JSW Infrastructure Ltd:Annual Report 2023-24 Analysis

JSW Infrastructure Ltd: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History: JSW Infrastructure Ltd was established in 2006 as a part of the JSW Group, a diversified Indian conglomerate. It was conceived as a strategic initiative to support the JSW Group’s growing needs for port infrastructure.

Headquarters Location and Global Presence: The company is headquartered in Mumbai, India. While primarily focused on the Indian market, JSW Infrastructure is actively exploring opportunities for strategic expansions and investments overseas.

Company Vision and Mission:

• Vision: To be a leading infrastructure company, enabling sustainable growth through innovative and efficient solutions.
• Mission: To develop and operate world-class port and infrastructure assets that enhance trade, commerce, and connectivity, while creating value for stakeholders.

Key Milestones in Their Growth Journey:

• 2006: Incorporation of JSW Infrastructure Ltd.
• 2008: Commissioning of the first port terminal at Jaigarh, Maharashtra.
• Expansion: Continuous expansion and acquisition of port and terminal facilities across India, including locations such as Paradip, Goa, and Mangalore.
• Diversification: Diversification into other infrastructure segments, such as container terminals, liquid storage, and railway infrastructure.
• 2023: Initial Public Offering (IPO) on the Indian stock exchanges.

Stock Exchange Listing Details and Market Capitalization: JSW Infrastructure Ltd is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Recent Financial Performance Highlights: Financial performance details are available on the company’s investor relations page and in financial news reports.

Management Team and Leadership Structure:

• Chairman: Sajjan Jindal
• CEO: Arun Maheshwari
• The company has a well-defined leadership structure with experienced professionals heading various departments such as finance, operations, and business development.

Notable Awards or Recognitions: JSW Infrastructure has received awards and recognitions for its operational excellence, safety standards, and contribution to infrastructure development. Specific award details can be found on the company’s website and annual reports.

Their Products #

Complete Product Portfolio with Categories:

• Port Terminals: Handling dry bulk cargo (coal, iron ore, minerals), liquid cargo (crude oil, petroleum products, chemicals), and containerized cargo.
• Container Terminals: Dedicated facilities for handling container traffic.
• Liquid Storage: Tank farms and related infrastructure for storing liquid cargo.
• Railway Infrastructure: Development and operation of railway sidings and connectivity to facilitate cargo movement.

Flagship or Signature Product Lines: The company’s flagship product line is its port terminals, particularly those handling dry bulk cargo. These terminals have been instrumental in supporting the JSW Group’s steel and energy businesses and serving other industrial clients.

Quality Certifications and Standards: JSW Infrastructure adheres to relevant quality certifications and standards such as ISO 9001 for quality management systems.

Primary Customers #

Target Industries and Sectors:

• Steel Industry: Primarily JSW Steel and other steel manufacturers.
• Power Industry: Power plants requiring coal imports.
• Oil & Gas Industry: Refineries and petrochemical companies.
• Mining Industry: Companies involved in mining and export of minerals.
• Container Shipping Lines: For container terminal operations.

Geographic Markets (Domestic vs. International): Predominantly focused on the domestic Indian market, but strategically positioned to capitalize on international trade flows.

Major Client Segments: Predominantly industrial clients in the steel, power, oil & gas, and mining sectors.

Major Competitors #

Direct Competitors in India and Globally:

• Adani Ports & Special Economic Zone Ltd (APSEZ)
• DP World
• PSA International
• JM Baxi Ports & Logistics

Competitive Advantages and Disadvantages:

• Advantages: Strong parentage within the JSW Group, established presence in key port locations, diversified cargo handling capabilities, and strategic investments in infrastructure.
• Disadvantages: Susceptibility to commodity price fluctuations and cyclical nature of the shipping industry.

How They Differentiate from Competitors: JSW Infrastructure differentiates itself through its focus on operational efficiency, customer-centric approach, and strategic locations that provide connectivity to key industrial hubs.

Future Outlook #

Expansion Plans or Growth Strategy: JSW Infrastructure plans to expand its port capacity through organic growth and strategic acquisitions. The company is also exploring opportunities in new infrastructure segments, such as logistics parks and warehousing.

Sustainability Initiatives or ESG Commitments: JSW Infrastructure is committed to sustainable development and has implemented various ESG (Environmental, Social, and Governance) initiatives, including reducing carbon emissions, conserving water resources, and promoting community development.

