What you must know about JSW Infrastructure IPO?

JSW Infrastructure Ltd was incorporated in the year 2006 and the company provides maritime-related services. These include cargo handling, storage solutions and logistics support services. In addition, JSW Infrastructure Ltd  also develops and operates ports and port terminals under Port Concessions. The company is part of the renowned JSW group (an offshoot of the original Jindal group) and this will be the first IPO by the group in more than a decade. JSW Infrastructure Ltd is the second largest commercial port operator in India; measured in terms of cargo handling capacity. It handles dry bulk cargo, break bulk cargo, liquid bulk cargo, gases, and containers. Apart from coal, the other key cargo materials handled by the company include iron ore, sugar, urea, steel products, rock phosphate, molasses, gypsum, barites, edible oil, LNG, and LPG.

Currently the ports operated by JSW Infrastructure Ltd have fairly long concession periods ranging between 30 years to 50 years. This is likely to provide long term sustainable visibility in terms of revenues. JSW Infrastructure Ltd is present across India with non-major ports in Maharashtra as well as port terminals in Goa and Karnataka. On the east coast, it has presence in Odisha and Tamil Nadu, apart from global presence in the UAE. In all, JSW Infrastructure operates 9 Port Concessions in India with an installed cargo handling capacity of 158.43 MTPA. The company's cargo handling capacity in India has grown at an impressive CAGR of 15.27% over the last 3 years. The issue of JSW Infrastructure Ltd will be lead managed by an impressive line-up of lead managers comprising of JM Financial, Axis Capital, Credit Suisse Securities, DAM Capital (formerly IDFC Securities), HSBC Securities, ICICI Securities, Kotak Mahindra Capital and SBI Capital Markets. KFIN Technologies Ltd will be the registrar to the issue.

Highlights of the JSW Infrastructure IPO issue

Here are some of the key highlights to the public issue of JSW Infrastructure IPO.

• JSW Infrastructure IPO has a face value of ₹2 per share while the price band for the book building IPO has been set in the band of ₹113 to ₹119 per share. The final price will be discovered within this band, through the process of book building.
   
• The IPO of  JSW Infrastructure Ltd will be entirely a fresh issue of shares. The fresh portion will entail the issue of 23,52,94,118 shares (23.53 crore shares approximately), which at the upper price band of ₹119 per share will translate into fresh issue size of ₹2,800 crore.
   
• There is no offer for sale component in the IPO. Typically, while a fresh issue of shares brings in fresh funds, it also dilutes the EPS and the equity. The offer for sale (OFS) is just a transfer of shares and hence does not dilute the equity or the EPS of the company.
   
• Since there is no OFS component, the fresh issue portion will also be the overall issue size. Hence, the overall issue size of JSW Infrastructure Ltd will comprise the issue of 23,52,94,118 shares (23.53 crore shares approximately), which at the upper price band of ₹119 per share will translate into fresh issue size of ₹2,800 crore.

The proceeds of the fresh issue portion will be used to repay / prepay some of the loans taken by its subsidiaries via parent company investments. The fresh funds will also be used to finance requirements through the investment in its subsidiary, JSW Jaigarh Port Ltd for upgradation and dredging. Part of the funds will also be used to invest in the subsidiary, JSW Mangalore Container Private Ltd as part of the expansion of the Mangalore port franchise.

Promoter holdings and investor allocation quota

The company was promoted by Sajjan Jindal and the Sajjan Jindal Family Trust. Currently the promoters hold 96.42% of the company, which will get diluted post the IPO to 85.62%. As per the terms of the offer, 75% of the net offer is reserved for the qualified institutional buyers (QIBs), while just 10% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The stock of  JSW Infrastructure Ltd will be listed on the NSE and on the BSE. The table below captures the gist of the allocation to various categories.

Lot sizes for investing in the JSW Infrastructure IPO

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of  JSW Infrastructure Ltd, the minimum lot size is 126 shares with upper band indicative value of ₹14,994. The table below captures the minimum and maximum lot sizes applicable for different categories of investors in the IPO of  JSW Infrastructure Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for JSW Infrastructure IPO and how to apply?

The issue opens for subscription on 25th September 2023 and closes for subscription on 27th September 2023 (both days inclusive). The basis of allotment will be finalized on 03rd October 2023 and the refunds will be initiated on 04th October 2023. In addition, the demat credits are expected to happen on 05th October 2023 and the stock will list on 06th October 2023 on the NSE and the BSE.  JSW Infrastructure Ltd offers a very unique combination. It has an established and tested business model with a niche focus and a profitable operation, apart from being the second largest commercial port operator in India. Let us now turn to the more practical issue of how to apply for the IPO of  JSW Infrastructure Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of JSW Infrastructure Ltd

The table below captures the key financials of JSW Infrastructure Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (All ₹ figures are in crores)

There are few key takeaways from the financials of  JSW Infrastructure Ltd which can be enumerated as under

1. In the last 2 years, the revenues growth has been robust in the range of 35% to 40% on a yearly basis. However, the challenge for the company is that the sales traction is yet to keep up with the huge investments made as is evident in the large assets size and the net worth. The company has reported very attractive net profit margins as well as very strong return on assets and return on equity.
    
2. One way to look at the company would be based on the market cap to profit ratio, which is nothing but the P/E ratio. The P/E ratio is more than 30 times, which is quite steep. If you look at the market as a percentage of revenues, it is around 8 times, which does raise a question now how much there left on the table.
    
3. The company has held a very low level of asset sweating as evidenced by the asset turnover ratio. However, that is understandable as costs tend to be front-ended in this business. The reduction of debt levels and business growth should help.

While pricing of the IPO does matter here, what is more critical is the eventual PAT margins that will sustain and the ROE that can be held by the company. Valuations are at par with the industry, but this can be seen as a big bet on Indian infrastructure, especially maritime infrastructure. It is an investment call that must be taken with a longer term view that with the view of listing gains. It remains a higher risk play for investors.