JSW Infra extends listing day rally on day 2, stock up 40% versus issue price

JSW Infra extends listing day rally on day 2, stock up 40% versus issue price

JSW Infrastructure, led by Sajjan Jindal, has witnessed a significant surge in its stock price during the initial days of trading. The stock has experienced a remarkable increase of 40 percent, reaching Rs 167 per share on the Bombay Stock Exchange (BSE), compared to its issue price of Rs 119.

JSW Infrastructure is primarily engaged in providing maritime-related services, which encompass cargo handling, storage solutions, and logistics services. The company also focuses on the development and operation of port terminals under long-term port concessions.

A noteworthy development for JSW Infrastructure is the recent upgrade in its credit ratings by Moody’s Investor Service. Moody’s elevated the company’s corporate family rating and senior secured bond rating to Ba1 from Ba2, and simultaneously adjusted the outlook from positive to stable. This credit rating upgrade reflects improved confidence in the company’s financial stability, operational strength, and overall creditworthiness.

The upgrade in credit ratings signifies that Moody’s believes JSW Infrastructure is better positioned to meet its financial obligations, including servicing its debt. It can also potentially lead to better access to capital at more favorable terms, further supporting the company’s growth and expansion initiatives. Additionally, a stable outlook indicates Moody’s expectation that the company will continue to perform well and maintain its financial strength in the near term.

This positive development in credit ratings, combined with the strong stock performance, suggests that investors are optimistic about JSW Infrastructure’s prospects in the maritime and port terminal industry. It highlights the company’s ability to capitalize on opportunities in India’s growing logistics and infrastructure sector.

JSW Infrastructure’s recently concluded Initial Public Offering (IPO), which closed on September 29, has infused approximately Rs 2,800 crore in fresh capital into the company. According to the prospectus, a significant portion of these proceeds has been earmarked for specific purposes.

Approximately 31 percent of the IPO proceeds will be directed towards debt repayment. Reducing debt is a prudent financial strategy that enhances the company’s financial stability and reduces interest expenses. Lowering the debt burden can also improve the company’s creditworthiness, making it more attractive to lenders and investors.

Another substantial allocation, comprising about 42 percent of the funds raised, will be allocated to capital expenditure. These funds will be utilized for various upgrades and expansion initiatives at JSW Infrastructure’s flagship Jaigarh port and its first container terminal, the JSW Mangalore Container Terminal. Investing in infrastructure and expansion projects is crucial for the company’s growth and its ability to meet increasing demand for its services, particularly in the maritime and logistics sectors.

As a result of this capital allocation strategy, Moody’s Investor Service anticipates that JSW Infrastructure Limited’s funds from operation (FFO)/debt ratio will consistently fall within the range of 17-23 percent over the next three years. This level is seen as supportive of the credit rating upgrade, suggesting that the company will maintain a strong ability to generate cash flow relative to its debt obligations.

In essence, the IPO’s success in raising substantial capital and the strategic allocation of funds towards debt reduction and infrastructure investment demonstrate the company’s commitment to enhancing its financial stability, expanding its operations, and positioning itself for sustained growth in the competitive infrastructure and logistics industry. This approach has garnered the confidence of credit rating agencies like Moody’s, which reflects positively on JSW Infrastructure’s financial outlook and creditworthiness.

JSW Infrastructure’s cash flow predictability is expected to be bolstered by its take-or-pay contracts, which played a significant role in generating more than 40 percent of its revenue in the fiscal year 2023. These contracts provide a reliable and steady stream of income, contributing to the company’s financial stability and cash flow consistency. Take-or-pay contracts typically require customers to pay a fixed amount regardless of the actual utilization of services, which can help mitigate revenue volatility and ensure a dependable revenue stream for the company.

The strong response to JSW Infrastructure’s initial public offering (IPO) underscores the high level of investor interest and confidence in the company’s prospects. The IPO was subscribed over 37 times, indicating strong demand for its shares. Qualified Institutional Buyers (QIBs) led the subscription with a significant oversubscription of 57.09 times their allotted quota. Non-Institutional Investors (NIIs) and retail investors also showed substantial interest, subscribing 16 times and 10.3 times, respectively, of the issue.

This robust subscription to the IPO reflects investor belief in JSW Infrastructure’s business model, growth potential, and financial performance. It also suggests that investors perceive the company as well-positioned to capitalize on opportunities in India’s infrastructure and logistics sector.

The high level of subscription by QIBs and the strong response from NIIs and retail investors indicate broad-based investor confidence, which can further contribute to the company’s financial stability and future growth initiatives. Overall, the IPO’s success and investor interest bode well for JSW Infrastructure’s expansion plans and its ability to access capital for future projects and investments.