IPO of Sarbottam Cement Opening From Today; In-Depth Analysis of Company Performance
Sun, Feb 25, 2024 7:47 AM on IPO/FPO News, Financial Analysis, Company Analysis, Latest,
Company Profile:
Sarbottam Cement, established in 2010 as a flagship product of Saurabh Group, commenced operations in February 2014. Headquartered at Neupane Tower, Tinkune, Kathmandu, with its factory located approximately 240 km away in Sunwal, Nawalparasi, the company boasts an authorized capital of Rs 4,000 million. Spread across 30 bighas of land, the factory utilizes innovative European production methods, being the first in Nepal to employ a Vertical Roller Mill (VRM), reducing energy consumption by up to 50% and establishing itself as the pioneer of eco-friendly cement production in the country.
Sarbottam Cement holds mines in limestone-rich areas of Palpa and Chitwan districts, ensuring access to top-quality raw materials. With a commitment to strength and quality, particularly crucial in earthquake-prone regions, the company employs over 200 people nationwide. Their dedication to providing reliable and trustworthy cement is underlined by stringent quality control measures and a focus on resilience against natural disasters. Sarbottam Cement stands as a leader in the Nepalese cement industry, blending technological innovation, environmental consciousness, and superior product quality.
About the Issue:
Sarbottam Cement Limited is opening its Initial Public Offering (IPO) through the book-building process, offering 27,76,076 unit shares to the general public, starting today i.e. on the 13th of Falgun, 2080, with a closing date on the 16th Falgun. The subscription period may be extended until the 27th Falgun, 2080 if the issue is not fully subscribed.
In a prior issuance, the company allocated 2,67,000 units to Nepalese citizens working abroad, fully allotting them, and 9,30,000 units to industry-affected locals in Nawalparasi and mine excavation-affected locals in Palpa. However, only 2,48,470 units were allotted to valid applicants, leading to the addition of the remaining 4,87,910 unsubscribed shares to the general public pool, resulting in a total of 30,84,530 units available for subscription. Among these units, 1,54,227 units each are reserved for mutual funds and company employees, while the remaining 27,76,076 units are open to the general public.
In total Sarbottam Cement is to issue 12.9033% of its issued capital amounting to Rs 4.65 Arba, equivalent to 60 lakh shares valued at 60 crore. Among these shares, 40% (24 lakh shares) have been allocated to Qualified Institutional Investors (QIIs), while the remaining 60% (36 lakh shares) are designated for the general public. This includes industry-affected locals, foreign migrants, mutual funds, company employees, and the general public at large.
Global IME Capital is appointed as the issue manager, and the IPO application process allows a subscription for a minimum of 50 units and a maximum of 10,000 units. The share price for common investors stands at Rs. 360.90 per share, determined through the book-building method, with this price being 10% lower than the 'cut-off price' set during the primary share allotment to qualified institutional investors, which was Rs. 401 for Sarbottam Cement. This reduction aims to enhance accessibility for common investors during the IPO offering.
| Sarbottam Cement Limited | |||
|---|---|---|---|
| Particulars | Percentage | Units | Amount |
| Total Issued Capital | 100% | 46,500,000.00 | 4,650,000,000.00 |
| Total Issue | 12.90% | 6,000,000.00 | 600,000,000.00 |
| Qualified Institutional Investors (QIIs) Issue | 5.16% | 2,400,000.00 | 240,000,000.00 |
| Locals Issue | 0.53% | 248,470.00 | 24,847,000.00 |
| Foreign Migrant Issue | 0.57% | 267,000.00 | 26,700,000.00 |
| Company Employees Issue | 0.33% | 154,227.00 | 15,422,700.00 |
| Mutual Funds Issue | 0.33% | 154,227.00 | 15,422,700.00 |
