JSW Infra does not have any plans to raise funds after its initial public offering (IPO), the company's Joint Managing Director (Jt MD) and Chief Executive Officer (CEO) Arun Maheshwari told Moneycontrol in an interview.
Last year, the company raised Rs 3000 crore in funds through a sale of bonds in the international market.
He added that JSW Infra has sufficient cash flows to fund future expansion plans and that it is comfortable with a net debt of around Rs 2,000 crore.
Maheshwari sees India's thermal energy consumption peaking by 2050, despite the push for green energy. That leaves a good two to three decades for coal demand to grow in India.
Watch the full interview here:
Edited excerpts from the interview:
Q. Given that the stock market is hovering near its all-time high, why did you launch JSW Infra's IPO at this time? How will it benefit the company and potential investors?
Arun: In January 2022, when we brought in the bond issue, we had given the guidance that, towards the end of the calendar year 2023, we'd be going public and that we had certain capex plans and strategies in place.
By virtue of that, we had planned this IPO about one and a half to two years ago. And the timing seems to be correct.
Q. Your company has only one listed peer – Adani Ports and SEZ Limited. Your DRHP includes a comparison with Adani for all accounting ratios. Is that an appropriate comparison given the difference in scale and the nature of the cargo?
Arun: Definitely, Adani’s scale is much higher than ours, but it is a fair comparison today. There is another listed company, Pipavav Port, but they are purely into containers.
There is no other major comparison in India.
Q. JSW Infra has high exposure to coal and steel cargoes. Given the volatility in the energy and commodity markets in the last two years, what’s your outlook?
Arun: I would say that we are just a port company handling cargo for customers in the steel, power, and other sectors.
So, we are not cyclical per se. Our volumes have been very stable over the past 20 years of operations, across sectors.
Our volumes have been consistently growing. The cyclical nature of the industry has not had any impact.
However, when the steel cycle moves up or down, margins may be impacted.
But volumes in India have been continuously growing for these sectors. So, we are well positioned to handle these cargoes.
Q. Given that your cargo handling volumes are expected to benefit from the energy expansion plans of JSW Steel and JSW Energy, how do you expect your volumes to increase in the next five years? How are you planning to increase your installed cargo handling capacity from 153.43 million tonnes per annum (mtpa) now to 200 mtpa?
Arun: We are fortunate that we are part of the JSW Group.
However, being separate companies, we are not guaranteeing each other the cargo or the services. We get the advantage of being looked at first and if we are able to handle the volume, we carry forward with the assignment.
We are well poised. JSW Steel and Energy had been very solid anchor customers for us during all these years of our growth journey.
Going forward, they will continue to be there.
But our ambition in the last five years has been very different.
We have been investing a lot in our third-party business profile, whether it's container, LPG, fertiliser, sugar, or coal exports to the coastal thermal power plants.
This has been our growth journey in the last five years, and the focus has been quite strong.
Almost 36-37 percent of our total volume as of June 2023 has been from third-party services.
Q. In third-party business, which are the major segments in EXIM traffic where you are planning to increase your market share?
Arun: Our major focus would be on containers, liquid, gas, and value-added services so as to further strengthen our position in the segments.
Q. According to the DRHP, for the nine months ended December 31, 2022, JSW Infra handled a cargo volume of 66.70 million metric tonnes (MMT). What was the volume for the full year 2022-23, and what are your expectations for 2023-24?
Arun: In 2022-23, we handled 93 MMT of cargo. In the June quarter of 2023-24, we handled about 25 MMT of cargo.
The June quarter is generally a good indication of the cargo volumes we expect to handle in the coming quarters. Having said that, the second half is generally slightly better than the first half.
Q. Last year, you had raised around Rs 3,000 crore ($400 million) through an international bond issue. This year, you’re looking to raise around Rs 2,800 crore through the IPO. Going forward, should we expect the company to raise around Rs 3,000 crore annually?
Arun: No. We are financially very prudent. As a group, we have been prudent. We would like to be as prudent as we have been so far.
