JSW Infrastructure IPO Review – Is it good or bad for investment?

JSW Infrastructure Limited is launching its Initial Public Offering (IPO), scheduled for subscription from September 25, 2023. This IPO is coming after 13 years of gap from the group. In this article we would provide JSW Infrastructure IPO details, Key IPO Dates, Size, Price Band, Positive Factors, Risk Factors and thorough review and analysis.

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JSW Infrastructure IPO – Key Details

IPO Opening Date 25-Sep-23
IPO Closing Date 27-Sep-23
IPO Listing Date 06-Oct-23
Issue Type Book Built Issue IPO
Face Value Rs 2 per equity share
IPO Price band Rs 113 to Rs 119 per equity share
Lot Size 126 Shares
Listing at BSE and NSE
Total Issue Size Rs. 2800 Crores

IPO Timelines

IPO Opens on 25-Sep-23
IPO Closes on 27-Sep-23
Basis of Allotment 03-Oct-23
Initiation of Refunds 04-Oct-23
Credit of Shares to Demat 05-Oct-23
Listing Date 06-Oct-23
Cut-off time for UPI mandate confirmation 27-Sep-23

About JSW Infrastructure Limited

Founded in 2006, JSW Infrastructure Limited is a pivotal player in maritime-related services, encompassing cargo handling, storage solutions, and logistics services. The company operates and develops ports and port terminals under Port Concessions.

JSW Infrastructure is a part of the prestigious JSW Group and stands as the second-largest commercial port operator in India in terms of cargo handling capacity in Fiscal 2022.

The company handles diverse cargo types, including dry bulk, break bulk, liquid bulk, gases, and containers. This array includes commodities like thermal coal, iron ore, sugar, and more.

Notably, JSW Infrastructure boasts long concession periods for its ports and port terminals, ranging from 30 to 50 years, ensuring sustained revenue streams.

Financial Insights into JSW Infrastructure

Financial Year ending / Period ending (Amt in Crores)
Particulars FY20 FY21 FY22 FY23
Assets 7191.85 8,254.55 9,429.46 9,450.66
Revenue 1237.37 1,678.26 2,378.74 3,372.85
Profit After Tax 196.53 284.62 330.44 749.51
Net Worth 2488.23 2,831.18 3,212.13 3,934.64
Reserves and Surplus 2486.53 2,829.84 3,208.98 3,645.75
Total Borrowing 3102.57 3,945.82 4,408.69 4,243.70

IPO Objectives

JSW Infrastructure intends to utilize the proceeds from the IPO for the following objectives:

1) Prepayment or repayment, in full or part, of all or a portion of certain outstanding borrowings through investment in the wholly owned Subsidiaries, JSW Dharamtar Port Private Limited and JSW Jaigarh Port Limited.

2) Financing capital expenditure requirements through investment in the wholly owned subsidiary, JSW Jaigarh Port Limited, for proposed expansion/upgradation works at Jaigarh Port i.e., i) expansion of LPG terminal (“LPG Terminal Project”); ii) setting up an electric sub-station; and iii) purchase and installation of dredger.

3) Financing capital expenditure requirements through investment in the wholly owned subsidiary, JSW Mangalore Container Terminal Private Limited, for the proposed expansion at Mangalore Container Terminal (“Mangalore Container Project”).

4) General corporate purposes.

Valuation of JSW Infrastructure IPO

JSW Infrastructure IPO price band is ₹ 113 to ₹ 119 per share.

  • Using the last year’s FY23 EPS of ₹ 4.01, the P/E ratio stands at 30x.
  • Factoring in the weighted EPS of ₹ 2.88 over the past three years, the P/E ratio is 17x.
  • Means company is asking the IPO price in the P/E of 17x to 30x.
  • There is only listed peer Adani Ports and SEZ which is trading at 36x. While it is not appropriate to compare with only peer, considering this, it is fully priced.

