JSW Infrastructure, the port development arm of the Sajjan Jindal-led JSW Group, has raised $400 million through its maiden international bond issue to refinance loans and significantly lower the cost of funds. The company now wants to build scale and aims for an initial public offering in two years, Arun Maheshwari, joint managing director and chief executive officer of JSW Infrastructure told Moneycontrol’s Rachita Prasad. Edited excerpts:
The company has stated that the proceeds of the bonds issue would be used to retire old debt. What will be the saving on interest cost?
We have a debt of around $500 million and much of it will be replaced with the funds we have raised. Our cost of funds will come down by an average of 3%.
JSW Infrastructure is no more the captive port business that it used to be. What are the growth plans?
We got into this business to secure our own supply chain but now we feel we can leverage on our expertise to expand this business. We started with 10% of third-party volume and increased it slowly to 30%. Our target is to achieve 40% of our total volume from third-party business, even as our total volumes increases.
Our effort has been to maximize operations and change the image of this company as a captive cargo business as we felt there is good opportunity in the cargo business and very few players within India. But we don’t want to leverage our balancesheet too much. We will be very cautious in assessing all our opportunities. So far we are quite concentrated in Maharashtra; we would like to spread our risk and expand our customer base, products and geographies. If there are compelling acquisition opportunities, we will look at it or we will grow on our own through greenfield projects.
There is a huge opportunity but the port business is also competitive. How so you intend to increase your share in a market where others like Adani Ports have early mover’s advantage?
I defer that there is a lot competition in the market. India has a huge coastline and every port will have its own hinterland, customer base, and stickiness of the cargo. There is space for everyone to survive and thrive. There is room for more ports, India only needs to work on the connectivity of these ports now.
Typically, JSW has incubated new businesses and once they reach a certain size, they have listed them. Is an initial public offer (IPO) for JSW Infrastructure on cards?
We will be going for an IPO in the coming years; it may not happen immediately. Given the timeframe and our needs, it could happen in two years. We would be listing the port business.
You have explored greenfield projects like the Rs 3,800 crore-Nargol port project, for which the state government has invited global bids. Are you going ahead with the bids?
At a group level we will be developing something in Orissa because JSW is setting up a steel plant. There are several opportunities within India. We are still assessing these options and don’t have a concrete plan yet. As for the Gujarat project, we're still looking at it. Personally I feel it is quite cost intensive and this place will be crowded. Ports like JNPT, Mundra, Hazira, they are all in the same line. So we are assessing right now whether the volumes here will justify the capex.
Would you diversify into any other segments within infrastructure?
We are not averse to new businesses that add value. A lot of opportunities keep coming our way. But we don’t want to enter other businesses just because we have the capability and there is an opportunity. We will get into it only if it is a long term bet for us, it is meaningful and value accretive for us. So we are aggressive but at the same time we are very cautious.
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