JSW Infrastructure Limited IPO

JSW Infrastructure Limited filed its DRHP on May 9, 2023 with SEBI to raise funds through IPO. The IPO consists of fresh issues only. The size of fresh issue is Up to [●] Equity Shares aggregating up to Rs. 2800 crore. 

Business Model of the Company

JSW Infrastructure Limited is the fastest growing port-related infrastructure company in terms of growth in installed cargo handling capacity and cargo volumes handled during Fiscal 2020 to Fiscal 2022, and the second largest commercial port operator in India in terms of cargo handling capacity in Fiscal 2022 (Source: CRISIL Report). The operations of the Company have expanded from one Port Concession at Mormugao, Goa that was acquired by the JSW Group in 2002 and commenced operations in 2004, to nine Port Concessions as of December 31, 2022 across India, making it a diversified maritime ports company. 

The Company provides maritime related services including, cargo handling, storage solutions, logistics services and other value-added services to its customers, and is evolving into an end-to-end logistics solutions provider. The Company develops and operates ports and port terminals pursuant to Port Concessions. Its ports and port terminals typically have long concession periods ranging between 30 to 50 years, providing it with long-term visibility of revenue streams. As of December 31, 2022, the capacity weighted average balance concession period of its operational ports and terminals is approximately 25 years with Jaigarh Port, one of its largest assets, having a balance concession period of 35 years. 

Object of the Issue

The Company proposes to utilize the Net Proceeds in the following manner 

1. Investment in its wholly owned Subsidiaries, JSW Dharamtar Port Private Limited and JSW Jaigarh Port Limited, for prepayment or repayment, in full or part, of all or a portion of certain of their outstanding borrowings; 

2. Investment in its wholly owned Subsidiary, JSW Jaigarh Port Limited, for financing its capital expenditure requirements for proposed expansion/upgradation works at Jaigarh Port
i) expansion of LPG terminal
ii) setting up an electric sub-station; and
iii) purchase and installation of dredger;

3. Investment in its wholly owned Subsidiary, JSW Mangalore Container Terminal Private Limited, for financing its capital expenditure requirements in relation to proposed expansion at Mangalore Container Terminal 

4. General corporate purposes.

In addition to the aforementioned Objects, the Company expects to achieve the benefits of listing its Equity Shares on the Stock Exchanges. 

Risks in the IPO

Rely on concession and license agreements from Government 

The Company relies on concession and license agreements from government and quasi-governmental organizations to operate and grow its business. The Company has several obligations under these agreements and a breach of the terms could lead to termination, which could materially adversely affect the business, results of operations, financial condition and cash flows.

Concession and license agreements are for limited periods

The concession and license agreements are entered into for limited periods ranging from 30 to 50 years and do not provide for renewals. The O&M agreements are granted for limited periods of up to five years and may not be renewed on equally favorable terms or at all. Inability to renew these arrangements could adversely affect the business, results of operations, financial condition and cash flows of the Company. 

The Company’s revenue is dependent on specific customers

The Company derives a substantial portion of its revenue from its top five customers. If such customers were to suffer a deterioration of their business, cease doing business with the Company or substantially reduce their dealings with the Company, the revenues of the Company could decline, which may have a material adverse effect on the business, results of 

operations, cash flows, financial condition and future prospects.

Some of the projects are awarded to the Company through Competitive Bidding Process 

 The growth of the business depends on the ability to obtain projects including by way of being awarded tenders pursuant to competitive bidding processes. Generally, such projects are awarded on satisfaction of certain prescribed pre-qualification criteria. While technological capacity and performance, health and safety records and personnel, reputation and experience are important considerations, price is also a major factor. The inability to effectively bid for such projects in the future could impact the operations and financial condition.

The environmental clearance for capacity enhancement issued to its Subsidiary

The environmental clearance for capacity enhancement issued to the Subsidiary, South West Port Limited has been challenged before the National Green Tribunal and is subject to the outcome of certain other litigations. Any adverse outcome in these litigations may have an adverse effect on the business, financial condition, results of operations and cash flows of the Company. 

Financial Performance 

As per the consolidated financial statement, the Company clocked total revenue of RS. 2400 crore in 9M FY23. During this period, the total expenses of the Company was Rs. 1884 crore. The rested profit for the period was Rs. 447 crore. In FY22, the total revenue of the Company increased 41% to Rs. 2378 crore as against Rs. 1678 crore in FY21. The total expenses of the Company have also increased 51% to Rs. 1952 crore as against Rs. 1285 crore in FY21. The net profit of the Company increased 16% to Rs. 330 crore as against Rs. 284 crore in FY21. 

In FY22, the total equity and liabilities of the Company was Rs. 9429 crore as against Rs. 8254 crore in FY21. In FY22, the total assets  of the Company was also Rs. 9429 crore as against Rs. 8254 crore in FY21. 

The net cash generated from operating activities of the Company in FY22 was Rs. 1176 crore as against Rs.  990 crore in FY21. The net cash used in investing activities of the Company in FY22 was Rs. 801 crore as against Rs. 1636 crore in FY21. The net cash generated from financial activities of the Company in FY22 was Rs. 2 crore as against Rs. 640 crore. The net cash and cash equivalents at the end of the year of the Company in FY22 was Rs. 528 crore as against Rs. 151 crore in FY21.