Industry Trends Affecting Their Business:

• Increasing trade volumes: Growth in international trade and domestic manufacturing activity is expected to drive demand for port infrastructure.
• Government infrastructure development initiatives: Government programs such as Sagarmala and Bharatmala Pariyojana are aimed at improving port connectivity and logistics infrastructure.
• Technological advancements: Adoption of automation, digitalization, and data analytics is improving operational efficiency and enhancing customer service.

Long-Term Vision and Strategic Goals: JSW Infrastructure aims to be a leading integrated infrastructure company in India, providing comprehensive solutions for port, logistics, and industrial infrastructure needs.

Financial Performance Analysis #

Key Financial Metrics: 3-Year Trend (INR Crores) #

• Total Income: Increased from ₹3,372.85 (FY23) to ₹4,032.30 (FY24), a 19.55% growth.
• EBITDA: Increased from ₹1,798.30 (FY23) to ₹2,233.97 (FY24), a 24.23% growth.
• Profit After Tax (PAT): Increased significantly from ₹749.52 (FY23) to ₹1,160.69 (FY24), a growth of 54.86%.
• Net Worth: Increased from 4,088.87 (FY23) to 8,231.02 (FY24).
• Cargo handled increased by 14.7%, with handling 106.45MMT cargo.

Business Segment Performance #

The company operates in developing, operating, and maintaining port services and related infrastructure. The port services segment showed strong growth, driven by cargo handling. Key ports and terminals with their respective cargo handled in FY24:

• Jaigarh Port: 21.51 MMT
• South West Port Limited (SWPL) - Goa Port: 7.17 MMT
• Dharamtar Port: 25.14 MMT
• Paradip Iron Ore Terminal: 12.37 MMT
• New Mangalore Container Terminal: 2.55 MMT
• East Quay Coal Terminal: 16.77 MMT
• Ennore Bulk Terminal: 1.47 MMT
• Ennore Coal Terminal: 9.31 MMT
• New Mangalore Coal Terminal: 4.77 MMT
• PNP Port: 1.32 MMT
• Fujairah Port: 12.04 MMT
• Dibba Port: 0.12 MMT
• JSW Middle East Liquid Terminal Corp: 1.43 MMT

Major Strategic Initiatives and Progress #

• Initial Public Offering (IPO): Successfully completed, raising ₹2,800 crores. Funds are being utilized for debt repayment (₹880 crores completed), capital expenditure at Jaigarh Port (LPG terminal expansion, electric substation, dredger purchase), expansion at Mangalore Container Terminal, and general corporate purposes.
• Acquisition of Liquid Storage Terminal in Fujairah: Completed, adding 465,000 cubic meters of liquid storage capacity and diversifying into the liquid storage business.
• Development of Greenfield Port at Keni, Karnataka: Awarded, with a concession agreement signed for a 30 MTPA port.
• Acquisition of Majority Stake in PNP Port: Agreement signed to acquire 50% + 1 share, aiming to upgrade and expand capacity.
• Tuticorin Dry Bulk Terminal: The Company emerged as a winner for a 7 MTPA dry bulk terminal, expanding JSW’s PPP portfolio.
• JNPT Liquid Berth: Concession Agreement with Jawaharlal Nehru Port Authority was signed for two liquid berths of 4.5 MTPA.
• Container Train Operator Licence/Concession: The company has entered into an agreement.

ESG Initiatives and Metrics #

• Sustainability Strategy: Focus areas include GHG emissions reduction, energy and water consumption management, waste management, and biodiversity conservation.
• Environmental Initiatives: Shore-based power supply, conveyor belt optimization, renewable energy sourcing (solar projects), and solar-powered infrastructure.
• Social Initiatives: Programs in education, health & nutrition, waste management, skills & livelihoods, water, environment, and sanitation.

Management Outlook #

• Growth Target: Aiming to more than double cargo handling capacity to 400 MTPA by FY2030 or earlier.
• Expansion Strategy: Focus on brownfield expansions, greenfield projects (especially non-major ports), strategic acquisitions, and increasing third-party customer base.
• Cargo Mix: Long-term target of a 50-50 split between JSW Group cargo and third-party customers.
• Logistic Solutions: Transforming into a comprehensive logistic solutions provider with last-mile connectivity.