Our internal cash generation is also quite strong. The kinds of projects we are taking on and what we envisage as our future strategy will be sufficiently covered by our internal cash flows and the money that we are raising now.
Our balance sheet is healthy and our ratios are good. Going forward, if the need arises, we can raise further money.
Q. Your DRHP says that out of the total proceeds, Rs 880 crore will be used to invest in the company’s arms, JSW Dharamtar Port Pvt Ltd and JSW Jaigarh Port Ltd, towards repayment of their debt. As of December 2022, JSW Dharamtar Port had a total debt of Rs 4,303.90 crore. What would be the ideal debt level for Dharamtar Port?
Arun: As of 31 March 2023, JSW Infrastructure's gross debt stood at about Rs 4,200 crore. Our net debt was around Rs 2,200 crore, of which we will pay off Rs 880 crore.
Q. Your DRHP says that Rs 151.05 crore will go into financing the capex of JSW Mangalore Container Terminal at New Mangalore Port (NMPT). How much more capex is needed for NMPT?
Arun: Yes, close to that. The total capacity after this investment in the second phase would be close to about 370,000 TEUs per annum.
Q. According to the DRHP, Rs 865.75 crore will be used for an LPG terminal project. Is this the Floating Storage and Regasification Unit being commissioned at H-Energy’s Jaigarh Terminal, Jaigarh Port, or is this a separate project?
Arun: This is a separate new project. We are preparing our onshore tankage facility at Jaigarh Port for LPG, which will be one-of-a-kind in India.
We will be aiming for an additional capacity of about two million tonnes at the LPG terminal. It will be commissioned in around 30 months.
Q. Given that EXIM volumes in India have fallen in the last six months, what are your expectations for cargo volumes? When do you expect EXIM volumes in the industry to bounce back?
Arun: (The performance of) one or two quarters should not be an indicator. The way India is growing and offering opportunities for growth is amazing. I think we are well positioned in this sector in the country.
Q. Last year, JSW Infra commissioned the Paradip East Quay coal terminal in Odisha with a capacity of 30 mtpa. Given that India’s coal imports have fallen 25 percent in the last three years and are expected to fall further with the government’s push towards green energy, what are the long-term plans for Paradip Port?
Arun: We use the Paradip Coal Export Terminal to transport coal across the eastern coastal belt of India.
We supply coal to power gencos in Tamil Nadu, Andhra Pradesh, Telangana, Maharashtra, and Karnataka from Paradip Port.
Our new terminal has been operational for the last 18-20 months and we are very happy to say that we are touching close to 60 percent utilisation.
I agree that there has been a serious attempt to shift towards green energy sources, but if we look at all government and industry reports, I think we will peak on energy consumption on the thermal side by 2050.
There's still very good demand for coal, and more capacities are being added towards the south of India in thermal power plants. It has a good future, at least for two to three decades more.
Q. The Indian Railways has been looking to increase its market share in cargo handling. Do you have any plans to connect your ports with the dedicated freight corridors through a direct rail line?
Arun: Yes, we will definitely explore the possibility of connecting our ports to direct railway lines.
Q. How do you view the competition in India, especially given the consolidation that’s happening in ports?
Arun: India has a coastline of 7,500 kilometers, and our EXIM traffic is only expected to grow. There is enough (for everyone).
Everybody can create assets, and we would encourage more players to set up shop. If the economy has to go from $4 trillion to $10 trillion, we need more players in this sector.
There is enough (for everyone) and everyone can grow very, very robustly in this sector.
Q. Are there any plans to diversify into any other segments within infrastructure?
Arun: Anything that adds value to our port sector would be very encouraging for us, whether it is the railway line, slurry pipelines, or gas lines. That would be exciting.
We are not averse; we are not closing our doors on any other opportunity that will add value to our business.
Q. In March, the National Green Tribunal suspended the environmental clearance for Jindal Steel Works’ (JSW) mega project at the Paradip port. Has there been a significant development since then? How are you planning to address the concerns raised by the NGT?
Arun: I think JSW Steel can probably answer this question better.
But what I understand largely is that everything is on course, and we are going ahead with that project. All approvals are in place for now.
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