Infrastructure News

Joint MD & CEO, ET Infra


In an interview to ET Now, Arun Maheshwari, Joint MD & CEO, JSW Infra, shares his business outlook and talks about the company’s IPO. Edited excerpts:

ET Now: A momentous occasion — the first in 13 years from the JSW stable. So, what will you use the IPO proceeds for?
Arun Maheshwari: The total IPO is for Rs 2,800 crore, out of which Rs 880 crore will go towards the repayment of debts. About Rs 1,200 crore will be towards capex, and Rs 700 crore will be towards general corporate purposes.

Give us an idea of your debt picture right now. What does the debt repayment plan look like? Also, the future net debt to EBITDA guidance that you may have in mind…
As on 31st March, if I had to look at it, the total net debt was Rs 2,200 crore. From the IPO proceeds, we will be paying close to about Rs 900 crore. The Rs 700 crore, which is general corporate spending, will be lying in the books.

And there has been a free cash flow which the company is generating month on month basis. So post IPO, we will be net debt free as a company.

But there are certain capex moves lined up in our future growth plans. However, as a sustainable guidance, it would be around 2.5 net debt to EBITDA going forward.

What is your existing in-house business — how much is coming from the JSW group per se and how much is coming from third party?
When we started this company in 2004, it was largely a captive company. The genesis of the company happened with an aim to secure the supply chain management of JSW steel and JSW energy. By virtue of that we secured one port terminal in Goa.

Thereafter, we kept on building the ports and we kept on realising that this was a good business to be in — so why don’t we start as a separate vertical?

For a good 14-15 years until 2018, we were handling only captive cargo; there was no outside cargo. Even in 2019, when we were handing 35 million tonnes of total cargo, we were doing only 6% outside the group.

But when the focus shifted, we thought why don’t we develop these separate terminals? In FY23, when we did 93 million tonnes of total cargo, we handled 33% from outside the group. In June ’23, we handled almost 37% from outside the group.

So the growth journey continues. The focus is on investment and the ambition to see it grow as a very independent vertical.

However, it is important to mention that for any port company you need to have a solid anchor customer. Otherwise, the capex would be very high because there are high entry barriers. So you need to have a very solid anchor customer, and what could be better than to have your anchor customer from your own group?

This customer is very growth-oriented too. Be it JSW steel or Cement or Power, everybody in the group s growth-oriented. So, good to have such a solid anchor customer.

So, what happens now in terms of new business growth versus in-house business growth because they both are very different?
The kind of opportunity that India is offering today to develop this business as an independent vertical is humongous. The govt wants to privatise almost all the terminals now, which provides a good opportunity. Almost 50% of India’s port capacity today is with government and they intend to bring in a landlord model.

It has already been done in JNPT. They want to replicate it in almost all the ports now. Assuming that even part of the quantity comes up for auction in another five-ten years, that will be a good 500-700 million tonne of capacity coming up for auction.

And where are the major players now? Pan-India there are only a couple of players; the rest all are regional players. So, this offers a good opportunity for companies like us who have a good balance sheet, intention to grow and a passion to be in this business.

I think going forward, we will be able to maintain 60-40 or 50-50 in favour of the group from here on.

Can you just tell us in terms of the breakup of your clients? Any kind of revenue concentration between anchors and third party?
Since the cargo is almost 63% from inside the group as on June 23, the revenue is more or less close to about 70% because they are largely from the greenfield ports. That is why revenue-wise they are slightly higher than other terminals.

If I have to look at it, most of our terminals are very new and very strategically located. If I have to talk about the coal terminal in Paradip which is one of the largest coal terminals in India, it is very close to the Mahanadi Coalfields. So, naturally customers like all the southern customers, all the gencos, become natural customers for us.

Just imagine, there has been no new thermal power plant coming in south India in the past two years, and still this is one of the largest terminals of coal running at almost 60% capacity. So, this kind of growth opportunities are there because these are strategically located.

Even though there is no single big anchor customer other than JSW Group, a number of customers are flowing in just because of that. Similarly, if I have to talk about our iron ore terminal in Paradip, this is the third year of operation and we are running at 100%. There is no need of having a solid anchor customer over there because the location attracts the business from ports generally.

What is the outlook when it comes to your overall margins as compared to your peers?
Our EBITDA margin is close to about 53%. The industry standard as of now in India is generally about 65%.

I would say our business model is very different. We are 50% on the greenfield port side and 50% on the terminal side. Terminals are given on major ports on a PPP model around which the ecosystem is provided by the major ports. We just have to mechanise, modernise, invest in the equipment. The risks are very minimal, the gestation time is very low, the customer profile is very well known to us.

With this kind of profile, our capex is very low. So, our business model is 50% from the greenfield port, 50% from the terminal side. That is why our EBITDA margins are towards the lower end.

If I have to look at my greenfield port alone, it is as comparable to any other greenfield port in India today, close to about 65% margin.

But as a group, we look generally towards a return on capital employed. Our return on capital employed is fairly robust and good. It is close to about 20% as of FY23.

What the outlook is in terms of your overall capacity? How you plan to grow that and how you are looking at ramping up your overall capacity plans?
Today our capacity is close to 158 million tonnes. In the past 20 years we have maintained 22% CAGR on the volume front. With the kind of balance sheet what we have today, even though the base volume is high now, I think we would be able to maintain a similar kind of CAGR going forward as well.

And what is the outlook in terms of your overall volume picture? How that has shaped up so far?
We started with a small terminal of about 5 million tonnes in 2004. Today, we are at 158 million tonnes. The way we are planning our future growth, in another 5-10 years’ time we should be almost double that, because the kind of growth that we see in India is very handsome, very-very good.

  • Published On Sep 27, 2023 at 01:42 PM IST

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