Detailed Analysis #

Financial Position: JSW Infrastructure Analysis #

Balance Sheet Analysis: 3-Year Comparative (Consolidated) #

(₹ in crores)

Significant Changes in Major Line Items (>10% YoY) #

• Non-current Assets: Increased by 18.65% (FY24 vs FY23) primarily due to increases in Property, plant and equipment, and Capital work in progress, Right of use Asset.
• Current Assets: Increased by 98.41% (FY24 vs FY23) due to significant increase in cash & bank balances (including IPO proceeds).
• Total Assets: Increased by 28.9% (FY24 vs FY23) due to increase of non-current assets and current assets, with current assets increasing higher.
• Total Equity: Increased significantly by 101.3% (FY24 vs. FY23) due to share premium form Initial Public Offering.

Working Capital Trends #

(₹ in crores)

Asset Quality Metrics #

(₹ in crores, unless otherwise specified)

Debt Structure and Maturity Profile #

(₹ in crores)

Off-Balance Sheet Items #

(₹ in crores)

Operating Performance Analysis #

Revenue Breakdown #

• Segment: The Company operates in developing, operating, and maintaining port services and related infrastructure.
• Geography:
  • India: FY24 revenue of ₹3,849.66 crore, a 15.24% increase compared to FY23.
  • Outside India: FY24 revenue of ₹182.64 crore.

Cost Structure Analysis #

• Operating Expenses: FY24 operating expenses were ₹954.20 crore, up from ₹834.62 crore in FY23. Key components: cargo handling, stores and spares, repairs and maintenance.
• Employee Benefit Expenses: Increased to ₹252.54 crore in FY24 from ₹197.54 crore in FY23.
• Finance Costs: Decreased to ₹114.66 crore in FY24 from ₹270.98 crore in FY23, primarily due to reductions in interest expense.
• Other Expenses: Increased to ₹711.69 crore in FY24 from ₹611.41 crore in FY23.

Margin Analysis (Consolidated) #

• Operating Margin: Consolidated EBITDA for FY24 was ₹2,233.97 crore, compared to ₹1,798.30 crore in FY23, indicating an increase in operating margin.
• Net Profit Margin: FY24 net profit after tax was ₹1,160.69 crore, compared to ₹749.52 crore in FY23. The net profit margin for FY24 is (28.79%).

Non-Recurring Items #

• Initial Public Offering (IPO) Expenses: Expenses related to its IPO are presented, after tax adjustments, under other assets until their write-off against the securities premium account.
• Acquisitions: Acquisition of Marine Oil Terminal Corp and PNP Maritime Services Private Limited.

EPS Analysis (Basic/Diluted - Consolidated) #

• Basic EPS: Increased to ₹5.69 in FY24 from ₹4.17 in FY23.
• Diluted EPS: Increased to ₹5.56 in FY24 from ₹4.06 in FY23.
• Standalone EPS: EPS of JSW infrastructure limited on standalone is ₹1.50.

Quarterly Trends #

• The Company reports Financials Quarterly

Cash Management Analysis #

Operating, Investing, and Free Cash Flow Components (Consolidated) #

• OCF (Operating Cash Flow) Components:
  • Profit Before Tax (FY24): ₹1,466.39 crore.
  • Depreciation & Amortization: ₹770.15 crore.
  • Finance Costs: ₹202.66 crore.
  • Changes in assets, liabilities and other adjustments will influence this.
• ICF (Investing Cash Flow) Components:
  • Purchase of Property, Plant & Equipment (including Capital Work-in-Progress and Intangible Assets under Development): ₹2,432.49 crores outflow (FY24).
  • Proceeds from sale of Property, Plant and Equipment: ₹1.14 crore.
  • Purchase of Investments: ₹10,657.65 crore.
  • Proceeds from Investment: ₹7409.23
  • Interest Received: ₹267.08 crore.
  • Acquired Pursuant to business Combination: ₹257.04 Cr.

Working Capital Management Efficiency (Consolidated) #

• Debtors Turnover (times): Revenue from operations (₹3,794.52 crore) / Average Trade Receivables. A decrease of 3.86% is shown in comparison. Calculation needs prior year data.
• Payables Turnover (times): (Operating Expenses + Other Expenses) / Average Trade Payables. An increase of 29.17% is shown in comparison. Calculation needs prior year data.
• Net Capital Turnover Ratio: Revenue from Operations/Working Capital: fell by -70.15%

Dividend and Share Buyback Trends #

• Dividend: A dividend of ₹0.55 per equity share was recommended for FY24. No dividend was declared in the prior eight years.

