JSW Infrastructure Ltd’s management has approved equity fund raising of up to 250 million shares on Friday, which is almost equal to its initial public offering (IPO) size in terms of number of shares.
A qualified institutional placement (QIP) is likely to be the preferred mode for raising funds. The fund-raising plan is aimed at meeting twin objectives: complying with the Securities and Exchange Board of India (Sebi) norms of minimum public shareholding and funding the aggressive capital expenditure plans.
JSW stock was listed on 3 October 2023; the promoters must reduce their stake to 75% or below by 2 October 2026, i.e., within three years of the date of listing. The current promoter stake is 83.6%, which means the equity base would need to be diluted by 12% to bring it to 75%. Thus, the management has kept the issue size of fresh equity shares at 12% of the current number of equity shares, at 2.1 billion, or about 250 million.
If the fresh shares are issued at ₹250 per share (near the current market price), JSW should be able to garner ₹6,250 crore, more than twice the ₹2,800 crore it raised in the IPO. Given that the combined capital expenditure for FY27 and FY28 is estimated at ₹16,500 crore ( ₹13,000 crore for ports and ₹3,500 crore for logistics), funds to be raised through a QIP would be useful.
JSW’s shares have now risen over 100% from their IPO issue price of ₹119. But can the equity dilution spoil the party from here on? The answer depends on whether JSW can get its expansion right.
Bridging capex gap
While FY26 and FY27 are expected to witness cargo volume growth of 5% and 9%, respectively, to reach 134 million tonnes per annum (mtpa) by FY27, JSW hopes FY28 will be the year of robust volume growth of about 25% to 165-175 mtpa. The management’s optimism regarding volume growth in FY28 is based on the commissioning of a few projects by March 2027.
The first is the iron ore slurry pipeline in Odisha, from Nuagaon to Jatadhar port, with a capacity of 30 mtpa, at a cost of ₹4,000 crore. The pipeline capacity needs to be matched with a corresponding increase in Jatadhar port capacity by 30 mtpa, which would require a capex of ₹3,000 crore. The capacities of two ports in Maharashtra, i.e. Jaigarh and Dharamtar, are being expanded by 15 mtpa and 21 mtpa, respectively, at a total cost of ₹2,400 crore.
The new projects would lift volumes and also improve the overall Ebitda (earnings before interest, taxes, depreciation and amortization) margin profile, as the three ports that are being expanded are private ports that do not involve royalty payments.
The management is forecasting a big jump in Ebitda for FY28, which could be almost twice its FY26 estimate of ₹2,600 crore. Brokerages such as PL Capital and Motilal Oswal Financial Services are conservatively pencilling in about 75% Ebitda growth for FY28 over FY26. Nevertheless, if that’s achieved, it will be substantial.
It is the strong Ebitda growth projected for JSW’s FY28 that makes its valuation almost the same as Adani Ports’ at about 14x EV/Ebitda, based on Bloomberg consensus estimates. Otherwise, from a near-term perspective, JSW remains about 30% more expensive than Adani Ports, trading at a 19x multiple to FY27 estimates.
