JSW Infra
IPO Size: Rs. 2,800 cr – Entirely Fresh Issue
- Capex for LPG terminal at Jaigarh, Ratnagiri (Rs. 868 cr) and dredger (Rs. 103 cr)
- Container terminal expansion at Mangalore (Rs. 152 cr)
- Debt repayment of Rs. 880 cr (gross debt Rs. 4,230 cr, net debt Rs. 1,874 cr)
- Balance ~Rs. 700 cr of General Corporate purposes, to be used to become net debt free
Price band: Rs. 113-119 per share
M cap: Rs. 24,990 cr, implying 11% dilution
- 75% allocation to institutions and 10% for retail, as restated monetary assets exceed 50% of net tangible assets in FY22 and FY23. Low retail float with low dilution may keep post-listing demand high.
IPO Date: Mon 25th Sep to Wed 27th Sep 2023, Listing Fri 6th Oct 2023
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
India’s 2nd Largest Private Port Company
JSW Infrastructure, privately owned with 96.4% promoter holding (mainly Sajjan Jindal Family Trust), operates 2 ports at Jaigarh and Dharamtar in Maharashtra and 7 terminals across East and West coast, aggregating 153 MTPA capacity in India, plus 2 ports of 41 MTPA under O&M in UAE. 50 MTPA capacity Jaigarh port contributed to 40% of company’s Rs. 3,200 cr revenue, followed by Dharamtar 15%.
Expanding Capacity
Company plans to increase capacity at 10% CAGR, to 300 MT by FY30E, both organically and inorganically. Organic expansion planned includes:
- 2 MTPA LPG terminal at Jaigarh Port, Maharashtra – from IPO proceeds
- 52 MT greenfield port at Jatadhar, Odisha - to cater to JSW Steel’s Rs. 65,000 cr 13 MT greenfield steel plant
- 30 MT greenfield port at Keni, Karnataka.
Jatadhar and Keni capex is not planned from IPO proceeds, and fresh debt may be taken to fund both.
Fortunes linked to JSW Steel
67% of volumes and 52% of revenue is generated from anchor clients i.e. JSW group, in particular, JSW Steel, contributing to 40% revenue. Material dependance on a single customer makes JSW Infrastructure also prone to risk of steel industry - like cyclicity, government duties etc. Over the next 2 years though, both JSW Steel and JSW Energy are expanding capacities by 32% and 100% respectively.
EBITDA Margin Lower, RoE Higher than Adani Ports
On FY23 revenue of Rs. 3,195 cr, JSW Infrastructure reported Rs. 1,800 cr EBITDA, translating into 56% EBITDA margin. Terminals business, accounting for 45% revenue, shares 37% of its revenue with government, lowering company’s overall EBITDA margin. Larger peer Adani Ports clocks 61% margin, with its port business operating at the world-highest 70% margin.
JSW’s Q1FY24 revenue rose to Rs. 878 cr, with EBITDA of Rs. 491 cr, with margin maintained at 56%, quite lower than Adani’s Q1FY24 margin of 66%. Due to exchange difference, JSW’s Q1 interest cost was negative at Rs. 16 cr. Thus, Q1FY24 EPS of Rs.1.7 cannot be annualized. Its FY23 EPS was Rs. 4.
So far, JSW’s capex per MT has been on the lower side, leading to 18% RoE in FY23, against 14% for Adani Ports. However, as fresh capex is undertaken, RoE will shrink to sub-16%.
Fully Valued in ST
Based on FY24E EBITDA of Rs. 1,950 cr and Enterprise Value (EV) of about Rs. 25,000 cr, share is being offered at current year expected EV/EBITDA multiple of 13x, which is marginally lower than Adani, but higher than Gujarat Pipapvav.
Smaller peer Gujarat Pipavav Port, operating a single port with 8.3 MT capacity, foreign promoter and debt-free balance sheet, is ruling at FY24E EV/EBITDA multiple of 9x. India’s largest private port operator Adani Ports, with 26% market share, 600 MT capacity, better EBITDA margin on favourable product mix, is ruling at an EBITDA multiple of 14.5x. On 4x capacity, Adani earns 8x EBITDA, with growth plans more aggressive than JSW, entailing integrated logistics facilities like warehousing, railway tracks, trains etc. Thus, given its size and business mix, JSW shares look fully valued.
27th Sep 2023 at 12:36 pm
25th Sep 2023 at 12:09 pm
25th Sep 2023 at 11:11 am
25th Sep 2023 at 10:07 am