Debt Service Coverage (Consolidated) #

• Debt Service Coverage Ratio: The data indicates a change in ratio of 6.26%. Exact calculations need details of the schedules principal repayments.

Liquidity Position and Cash Conversion Cycle #

• Current Ratio: The data indicates the ratio has increased by 113.13%. Exact calculation needs numbers of both consolidated current assets and liabilities, but not provided in a comparative format.

Profitability Ratios (3-Year Trends) #

• Return on Equity (ROE): FY24: 14.10%, FY23: 18.33% (Consolidated). The decrease between FY24 and FY23 attributed to Equity increased because of IPO.
• Net Profit Margin: FY24: 28.78%, FY23: 22.22% (Consolidated). A significant increase in net profit margin is observed, driven by higher revenue and controlled expenses.

Liquidity Metrics (Consolidated) #

• Current Ratio: FY24: 1.46, FY23: 1.98 (Consolidated). The ratio has declined but remains above 1, indicating sufficient current assets to cover current liabilities.

Efficiency Ratios (Consolidated) #

• Asset Turnover: Can infer a decrease (Total income increase of 19.55%, versus a significant assets increase primarily because of IPO proceeds.
• Receivables Turnover: FY24 is 10.64 and FY23 is 11.07

Leverage Metrics (Consolidated) #

• Debt/Equity Ratio: FY24: 0.14, FY23: 0.56. A significant decrease, indicating a much stronger equity base after the IPO and debt repayment.
• Interest Coverage Ratio: Calculated using consolidated data, Interest coverage is high, improving substantially due to decreased finance costs and increased EBIT. (FY24 EBIT: 1392.47 Finance Cost: 224.07) FY23, EBIT:928.4, Finance Cost 403.68.

Working Capital Ratios #

• The working Capital increased form FY23, 288.25 crore to FY24. 460.94 crore.

Comparison with Industry Averages #

• The substantial decrease in Debt/Equity highlights a deviation from a potentially more leveraged industry norm, suggesting lower financial risk.
• High cash and equivalents balance that will be utilzed for capex.

JSW Infrastructure Limited: Financial and Operational Analysis #

Revenue and Profitability #

• Consolidated Total Income increased by 19.55% from FY23 to FY24.
• Consolidated EBITDA increased by 24.23% from FY23 to FY24.
• Consolidated Profit After Tax increased by 54.86% from FY23 to FY24.

Market Share and Competitive Position #

• JSW Infrastructure is the second-largest commercial port operator in India, based on cargo handling capacity.
• Fastest-growing port operator.

Key Products/Services Performance #

• Cargo handling services are the primary revenue driver, encompassing bulk cargo, LPG, POL, and container cargo.
• Installed cargo handling capacity of 170 MTPA.
• Handled 106.45 Million Metric Tonnes of cargo in FY24.

Geographic Distribution and Market Penetration #

• Operations are strategically located on both the west and east coasts of India, with 10 port concessions.
• International presence includes a liquid tank storage terminal in Fujairah, UAE, and O&M contracts at two dry bulk terminals in the UAE.
• Developing the Keni Port in North Karnataka.

CAPEX and ROIC #

• Plans to more than double capacity to 400 MTPA by FY2030.
• Using proceeds from their IPO to expand and upgrade ports.

Operational Efficiency Metrics #

• Capacity utilization across all ports was 61% in FY24.
• Ports have deep draft, enabling the handling of larger vessels.
• Multimodal Evacuation capabilities.

Growth Initiatives and Challenges #

Growth Initiatives #

• Low Cost Brownfield Expansions
• Increase the third party customer base
• Pursuing greenfield opportunity
• Pursuing acquisition opportunities
• Ensuring Sustainable Growth
• Acquisition of a liquid storage terminal in Fujairah, UAE.
• Development of a greenfield port at Keni, Karnataka.
• Acquisition of a majority stake in PNP Port.
• Winning the bid for a dry bulk terminal at Tuticorin.
• Signing a concession agreement for liquid berths at JNPT.