Positive Aspects of JSW Infrastructure IPO

Investors should also consider these positive aspects when evaluating this IPO:

  • Strong Financial Performance: JSW Infrastructure Limited has demonstrated consistent revenue and profit growth over the years. Its revenue and profit after tax have shown a significant increase from March 2020 to March 2023, reflecting the company’s ability to generate sustainable earnings.
  • Growing Cargo Handling Capacity: JSW Infrastructure is the 2nd largest commercial port operator in India in terms of cargo handling capacity. With an installed cargo handling capacity of 158.43 MTPA as of June 30, 2023, and a CAGR of 15.27% in capacity from March 2021 to March 2023, the company is well-positioned to benefit from the growth in India’s trade and logistics sector.
  • Long Concession Periods: The company’s ports and port terminals typically have long concession periods ranging from 30 to 50 years. This provides JSW Infrastructure with a stable and long-term revenue stream, enhancing the investment’s reliability.
  • Strategic International Presence: JSW Infrastructure Limited operates terminals in the UAE, adding an international dimension to its operations. This diversification can mitigate risks associated with purely domestic operations.
  • Experienced Management: The company is backed by experienced management led by Mr. Sajjan Jindal and Sajjan Jindal Family Trust, who are the promoters of the company. Their track record and industry expertise inspire confidence in the company’s growth prospects.
  • Utilization of Proceeds: The funds raised through the IPO will be used for strategic purposes, including prepayment or repayment of outstanding borrowings, financing capital expenditure for expansion and upgradation projects, and general corporate purposes. This allocation of funds reflects a prudent and growth-oriented approach.

Risks to Consider in this IPO

Here’s a summary of the risks associated with the JSW Infrastructure IPO:

  • Reliance on Government Agreements: Business heavily depends on concession and license agreements with government and quasi-governmental bodies. Breaching these agreements could lead to termination, causing significant harm to business, financial condition, and cash flow.
  • Cargo Dependency: A substantial portion of its cargo volume relies on a few specific types of cargo. Any significant reduction or elimination of these cargo types could negatively impact on its profitability.
  • Environmental Clearance Challenges: Its subsidiary’s capacity enhancement project’s environmental clearance is currently under litigation, which may have adverse effects on its business, financial condition, and operations depending on the outcome of these legal proceedings.
  • Credit Rating Impact: A negative change in company credit ratings may hinder its ability to secure funds for future capital needs.
  • Related Party Transactions: They engage in substantial related party transactions within the JSW Group, which poses potential conflicts of interest and requires careful management.
  • Capital Intensive Nature: Its industry demands significant capital for expansion and development projects, and its ability to raise necessary funds may be limited. Additionally, investments in new services and facilities may not yield the expected results.
  • Debt Burden: We carry substantial indebtedness that requires substantial cash flows for servicing. Breaching financing terms or failing to meet obligations could harm its business and financial condition.
  • Trademark Ownership: They don’t own the JSW trademark, and any damage to this trademark or the JSW Group’s reputation could negatively affect its financial condition, cash flows, and operations.
  • Expansion Risks: Delays or difficulties in ordering equipment or services for its expansion projects may result in time and cost overruns, potentially impacting its business and results.
  • Legal Proceedings: There are ongoing legal proceedings involving company, subsidiaries, directors, promoters, and group companies. An unfavorable outcome in these cases could adversely affect our business prospects, financial condition, ongoing operations, and reputation.
  • Receivables and Payment Defaults: Failure to collect receivables and experiencing customer payment defaults could lead to reduced profits and negatively affect its cash flow.

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JSW Infrastructure IPO Review – Is it good or bad for investment?

JSW Infrastructure IPO offers a attractive investment opportunity due to its robust financial performance with consistent revenue and profit growth, a prominent position as the 2nd largest cargo handler in India, and the advantage of long-term concession agreements that ensure steady revenue streams. Backed by experienced management and with funds earmarked for strategic purposes, including expansion and debt reduction, the IPO presents a promising proposition for investors.

On the otherside, company faces several critical risk factors, including heavy reliance on government agreements that, if breached, could significantly harm its business and financial stability. A substantial portion of its cargo volume depends on a few specific cargo types, posing a profitability risk if they are reduced or eliminated. Legal challenges to its subsidiary’s environmental clearance and credit rating changes could also negatively impact the company.

High risk tolerance investors can invest in JSW Infrastructure IPO after understanding all risk factors in this IPO.

Suresh KP

One comment

  1. Thanks Suresh, I m going for this IPO… this business is able to get margin of 15 to 20% consistently after tax.

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