The ideal port of shipment is in calm waters. The companies run by Gautam Adani have presented investors with a difficult opportunity to capture part of India’s infrastructure boom, but an IPO by billionaire Sajjan Jindal will test their appetite for something more solid.
The JSW Group chairman is going public with India’s second-largest commercial port operator in Mumbai just months after the $20 billion Adani Ports & Special Economic Zone lost about 40% of its market value and then mostly recovered from a brief attack had recovered. Adani has dismissed Hindenburg Research’s allegations of stock manipulation and fraud, but the company’s scrutiny is intensifying after its auditor, a subsidiary of Deloitte, expressed caution about some of the company’s transactions this week and gave its books a “qualified opinion”. has. . For the would-be stock market, it presents a difficult benchmark in a global industry where there are few publicly traded giants.
JSW Infrastructure is deeply connected to India’s growth story. The Company owns and operates nine port concessions including in Goa and Tamil Nadu, some with terms of up to 50 years. It helps transport iron ore for the group’s flagship steel company, JSW Steel, and also serves private customers. The company will use the proceeds from the $340 million share offering to pay down debt and expand an LNG terminal at the Port of Jaigarh, among other things.
Havens generate stable cash flows over the long term and would typically be attractive to global investors seeking refuge from high western inflation. More than half of the cargo handled in Indian ports last year consisted of coal, petroleum and lubricants. And while the global energy transition is hampering infrastructure investment, India’s growing energy needs mean the country will continue to import some of these commodities in increasing quantities.
Although Adani is mired in a governance controversy, the underlying port business is compelling. JSW Infrastructure grew revenue 92% in the three years ended March 2022, three times faster than its competitor. But Adani handles five times the freight traffic and its net profit margin was 12 percentage points higher at the end of that period as a larger proportion of its customers are third parties to whom the company can charge higher rates. If the competitor were up 34 times in annual earnings through March 2022, JSW would be worth $1.4 billion.
The prices of Jindal’s deal will also eventually result in some kind of fresh market judgment on Adani’s recovery.