In today’s Finshots we take a look at the JSW Cement IPO which opens for subscription tomorrow and closes on 11^th August.

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The Story

If you ask investors to name sectors they’re bullish on, you’ll hear the usual suspects. Tech, EVs, infra, maybe even green energy.

Cement is not usually at the top of the list. But it probably should be because nothing quite captures India’s growth story like cement. Every skyscraper, highway, bridge or metro line begins with it. It’s the base layer of the industrial boom we’re witnessing.

And that’s why Sajjan Jindal, the man behind the JSW empire, started quietly laying the groundwork for his cement play back in 2006 with JSW Cement. Demand for housing and road construction was booming; global players were entering the space and local majors were partnering. And the timing may not have looked like a headline-grabber, but it gave JSW a headstart in building a low-cost, backward-integrated supply chain.

Come back to today and JSW Cement is headed for the public markets. It’s raising ₹3,600 crores through its IPO. Of this, ₹1,600 crores will go into JSW Cement itself to fund expansion and repay debt. The remaining ₹2,000 crores is early investors like Apollo Global and SBI selling their stake through an Offer for Sale (OFS).

But before we get into the IPO, let’s take a look at why cement is a capital-heavy, commodity business.

It starts with digging. You need mines to extract limestone. This raw material is then crushed and fired in massive tankers called kilns at 1,400℃ to form hard stones called clinkers. Then the clinkers are cooled, blended with gypsum and ground into the fine grey powder we call cement.

Now think about that entire process and you’ll know that the biggest cost drivers could be fuel (about 30%) freight (25%) and raw materials (20%).

And since cement is bulky, it’s highly regional and expensive to transport. Plants are usually set up near limestone mines. And once cement is produced, it has to be sold within a 200–300 km radius to stay profitable. That’s why cement companies don’t just scale nationwide overnight. They do it cluster by cluster, in a hub-and-spoke model. And that’s also why most players are dominant in specific zones.

Then there’s pricing. If demand softens (it does as cement is also seasonal) or a new plant dumps excess supply in your region, prices tank. And without pricing power, if one company slashes rates, everyone follows. Customers don’t care who made the cement, just what it costs.

So slice it anyway, but if the costs shoot up, margins shrink fast. And since building a new cement plant can cost thousands of crores, returns take years to show up.

That’s the kind of tough business JSW Cement is in.

It’s still a young but mid-sized player, with around 21 million tonnes per annum (mtpa) of cement grinding capacity across South, East, and West India. That’s nearly one-tenth the size of UltraTech (the largest Indian cement player) and about 3% of the total industry size. A tiny share, for sure. But it wants to double that to around 42 mtpa by FY27 and become a pan-India force.

How? By betting big on what it calls “green cement”.

You see, cement production is one of the dirtiest businesses in the world. In India, it’s responsible for 7-9% of total CO₂ emissions.

And here’s something we didn’t tell you earlier. Cement comes in different forms, thanks to its blending process. These are variants like PSC (Portland Slag Cement), PPC (Pozzolana), PCC (Composite) and GGBS (Ground Granulated Blast Furnace Slag). That last one — GGBS, is a big deal. It’s made using steel and iron plant waste (slag) instead of limestone. And thanks to its group company JSW Steel, JSW Cement has easy access to this raw material.

In fact, it’s India’s largest GGBS producer with an 84% market share and green variants form about 70% of its total cement volumes.

That’s a big win. Because it lowers emissions, cuts raw material costs, and positions the company for future demand from green-conscious buyers. And this tilt is what the company believes sets it apart.

It also claims the lowest CO₂ intensity among all players. And that’s important since India’s cement regulations are evolving. Sustainability won’t be a choice in a few years but the default. And JSW Cement wants to build that reputation early.

But you see, green doesn’t always mean profitable.

The company’s FY25 results show a clear crack. It posted a loss of ₹164 crores, down from a profit of ₹131 crores in the previous year. Revenues have stayed flat since FY23 at around ₹6,000 crores and profit margins have shrunk.

If you’re wondering why, well, to begin with, most of its operations are concentrated in the South and West, where it’s still trying to grab market share from entrenched giants like UltraTech and Adani’s Ambuja–ACC.

It doesn’t have national pricing power yet (which it is trying to capture by expanding in the North). In FY25, its realisation of ₹225 per 50 kg cement bag sold was lower than the Indian-average of about ₹263 per bag. So when input costs spiked last year, especially fuel and freight, it couldn’t pass them on to consumers. And cement demand in the region where it’s present didn’t grow as expected, so realisations dropped.

Plus, all this happened just as the company is doubling down on expansion. It’s setting up plants, entering new regions, and building logistics networks. These are upfront capital expenditures, or the costs where benefits come later.

One big chunk of the IPO proceeds — ₹800 crore, will go toward building a new plant in Nagaur, Rajasthan, its first foray into North India. But that money will only be used in FY26 and FY27. So, to keep construction on schedule, JSW Cement has already borrowed ₹2,100 crores from Axis and Union Bank (at nearly 8.8% interest cost).

Which means even after IPO repayments, debt will remain elevated. And that’s a concern since the company already has ₹6,122 crores in total debt. So, if demand doesn’t pick up fast enough, or margins stay tight, interest burdens could pinch further.

Also, JSW Cement’s Return on Equity (RoE) is barely above 2%. Lower than peers and also low compared to its interest costs.

In other words, you’re paying a premium for future potential, not current performance.

So, is that a good bet?

Well, that depends on your outlook.

JSW Cement has grown volumes and capacity faster than most peers over the past decade. It has access to captive raw materials and ports. It has built credibility in ESG-focused circles. And it’s entering large, high-demand markets like UP, MP, Punjab and Rajasthan, which are seeing a surge in real estate and public works.

Valuation wise, it’s hard to value a cement company that has posted losses. So instead of profits, let’s look at EV/EBITDA — a ratio that compares a company’s enterprise value (EV) to its operating profits before interest and depreciation. 

Think of Enterprise Value as the true cost to buy the whole company. It’s like asking: “What would it cost to take over this business completely, liabilities and all?” It’s a cleaner way to compare capital-heavy businesses like cement, because it focuses on cash operating profits before accounting complexities kick in. At the upper price band of ₹147/share, the IPO values the company at roughly 20,000 crores. That’s about 23x its EBITDA — same as the industry average, but at a premium when you account for its peers’ higher margins and scale.

Meanwhile, recent share acquisitions by the promoter group were done at a significantly lesser price just a few months ago.

Besides, we haven’t talked about the assets yet. Another way to judge a company like this is to check how efficiently it’s using the capacity it already has. Think of it like a restaurant. If your kitchen can make 100 meals a day but you’re only serving 60, you’re not sweating the asset enough. For JSW Cement, grinding capacity utilisation has dropped to 63% in FY25, down from 67% last year. That’s also lower than the Indian cement industry average of 72%.

So what should you make of it?

This IPO is a story of ambition. Of building something big, green and durable in one of India’s toughest sectors. Of going from regional player to national force. But it’s also a story where a lot depends on timing, execution, indebtedness and market discipline.

If JSW Cement pulls it off, it could become a powerful, ESG-friendly compounder in India’s next growth phase. If it doesn’t, the weight of debt and competition could drag down returns.

So if you’re betting on India’s infra growth and green push, it’s a fair proxy worth taking a closer look at. But don’t expect instant gains. This isn’t a fast mover. It’s a slow, cyclical compounder where execution, not hype, drives returns.

And only time will tell if the company can change that significantly.

Until then…

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