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An ‘integrated ports and logistics player’ in the making

JSW Infrastructure (JSWIL), India’s second largest private port player, is well positioned to capture the opportunities arising from the government of India’s (GoI) thrust on infrastructure spending and privatisation of port terminals. The company’s ambitious plan to achieve 400mtpa capacity by FY30E (16% CAGR over FY24-30E) is aligned with GoI’s target to 4x India’s existing ports capacity (2,600mtpa) to 10,000mtpa by FY47E. Part of the JSW group, JSWIL derives significant volume from its group customer (JSW Steel; 52%/60% in 1HFY25/FY24), providing significant visibility and stability to its ports’ volumes. Simultaneously, the company has improved its 3rd party volume mix from 6% in FY19 to 48% in 1HFY25, indicating a growing and robust customer base. The company’s acquisition of Navkar Corporation (operates three CFS and one ICD) and Sical’s CTO licence, and a contract to build and operate GCT (Gati-Shakti cargo terminal) are reflective of its intent to create an integrated logistics value chain across key ports, building stickiness for its customers. We believe JSWIL’s robust balance sheet (0.3x/0.9x net debt to equity/ net debt to EBITDA), superior cash flows and possible dilution to meet the public market requirement (promoter holding currently 85.6%) are well placed to meet the targeted capex spends of INR 300bn over FY24-30E. We estimate JSWIL to generate revenue/EBITDA CAGR of 20%/18% over FY24-27E on the back of capacity addition (brownfield expansion) and growing customer base. We value the company on 25x FY27 EV/EBITDA to arrive at Mar’26TP of INR 390. We maintain BUY.

* JSWIL, the second largest private port player, targets to achieve 400mntpa by FY30E:

JSWIL, part of JSW group, has expanded from one terminal in Mormugao in 2004 to 10 ports in 1HFY25 and is the second largest private port player in India. A majority of JSWIL’s ports are deep draft ports with multi-modal evacuation infra (road/rail/ water). The residual period of concession for the JSWIL portfolio is over 25 years, which is the highest among peers, thus providing significant long-term visibility. Further, the company targets to expand capacity by 2.4x to 400mntpa by FY30E on the back of brownfield expansion in Jaigarh and Dharamtar port and greenfield expansion in Jatadhar, Keni and Murbe port.

* Increasing 3rd party mix to improve utilisation over medium to long term:

JSWIL derives significant revenue from its group (54%/52% in 2Q25/1H25). However, the contribution has significantly dropped 75% in FY21 on the back of increasing mix of 3rd party customers. The growth in 3rd party customers have been largely on the back of the company’s customer acquisition strategy, and concession agreements it has received to operate and develop terminals at major ports. Since most of the terminals at major ports serve 3rd party cargo, the 3 rd party mix has improved. During 1HFY25, the contribution from 3rd party saw a significant jump largely due to shutdown at the JSW Steel Dolvi plant. The management guides to achieve 50-50% mix in 3rd party and group customer mix over the medium to long term. We believe the growing 3rd party mix will improve the company’s utilisation, leading to improved margins for the ports.

* Creating a robust logistics value chain across assets:

The recent acquisition by the company reflects its intent to create a logistics value chain across its key assets. In Jul’24, JSWIL announced it was acquiring majority shareholding (70.37%) in Navkar corporation at an equity consideration of INR 11bn. Navkar operates three container freight stations (CFS), two Gati Shakti terminals (GCT), and one inland container depot in Morbi (ICD); t also owns cat 1 and 2 CTO licence. During Dec’23, the company also acquired a CTO licence from from Sical Logistics. In Jun’24, it won an LOA for construction of a Gati Shakti terminal at Arokkonam, Chennai. The acquisition of Navkar and CTO licences has increased the addressable market opportunity for the private port player (rail logistics market size is c. IRN 2trln-2.5trln and warehousing market size is c. INR 1trln-3trln). Besides creating key logistics assets, the company has purchased an under-construction slurry pipeline project for INR 17bn for transportation of iron ore from JSW steel.

* Robust financials to aid capex plans:

Over FY19-24, JSWIL’s financial strength has significantly improved on the back of a) improvement in cash flow from operations from INR 3.3bn to INR 18bn in FY24 led by tight control on working capital days (155 days in FY19 to 42 days in FY24) and b) proceeds from IPO issuance (INR 17bn). In FY24, the company’s net debt to equity was 0.1x (vs. 1.3 in FY21) and net debt to EBITDA was 0.1x (vs. 4.5x in FY21). We believe JSWIL’s ambitious capex plan to achieve capacity of 400mnt by FY30E with a capex spend of INR 300bn will be aided by robust cash flow generation, substantial scope to leverage its balance sheet within its guided range of 2.5x net debt to EBITDA and possible dilution to meet public market requirement, i.e., 75% promoter holding (promoter holding ~85.6% as on Sep’24).

* Maintain BUY with Mar’26TP of INR 390:

We expect the current valuation multiple of JSWIL to sustain given a) JSWIL’s robust growth, b) new port developments/acquisitions in the medium term, and c) possibility of upward revision in tariff at its major port terminal (new policy allows such revisions, subject to regulatory approvals). We value JSWIL on 25x FY27 EV/EBITDA to arrive at Mar’26TP of INR 390. Key risks to call - a) Any material downward price revision for group customers, and b) sharp depreciation of INR against USD.

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SEBI Registration Number is INM000010361