The ₹2,800 crore initial public offering (IPO) of JSW Infrastructure, a port infra firm, opened for bidding on Monday, September 25 and will close on Wednesday, September 27. The company is offering its shares in the range of ₹113-119 apiece for the issue.
Issue size: JSW Infra IPO comprises a fresh issuance of ₹2,800 crore worth of shares; there's no offer for sale (OFS) component.
Objective: The company plans to invest the net proceeds from the offering into its fully owned subsidiaries, JSW Dharamtar Port Private Limited and JSW Jaigarh Port Ltd., in order to prepay or repay all or a portion of certain outstanding borrowings.
Subscription status: The issue received a weak response from investors. At 1:05 pm on its first day of bidding, the IPO was subscribed to just 17 percent against its offer. It has received bids for 2.18 lakh shares against 12.94 crore shares on offer. The category for retail investors was bid the most, 72 percent, followed by that of non-institutional investors (NII), which was subscribed to 14 percent. However, the qualified institutional buyers (QIBs) portion has not received any bids till now.
GMP: JSW Infra shares are commanding a premium of ₹16 apiece in the grey market today, indicating a decent listing at over 15 percent premium to the IPO price.
However, it is important to note that grey market premiums are just an indicator of how the company's shares are stacked up in the unlisted market and are subject to change rapidly.
Reservation: Up to 75 percent of the net offer has been reserved for the qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will have a 15 percent allocation in the offer. Retail investors will get the remaining 10 percent of the offer.
Lot size: JSW Infra IPO lot size is 126 equity shares and in multiples of 126 equity shares thereafter. Hence, one lot will cost investors ₹14,994.
Anchor investors: JSW Infra raised ₹1,260 crore from 65 anchor investors on Friday allocating 10,58,82,352 shares at a price of ₹119 apiece. The government of Singapore, Monetary Authority of Singapore, Morgan Stanley, Fullerton, HSBC Trustee, TA Global, Master Trust Bank of Japan, Cohesion MK Best Ideas, Goldman Sachs, Theleme India Master Fund and others participated in the anchor book.
About the firm: Incorporated in 2006, JSW Infrastructure is a part of JSW Group and the fastest-growing port-related infrastructure company that provides maritime-related services including cargo handling storage solutions, logistics services, and other value-added services to its customers which is also evolving into an end-to-end logistics solutions provider.
It is the 2nd largest commercial port operator in India, handling 92.8mn MT in FY23 (43 percent CAGR over FY21-23). 63 percent of volumes are derived from JSW Group customers while the balance 37 percent is from 3rd party customers which it plans to further increase to achieve a balanced customer base. The company develops and operates ports and port terminals pursuant to port concessions which typically have long concession periods ranging between 30 to 50 years.
Peer: Adani Ports and Special Economic Zone Ltd, which has a P/E ratio of 35.95, is the company's listed industry peer.
Financials: The company's Revenue and PAT have grown robustly at 41 percent and 62 percent CAGR over FY21-FY23 to ₹3,190 crore and ₹750 crore, respectively, led by strong volume growth. The EBITDA margin on average hovers at 50 percent while RoE stood healthy at 21 percent in this period. Net D/E post repayment would come to -0.2x levels.
The firm reported a net profit of ₹749.51 crore with revenue coming in at ₹3,372.85 crore for the financial year ended on March 31, 20223. Meanwhile, its net profit came in at ₹330.44 crore with a topline of ₹2,378.74 crore in the financial year 2021-2022.
Book-running managers: JM Financial, Credit Suisse Securities (India), Axis Capital, Dam Capital Advisors, HSBC Securities & Capital Markets, ICICI Securities, Kotak Mahindra Capital Company and SBI Capital Markets are the book-running managers to the issue, while Kfin Technologies is the registrar for the IPO.
Important dates: The company will fix the basis of IPO allotment on October 3 and initiate refunds on October 4, while the credit of shares to the Demat account of eligible allottees will take place on October 5.
JSW Infra shares are likely to be listed on October 6 on stock exchanges BSE and NSE.
Most brokerage firms have a 'subscribe' recommendation for JSW Infra's IPO citing its strong parentage, robust long-term business model, limited competition, reasonable valuations, and growth prospects for the future. However, uncertainty in traffic at ports, changes in government regulations and environmental concerns are the key risks for the issue. Here's what brokerage firms say:
Motilal Oswal: Subscribe
We like JSW Infra given its dominant position among the port operators in India, along with its broad cargo profile and diversified geographical presence. The issue is valued at 19x 1QFY24 P/E on an annualised and diluted basis, which looks attractive. We believe JSW Infra could benefit from the government's focus on port development, limited competition and strong parentage. Hence we recommend Subscribe.
BP Equities: Subscribe
Being in a capital-intensive business requiring huge capital as well as years of experience, JSW Infrastructure Ltd. looks well-positioned to maintain its dominant position in the ports industry in India in terms of cargo handling capacity and cargo volumes handled. The company also enjoys a strong parentage of JSW Group which has a presence in various sectors in India and offers customer stickiness in the long term. The company also has plans to undertake various greenfield and brownfield expansions in the coming years which would prove beneficial for the business performance going forward. The company has a track record of sustained Revenue/EBITDA/PAT performance which grew at a CAGR of 41.2%/42.1%/62.3% during the FY2021-23 period. On the upper price band, the issue is valued at a P/E of 29.7x based on FY2023 earnings which we feel is fairly valued. We, therefore, recommend a “Subscribe” rating for the issue.
Nirmal Bang: Subscribe
JSW Infrastructure Ltd is the fastest-growing port-related infrastructure company. It has a diversified customer base to include third-party customers across geographies by leveraging locational advantage and maximizing assets. Hence it is able to generate higher EBITDA margins and ROCE compared to Adani Ports. It intends to leverage its presence in the non-major ports to provide fully integrated logistics solutions to its customers. JSW Infrastructure is being offered at reasonable valuations at 17.2x FY23 EBITDA and thus we recommend subscribing to the issue.
Marwadi Financial Services: Subscribe
Considering the TTM (Jun-24) / FY24-Annualized EPS of ₹4.19/6.14 on a post-issue basis, the company is going to list at a P/E of 28.42x/19.39x with a market cap of ₹24,990 crore, whereas its peer Adani ports and SEZ Limited is trading at a P/E of 24.3x.
We assign a “Subscribe” rating to this IPO as the company is the fastest-growing port-related infrastructure company and the second largest commercial port operator in India. The company also benefits from a strong corporate lineage of the JSW Group along with strong financial metrics and growing margin profile, return metrics, and growth. Also, it is available at a reasonable valuation as compared to its peers.
Choice Broking: Subscribe
JSW Infra is demanding a P/E multiple of 28.7 times, which is in line to only the listed peer companies. Establishing and operating port infrastructure is capital-intensive. Moreover, key success factors for a port operator are the residual concession life of the port and the utilization levels. Its domestic cargo handling utilization is around 60 percent and the average residual concession life is around 25 years, which provides long-term visibility of revenue streams. With a lean balance sheet post-IPO, JSW Infra is well-positioned to participate in the port privatization drive of the government or any inorganic expansion.
Also with JSW Group companies as key customers, there seems to be certainty in the long-term cargo volumes for JSWIL. Further, with a lean balance sheet post-IPO, JSWIL is well-positioned to participate in the port privatisation drive of the government or any inorganic expansion. Thus, we assign a 'Subscribe' rating for the issue.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.