For JSW Infrastructure, acquisitions and expansion are the key growth drivers

Shares of JSW Infrastructure Ltd dropped about 6% in early trade on Friday, even as the company reported a solid 24% year-on-year Ebitda growth. Investors appear worried about the decline in net profit primarily due to a foreign exchange adjustment.

The company, however, is expected to maintain its growth momentum due to increasing exports, rising demand for transportation, and gains accruing from recent acquisitions.

The company’s volume growth in Q1 was 9% year-on-year amid a planned shutdown at JSW Steel’s plant in Dolvi, a captive customer of the group. This was compensated by solid growth of 48% in the third-party cargo, with its share in total cargo rising to 50% from 37%.

The company needs to build this non-captive customer base on a sustained basis, as high dependency on captive customers poses a risk to its business. Higher handling charges from non-captive customers aided consolidated revenue growth of 20% to ₹1,109 crore. Revenue and Ebitda growth were marginally lower than 23% and 29% in Q4FY24 but same as full year FY24 growth rate. 

Post results, Motilal Oswal Financial Services analysts have marginally cut their adjusted profit after tax estimates by 4% and 2% for FY25 and FY26, respectively.

Charting growth plans

JSW Infrastructure’s management projects 10-12% volume growth in FY25. The company has a total cargo handling capacity of 170 million tonnes per annum (mtpa) spread across two ports and eight terminals at major ports. 

It plans to take its capacity to 250 mtpa by 2027 and 400 mtpa by 2030 through expansion at its existing facilities, acquisitions and development of newer ones. The projects include a greenfield port of 30 mtpa capacity in Karnataka, being developed at a cost of ₹4,200 crore, for which it won the bid in November. 

The company is also developing a berth in Tuticorin port with 7 mtpa capacity and two berths at JNPT of 4.5 mtpa to handle liquid cargo, both through public private partnership (PPP) mode. 

Its recent acquisitions include a liquid handling terminal in the UAE and a port on the western coast of Maharashtra, both with a capacity of 5 mtpa, acquired in December last year. The company plans a total investment of ₹30,000 crore by FY30, including ₹13,000-14,000 crore in the next three years.

Further, JSW Infrastructure has announced the acquisition of a majority stake in Navkar Corp. Ltd at an enterprise value of ₹1,644 crore, marking its foray into logistics which would complement its existing businesses. 

Navkar is a multi-modal logistics service provider with a CTO (container train operator) license and had revenue of ₹435 crore in FY24, about 12% of JSW Infrastructure’s FY24 revenue, but it made losses during the year. It has also received a contract for construction & operation of a multi-modal cargo terminal in Tamil Nadu near Chennai. With two operational terminals in the vicinity, this would help augment the company's ports business.

JSW Infrastructure’s shares currently trade at ₹315 apiece, meaningfully appreciating from their issue price of ₹119 during its IPO in October, aided by the acquisitions and port development contract received from the government, providing higher revenue visibility.

The path ahead, however, may not be smooth. As analysts from Kotak Institutional Equities point out, “JSW Infra continues to invest in assets for becoming a complete logistics solution provider, although lack of large and scalable assets in the market may prolong this journey.”

Investors seem to be adequately factoring in the brighter picture for the immediate future. Much will depend on the company’s pace of execution of its ongoing projects.