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Sajjan Jindal might be one of India’s richest men but he is happy to travel publicly — at least when it comes to financing. The boss of industrial conglomerate JSW Group launched his latest public vehicle on Tuesday, JSW Infrastructure.
The country’s second-largest commercial port operator received a warm reception at its stock market debut. Shares soared 30 per cent, valuing the group at $4bn.
New shareholders should note that a ticket on this ride is inextricably linked to the group’s broader fortunes. That applies to other Indian family controlled conglomerates. These include the Adani group, with which JSW is expected to compete for mooted privatisations of state-controlled ports.
JSW Infrastructure started out as the group’s logistics arm. Two-thirds of its cargo originates from within the group. Iron ore and coal make up the bulk of total cargo processed. For India to achieve its full potential, it is going to need lots of both. A premium valuation for the shares suggests exactly that.
The deal raised about $337mn via a primary sale of new shares equal to about 11 per cent of the total outstanding. The funds will go partly to fund the construction of natural gas terminals at two brownfield sites and smaller investments in a container port and new dredging equipment. The rest will go towards paying down debts.
At around 90mn tonnes of annual cargo JSW Infrastructure is about a quarter the size of the country’s largest private port operator Adani Ports and Logistics. That should mean faster growth.
Recent results paint a different picture. Volume growth for JSW and Adani was 9 per cent and 12 per cent respectively in the latest quarter to June. Falling steel prices, at a two-year low, are probably a factor in the former’s slower growth.
Following their steep rise at the open, JSW shares were trading at about 20 times forward ebitda, using an FT estimate. Adani trades on a 15 times multiple, according to S&P Capital IQ, though doubts surround the group’s finances.
Expect the gap to narrow if JWS fails to keep up with the pace of its larger peer.