Challenges #

• External factors like global economic headwinds and geopolitical tensions are mentioned as potential risks.
• Regulatory changes
• Environmental concerns

Risk Framework #

Strategic Risks #

• Severity: High, due to the capital-intensive nature of the port infrastructure business and dependence on long-term concession agreements. The company aims to more than double capacity by FY2030.
• Likelihood: Medium, as strategic risks are influenced by economic cycles, government policies, and competitive pressures.
• Trend: Increasing, The stated ambition is “to more than double our capacity to 400 MTPA by FY2030 or even earlier.”
• Mitigation Strategies: Diversification of cargo mix (targeting a 50-50 split between JSW Group and third-party customers), expansion into new geographies and business segments (liquid storage, acquisitions), pursuit of brownfield and greenfield projects, and securing long-term contracts.
• Control Effectiveness: Partially effective, demonstrated by successful acquisitions (liquid storage terminal in Fujairah, PNP Port) and securing new projects (Keni Port, Tuticorin terminal, JNPT liquid berths).
• Potential Financial Impact: Significant capital expenditures are planned. The successful execution of expansion plans is critical to revenue growth and maintaining profitability. Delays or cost overruns could materially affect financial performance.

Operational Risks #

• Severity: Medium to High. Operational risks include port operations, cargo handling, and potential disruptions due to accidents, equipment failures, labor disputes, or natural disasters.
• Likelihood: Medium. Ports inherently face operational risks.
• Trend: Stable to increasing, linked to the scale of operations. For example, there’s an increase in the operational capacity to 55 MTPA with seven berths.
• Mitigation Strategies: Investment in mechanized cargo handling systems, multi-modal evacuation channels, safety protocols (evidenced by British Safety Council 5-star rating for Jaigarh Port), and technological upgrades (steel barcoding, energy management systems).
• Control Effectiveness: Appears good, suggested by awards and certifications, such as Jaigarh Port’s 5-star rating and various “Grow Care India 2023” awards.
• Potential Financial Impact: Operational disruptions can lead to revenue loss, increased costs, and potential penalties or fines.

Financial Risks #

• Severity: Medium, The Company has strong financial metrics, however, it is subject to changes in interest rates and foreign currency exchange rates, and fluctuations in trade volumes.
• Likelihood: Medium, as interest rates and exchange rates are subject to market volatility.
• Trend: Decreasing due to the reduction of debt post IPO. Net debt reduced from ’ 2,216 crore (March 31, 2023) to ’ 65 crore (March 31, 2024).
• Mitigation Strategies: The Company’s borrowing is at a fixed rate (4.95% Senior Notes), the proceeds from IPO were used for debt reduction, natural hedging through foreign currency revenues, cash flow hedges.
• Control Effectiveness: Currently effective, indicated by the upgrade in Corporate Family Rating (CFR) by Moody’s and revised outlook by Fitch Ratings.
• Potential Financial Impact: Interest Rate Risk: A 25 basis point increase/decrease impacts profit. Foreign Exchange Risk: A 1% appreciation/depreciation of INR against USD significantly affects profit.

Compliance/Regulatory Risks #

• Severity: Medium, due to stringent environmental, safety, and operational regulations governing the port sector.
• Likelihood: Medium, as changes in regulations or non-compliance can lead to penalties, restrictions, or operational disruptions.
• Trend: Stable, but requires continous monitoring.
• Mitigation Strategies: Robust governance mechanisms, adherence to listing regulations, compliance with the Companies Act, 2013, and engagement with regulatory bodies.
• Control Effectiveness: Appears effective, demonstrated by compliance statements in the Director’s Report, Secretarial Audit Report, and Corporate Governance Report.
• Potential Financial Impact: Non-compliance can lead to fines, penalties, legal costs, and reputational damage.

Emerging Risks #

• Severity: Medium to High. Geopolitical risks, changes in global trade patterns, climate change impacts, and technological disruptions are identified.
• Likelihood: Medium, increasing due to global uncertainty.
• Trend: Increasing.
• Mitigation Strategies: The company focuses on GHG emissions, energy and water consumption, waste management, and biodiversity. Sustainability is a core element. Technology adoption to improve operations.
• Control Effectiveness: Developing, The commitment to sustainability and technological adoption indicates an awareness of these risks, but the long-term effectiveness of mitigation strategies remains to be seen.
• Potential Financial Impact: Climate change (e.g., sea-level rise) could affect port infrastructure and operations. Geopolitical shifts can influence trade routes and cargo volumes. Technological disruptions could require significant investments.

