JSW INFRASTRUCTURE LIMITED
Introduction
Any country’s imports and exports run smoothly on its efficient port operations. With a large coastline, India is poised to take advantage of its geography to be the navigator to the shipping lines and also a catalyst to the country’s growth. Ports sector is, therefore, an important component in the India growth story.
The Company
JSW Infrastructure Ltd (JSW Infra) is the second-largest commercial port operator in India in terms of cargo handling capacity. The company is part of the $23 billion JSW Group, a multinational business house with an international portfolio of diversified assets across several industries including steel, energy, infrastructure, cement, paints and sports, etc.
JSW Infra started its operations in 2004 with one port concession at Mormugao, Goa, which was acquired by JSW Group in 2002. Presently, the company has nine port concessions in India with non-major ports located across the industrial hubs of Maharashtra, Goa, Karnataka, Odisha and Tamil Nadu. The company’s international port facilities include 2 terminals at Fujairah and Dibba in the UAE. JSW Infra’s installed cargo handling capacity in India is 158.43 MTPA as of March 31, 2023.
JSW Infra’s operations broadly consist of cargo handling, storage solutions and logistics. It handles various types of cargos, including dry bulk, liquid bulk, gases and containers. Major cargos presently handled includes coal, iron ore, sugar, urea, steel products, rock phosphate, molasses, gypsum, edible oil, LNG, LPG, etc.
JSW Infra came out with an IPO in September 2023, for Rs. 2800 crore at a price of Rs. 119 per share of FV Rs. 2 each. The company proposes to spend the issue proceeds to pre-payment of a portion of its borrowings, investment in its two wholly owned Subsidiaries, JSW Dharamtar Port Private Limited and JSW Jaigarh Port Limited.
Strengths
JSW Infra is the fast-growing non-major port operator in India. The company’s installed cargo handling capacity grew at a CAGR of around 20% from 102.50 MTPA as of March 2020 to 158.43 MTPA as of March 2023. The company’s ports and port terminals typically have long concession periods ranging between 30 to 50 years, which provides long-term revenue visibility.
The company has a competitive advantage in strategic port locations. JSW Infra’s port facilities are located across the East and West coasts of the country, which all are strategically located closest to its main customers, including JSW Group of companies. As per CRISIL report, JSW Infra’s location advantage helps the company to serve the industrial belts of Maharashtra, Goa, Karnataka, Tamil Nadu, Andhra Pradesh, and Telangana as well as mineral rich belts of Chhattisgarh, Jharkhand, and Odisha.
JSW Infrastructure is continuously expanding its cargo handling capacities. It also looks to organic and inorganic growth opportunities. The company plans expansion of its LPG terminal subsidiary, JSW Mangalore Container Terminal Private Limited with the IPO proceeds. Recently, it signed an agreement to acquire a liquid storage facility, which was owned by NPT Commodities Limited with 465,000 cubic meters capacity at the Fujairah port in Middle East for a consideration of $187 million. This acquisition is expected to be completed by December 2023. It helps the company to foray into the high margin liquid storage business at the Fujairah port UAE, which is famous as one of the largest bunkering hubs in the world.
JSW Infra last week announced that it won the rights to develop a greenfield port at Keni in Karnataka with an initial capacity of 30 million MTPA. This all-weather, deep-water Keni port will be developed as a public-private partnership model at a cost of Rs 4,119 crore. The project is expected to be completed in the next five years and it has an operational license for a period of 30 years. The proposed Keni port will be strategically located close to areas mainly of coal and coke cargo movements, which is being utilized for steel, cement, and power plants. It is further supported by iron ore, limestone, dolomite handling, as well as exports of finished steel products.
Strong operational and financial performance
JSW Infra handled over 9 million tons cargo for the first half year of the current financial year ended September 2023, which shows 70% growth year-on-year basis. Cargo handled through its Jaigarh and Dharamtar port have increased by 35% and 34% respectively (YoY) supported by increased cargo from JSW Steel. The Paradip coal terminal, which had the first full year of operations in FY23 has registered a cargo growth of 28% in the latest quarter.
The company’s financial performance is amazing as its revenue and net profit are registering steady growth. In FY2022-23, the company’s revenue and net profit were reported at Rs 3373 crore and Rs. 750 crores respectively. In FY 2020-21, its revenue and net profit were Rs 1678 crore and Rs. 285 cr. For Q2 FY24, the company’s revenue increased to Rs 848 crore from Rs 832 crore, YoY. EBITDA for the quarter ended September 2023 has jumped by 33% to Rs 499 crores from Rs 375 crores in the quarter ended September 2022. EBITDA margins stood at 55.6% in the latest quarter as compared to 53.9% in the quarter ended September 22. At the same period net profit jumped almost 85% to Rs 256 crore from Rs 138 crore.
Strengthening Balance Sheet
As of September 30,2023, JSW Infra remains a net debt free company having a total cash and cash equivalents of Rs 5,333 crores, while its gross debt stood at Rs 4,261 crores. Out of the total IPO proceeds of Rs 2,800 crores, approximately Rs 900 crores were earmarked for debt repayment. Balance Rs 1,200 crores is set aside for Capex of 2-million-ton LPG project at Jaigarh Port and expansion of Mangalore Container Terminal. Based on the company’s strong overall performance, the credit agency Moody’s has upgraded JSW Infra’s credit rating from BA2 to BA1 with Stable Outlook.
Favorable Government policy changes
Ports in India handle almost 95% by volume and 68% by value of India’s external trade. The growth of the port sector generally depends on the overall economic activity of the country, especially exports and imports. So, the government policies play an important role in supporting the growth of the ports sector. It is estimated that India will remain one of the fastest growing major economies among the world soon, supported by strong Capex by the government and private sector. Various initiatives from the Narendra Modi government like ‘Make in India’ schemes and ‘Production-linked Incentive scheme’ as well as large investments in infrastructure are boon for the country’s economic growth.
Domestic waterways are considered as the cost-effective and environment-friendly mode of freight transportation. The government of India is taking several steps to make the logistics sector more efficient and effective. It targets to increase the country’s total port handling capacity to 10,000 million tons by 2047 from the existing of 2,600 million tons per annum. To meet this target, the government encourages public-private partnership terminals. As part of the Sagarmala project, the Indian government targets more than 574 projects worth Rs. 6 lakh crores which have been planned for implementation by 2035. This will significantly enhance port connectivity and operational efficiency through vessel turnaround time as well as facilities for accommodating larger ships. These efforts offer huge growth opportunities for private sector port developers like JSW Infra.
As per the latest communication, the government of India mentioned that they are readying a tariff migration regime to allow pricing freedom for existing private terminal operators at major ports. JSW Infra can potentially be a big beneficiary of these ongoing policy changes because the company currently operates seven major port terminals, and it will get greater autonomy in pricing.
Risk Factors
Almost two-thirds of JSW Infra’s revenue comes from the JSW Group of companies which causes some concentration risk. However, it is notable that the company is slowly reducing dependence on group companies.
Elevated inflation and geo-political issues may cause reduction in economic activity and global trade, which also adversely affect the cargo traffic with ports.