| General Public Issue | 5.97% | 2,776,076.00 | 277,607,600.00 |
| Issue Manager | Global IME Capital | ||
| Issue Open Date | 13th Falgun | ||
| Issue Closing Date (Earliest) | 16th Falgun | ||
| Issue Closing Date (Late) | 27th Falgun | ||
| Minimum Application | 50 | ||
| Maximum Application | 10,000 | ||
Company Overview
| Plant Location | Sunwal, Nawalparasi |
| Area | 30 Bigha with a mine of 20 sq km |
| Production Capacity | 3000 Tons Per Day |
| Products | 43, 53 Grade OPC and PPC Cement, Clinker |
| Distribution Network | 2400 Numbers |
| Production Quantity | 60 thousand Bags of 50kg per day |
| Total Revenue | Rs. 5.38 Arba |
| Total Equity | Rs. 7.5 Arba |
| Total Debt | Rs. 5.76 Arba |
| Debt to Equity Ratio | 0.76x |
| Investments | Rs. 55.6 Crores |
| Cost of Materials | Rs. 1.08 Arba |
| Reserve and Surplus | Rs. 3.45 Arba |
| Cost Efficiency | Rs. 78.1 Crores |
| Net Worth Per Share | Rs. 185.19 Till (Q4 79/80) |
| Earnings Per Share | Rs. 5.13 (Q4 79/80) |
Capital Structure
| Authorized Capital | Rs. 5 Arba |
| Issued Capital | Rs. 4.65 Arba |
| Current Paid-Up Capital | Rs. 4.05 Arba |
| Capital after IPO Issuance | Rs. 4.65 Arba |
Shareholding Structure
| Number of Shares | Amount | Percentage | Remarks | |
|---|---|---|---|---|
| Promoters Shareholders | 40,500,000.00 | 4,050,000,000.00 | 87.10% | Already issued |
| General Public (Including QII, Locals, Employees and Mutual Funds) | 6,000,000.00 | 600,000,000.00 | 12.90% | On Process of Issuance |
Board of Directors
| Name | Position |
|---|---|
| Bishnu Prasad Neupane | Chairman/ Managing Director |
| Mina Kumari Agrawal | Director |
| Tikaram Neupane | Director |
| Diwas Neupane | Director |
| Tenzing Lakden Tamang | Director |
Management Team
| C.A Santosh K.C | CEO |
| Er. Abhishek Jha | Institutional Sales Head |
| Mr. Gopal Sarda | Marketing and Brand Head |
| Mr. Netra Ghimire | Admn. Head, Factory |
| Mr. Surendra Mahaseth | E&I Head |
| Mr. Nab Raj Poudel | Company Secretary |
Uses of Fund
| Paying off Debt | |
|---|---|
| Debt Details | |
| Bank Name | Amount |
| Prabhu Bank | Rs. 175,501,356 |
| Nepal Investment Mega Bank | Rs. 186,821,142 |
| Nepal Bank | Rs. 875,037,502 |
| Prime Commercial Bank | Rs. 1,000,000,000 |
| Total | Rs. 2,237,360,000 |
| Remaining Amount | |
| NEA Electricity Bill | Rs. 732,234,818 |
Financial Highlights:
| Financial Highlights | |||||||
| Particulars | Actual | Estimated | |||||
|---|---|---|---|---|---|---|---|
| 2076/77 | 2077/78 | 2078/79 | 2079/80 | 2080/81 | 2081/82 | 2082/83 | |
| Total Paid-up Capital (In '000') | 1,980,000 | 4,050,000 | 4,050,000 | 4,050,000 | 4,650,000 | 4,650,000 | 4,650,000 |
| Reserve & Surplus (In '000') | 2,875,374 | 2,435,248 | 2,905,432 | 3,456,975 | 4,985,815 | 4,851,539 | 4,641,650 |
| Net Profit (In '000') | 932,768 | 1,310,357 | 467,661 | 213,868 | 828,428 | 1,028,224 | 1,185,111 |
| Earning Per Share (Rs.) | 39.28 | 32.35 | 11.55 | 5.28 | 17.82 | 22.11 | 25.49 |
| Net Worth Per Share (Rs.) | 245.22 | 160.13 | 171.74 | 185.36 | 207.22 | 204.33 | 199.82 |
| Return on Equity(%) | 16.02 | 20.21 | 6.72 | 2.85 | 8.60 | 10.82 | 12.75 |
ICRA Rating Nepal:
ICRA Nepal has reaffirmed the issuer rating of [ICRANP-IR] BBB+ (pronounced ICRA NP issuer rating triple B plus) to Sarbottam Cement Limited. ICRA Nepal has also reaffirmed the long-term rating of [ICRANP] LBBB+ (pronounced ICRA NP L triple B plus) and the short-term rating of [ICRANP] A2 (pronounced ICRA NP A two) to Sarbottam’s bank loan limits.
Credit strengths:
- Relatively better operational profile.
- Controlled leverage levels.
- Experienced promoters/management; operational synergies from being part of the Saurabh Group.
Credit challenges
- Stretched liquidity profile.
- Reduced scalability/margins led to a major moderation in coverage indicators.
- Intense industry competition.
- Vulnerability to cyclicality and seasonal demand; risk of regulatory changes.
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