Strategic and Management Analysis of JSW Infrastructure Limited #

Company Overview #

JSW Infrastructure operates primarily as a single business segment: developing, operating, and maintaining port services and related infrastructure. Therefore, the following analysis applies to the entire company.

Long-Term Strategic Goals and Progress #

• Goal to more than double cargo handling capacity from 170 MTPA to 400 MTPA by FY2030 or earlier, represents an ambitious growth target, which shall be implemented by using low-cost brownfield expansions, and pursuing greenfield and acquisition opportunities.
• Progress is demonstrated by the increase in cargo handled to 106.45 MMT in FY24, a 14.7% increase year-over-year.
• Strategic shift towards becoming a complete logistics solutions provider with last-mile connectivity.
• The mix will be 50-50 between the JSW Group and the third-party customers.
• Successfully completed an IPO, raising ₹ 2,800 crore, significantly strengthening the balance sheet to fund expansion plans.
• Post-IPO acquisitions (liquid storage terminal in Fujairah, majority stake in PNP Port, greenfield port development at Keni, Karnataka, dry bulk terminal bid in Tuticorin, and liquid berths agreement at JNPT) support the capacity expansion goal.

Competitive Advantages and Market Positioning #

• Second-largest commercial port operator in India with 170 MTPA capacity and the fastest-growing port operator.
• Strategic asset locations on both east and west coasts of India with access to deep draft and multi-modal evacuation channels.
• Ability to handle large vessels (Cape size and Post-Panamax) due to deep draft advantage provides operational efficiencies.
• The growing market share of handling cargo of third-party customers is 40% and will go up to 50% in long term.

Innovation Initiatives and R&D Effectiveness #

• Embraces technology to enhance operations. Initiatives involve steel and store barcoding, PLC mobility, energy management systems, migration of existing truck management, and customer-facing portals.
• Technology upgrades at several ports, including CCTV, network infrastructure, and firewalls, indicate a focus on operational efficiency, safety and connectivity improvements.
• R&D expenditure is reported as NIL.

M&A Strategy and Execution #

• Active M&A strategy demonstrated by several acquisitions post-IPO.
• Acquisition of Marine Oil Terminal Corp (liquid storage terminal in Fujairah) expands international presence and diversifies into liquid storage.
• Acquisition of a majority stake in PNP Maritime Services Private Limited (PNP Port) adds 5 MTPA capacity with potential to expand to 19 MTPA.
• Winning the bid for a 7 MTPA dry bulk terminal at Tuticorin and signing a concession agreement for two liquid berths (4.5 MTPA) at JNPT demonstrate continued expansion through PPP model.

Management’s Track Record in Execution #

• Successful IPO and subsequent utilization of proceeds for debt repayment and planned capital expenditures indicate strong execution capabilities.
• Consistent increase in cargo handling volumes and capacity utilization.
• Demonstrated ability to secure concessions and win bids for port development projects.
• Upgradation of Corporate Family Rating and senior secured notes by Moody’s and Affirmation of senior secured notes by Fitch Ratings.

Capital Allocation Strategy #

• IPO proceeds allocation prioritizes debt repayment (₹ 880 crore), capital expenditure for expansion projects at Jaigarh Port (₹ 1,029.03 crore) and Mangalore Container Terminal, and general corporate purposes.
• Acquisitions are being funded through a combination of internal accruals and potentially debt, as indicated by the war chest created post-IPO.
• Focus on maintaining a strong balance sheet with low net debt.

Organizational Changes and their Impact #

• Listing on stock exchanges (BSE and NSE) following the IPO represents a significant organizational change, bringing increased scrutiny and accountability.
• No significant organizational change impact is observed in the report, except the listing of the company on stock exchanges.

ESG Framework #

ESG and Sustainability Analysis #

Environmental Metrics and Targets #

• Energy Conservation Initiatives: Implemented shore-based power supply for vessels, minimized conveyor belt idle time, and utilized renewable energy sourcing (over 7500 MWh) at select ports. Solar-powered streetlights and panels were installed at Jaigarh Port.
• GHG Emissions: Focused on GHG emissions as a key area in their Sustainability Strategy.
• Water and Waste: Focus areas on water consumption and waste generation, supported by policies.

