IPO: JSW Infrastructure

JSW Infrastructure, a port-related infrastructure company, has come out with its IPO (initial public offering). Here's a breakdown of the company's strengths, weaknesses, and growth prospects to help investors make an informed decision. In a nutshell Quality : The three-year average ROE and ROCE of JSW Infrastructure are 12.4 and 12.8 per cent, respectively. In FY23, the company's ROE and ROCE were 18.3 and 19.5 per cent, respectively. Growth : Its topline grew by 40.5 and 41.7 per cent in FY23 and FY22, respectively. Valuation : The stock will be priced at a P/E and P/B of 28.7 and 3.5 times, respectively, as compared to its peer Adani Ports' P/E and P/B of 28.6 and 3.8 times, respectively. Overview : The company has a competitive edge due to high entry barriers and strategic port locations, but it's notable that a significant portion of its revenue (66.6 per cent) comes from related companies (JSW group). This reliance on related companies has decreased from 75.2 per cent in FY21 to 66.6 per cent in FY23, potentially reducing concentration risk. About JSW Infrastructure JSW Infrastructure is the second-largest commercial port operator in India in terms of cargo handling capacity. The company provides maritime-related services including, cargo handling, storage solutions, logistics services and other value-added services to their customers, and is evolving into an end-to-end logistics solutions provider. Strengths of JSW Infrastructure Second-largest commercial port operator in India in terms of cargo handling capacity in an industry where entry barriers are very high due to substantial investment requirements, long gestation periods and significant regulations. Predictable revenues driven by long-term concessions (contractual agreement where an entity is granted rights to operate a specific port or terminal by a port authority for a defined period in exchange for fees or revenue-sharing) with an average balance concession period of 25 years as of June 30, 2023. Weaknesses of JSW Infrastructure The company relies heavily on its top five customers for a significant portion of its revenue , accounting for 54.2 per cent of total revenue. The top client, which is a related party company, contributes 41.4 per cent to the company's revenue. This concentration of revenue from a small number of clients poses a risk, as any adverse changes in these relationships or their business activities could impact the company's financial stability. Huge reliance on concessions and licence agreements from government and quasi-governmental organisations to operate and grow business. IPO details Total IPO size (Rs cr) 2800 Offer for sale (Rs cr) 0 Fresh issue (Rs cr) 2800 Price band (Rs) 113-119 Subscription dates September 25-27, 2023 Purpose of issue To repay debt and fund capex Post-IPO M-cap (Rs cr) 24990 Net worth (Rs cr) 7046 Promoter holding (%) 85.6 Price/earnings ratio (P/E) 28.7 Price/book ratio (P/B) 3.5 Financial history Key financials 2Y growth (% pa) TT