fiscals. Total revenues have increased by 10% for FY21 to Rs 7522 crore from Rs 6829 crore in FY20. The revenues were reduced by 4% for FY19 as against revenues for FY18. Nuvoco posted a loss of Rs (25.92) crore for FY21 as against profits of Rs 250 crore in FY20. However, the EBITDA of the Issuer has grown on year to year basis; EBITDA margins have been strong for all three fiscals.

Debt to equity is at a higher side being 1.19 as of 31^st March 2021. Return on net worth is (0.35%).

Table 1 - Financials and Ratios (Amount in INR Crore)
Particulars	FY21	FY20	FY19
Total Revenue Revenue from operations	7,522.69	6,829.94	7,105.88
PAT	-25.92	249.26	-26.49
EBITDA	1494.36	1333.85	971.43
Total Assets	19907.57	13444.32	13261.7
Cash and Bank	527.77	510.85	124.71
Cash Generated from operations	1717.36	1024.77	860.09
EBITDA Margin	19.86%	19.53%	13.67%
Net Margin	-0.34%	3.65%	-0.37%

Valuations and Peer Comparison

The Issuer has a negative P/E as the EPS is -0.82 as of 31^st Mar 2021. However, on an average EPS basis for last three fiscals, the Issue is priced at 204x calculated at the upper price band of Rs 570 per share. Thus the Issue is aggressively priced. P/BV is 2.45x at NAV of Rs 232.43 as of 31^st Mar 2021.

Table 1 - Comparative Analysis of Glenmark Life Science with Competitors
Particulars	Ultratech Cement	Shree Cement	Ambuja Cement	ACC Limited
Face Value per share	10	10	2	10
Total Income for FY21 (INR Crores)	45459.97	13942.7	24965.8	14002.7
EPS	189.33	633.54	11.91	75.98
NAV per share	153.06	428.17	14.65	67.64
Return on net worth	12.36%	14.82%	10.68%	11.26%
P/E	38.62	44.26	32.4	28.31

Conclusion

The Issuer has a strong brand value of being associated with Nirma Group. Nuvoco has diversified product offerings and is the largest cement manufacturer in East India and the fifth largest cement manufacturer in India in terms of capacity. If we look at the sector outlook, the cement sector would have strong demand as Government increases its infra spending. But it’s bound to happen only in the long term.

The financial performance of the Issuer is weak, it has losses after tax and the topline is volatile. Even after repayment of debt with IPO proceeds, debt to equity would be at higher levels. Hence considering all the above factors, one can avoid this IPO.

Reviewer recommends Avoid to the issue.

Review By CA Priyanka Choudhary on 26th Jul 2021

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

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