Social Responsibility Programs #

• Key Focus Areas: Programs implemented in education, health & nutrition, waste management, skills & livelihoods, water, environment, and sanitation.
• CSR Spend Data: FY24 data included CSR spend, that are used for Educational infrastructure, Waste management & sanitation and Nurturing aquatic & terrestrial ecosystems.
• Employee Benefits: Provides defined contribution plans (Provident Fund, ESI, Pension) and defined benefit plans (gratuity).
• Workplace Safety: Dedicated to a discrimination and harassment-free workplace, with an Internal Complaints Committee in place.
• Supplier Screening: New suppliers have been screened using the environment and social criteria.

Governance Structure and Effectiveness #

• Board Oversight: The Board of Directors and its Committees lead the corporate governance mechanism. The Board guides senior management in reviewing the Integrated Report’s content.
• Code of Conduct: A Code of Conduct for Board Members and Senior Management, along with an Insider Trading Code, is in place.
• Whistleblower Policy: A Whistleblower Policy and Vigil Mechanism are established, with no reported access denials to the Audit Committee.
• Audit: The Statutory Auditors reported no instances of fraud. Secretarial audits of material subsidiaries were conducted without qualifications.
• Board Structure: Board has a mix of Executive, Non-Executive and Independent Directors, indicating attempts at balanced oversight.

ESG Ratings and Peer Comparison #

• Credit Ratings: Moody’s upgraded the Corporate Family Rating and senior secured notes. Fitch affirmed senior secured notes and revised the outlook to positive. CARE Ratings assigned ‘CARE AA+’ with a stable outlook. These ratings reflect financial stability but do not directly represent a comprehensive ESG assessment.

Regulatory Compliance and Future Preparations #

• Compliance: Complies with the Companies Act, 2013, SEBI Listing Regulations, GRI Standards, NGRBC, Business Responsibility and Sustainability Reporting, and UN SDGs. Compliance with Secretarial Standards 1 and 2 is confirmed.
• Future Considerations: Will assess the impact of the Code on Social Security, 2020 (‘Code’) relating to employee benefits, when it is put in force and relevant provisions are notified, the company will take the necessary actions.

Forward Outlook: Port Services Analysis #

Management Guidance and Assumptions #

• Management aims to more than double cargo handling capacity from 170 MTPA to 400 MTPA by FY2030 or earlier.
• Long-term cargo mix will be 50-50 between the JSW Group and third-party customers.
• Assumption of continuing growth of the Indian economy and infrastructure build-up.
• Assumption of a stable increase in port capacities.

Market Growth Forecasts #

• India’s GDP growth was 8.2% in FY2024, with projections for continued robust growth.
• Maritime Amrit Kaal Vision 2047 projects quadrupling India’s port capacity to 10,000 million tonnes by 2047 (from 2,600 million tonnes).
• Favorable factors: India’s growing economy, infrastructure growth, and strong cargo growth potential.

Planned Strategic Initiatives #

• Transforming into a complete logistic solutions provider with cost-effective, last-mile connectivity.
• Brownfield expansion at existing facilities.
• Increasing the third-party customer base.
• Pursuing acquisition opportunities (e.g., liquid storage terminal in Fujairah, PNP Port).
• Pursuing greenfield opportunities, with a focus on non-major ports (e.g., Keni Port in Karnataka).
• Purchase of Container train operator license.

Capital Expenditure Plans #

• Massive capex plan underway to achieve the 400 MTPA capacity target.
• Proposed expansion/upgradation at Jaigarh Port, including an LPG terminal project, electric substation, and dredger purchase.
• Proposed expansion at Mangalore Container Terminal.
• Development of a greenfield port at Keni, Karnataka (estimated cost of ‘4,119 crore, initial capacity of 30 MTPA).
• Upgrading PNP Port facilities and expanding capacity from 5 MTPA to 19 MTPA.

Efficiency Improvement Targets #

• Modernizing assets for faster turnaround and lower capex, leading to higher ROCE.
• Mechanization, modernization, and digitalization of operating practices.
• Increase capacity utilization from the actual 63%.

Potential Challenges and Opportunities #

Opportunities #

• Benefit from India’s economic growth, infrastructure development, and cargo growth.
• Government’s privatization drive in the port sector.
• Acquisitions of privatized terminals at major ports.
• Strategic location of assets with deep draft and multi-modal evacuation.
• Strong balance sheet to finance investments.

Challenges #

• Inherent risks in large infrastructure projects: regulatory hurdles, project execution delays, and fluctuations in commodity prices.
• Foreign exchange volatility.

Scenario Analysis and Sensitivity to Key Assumptions #

• Sensitivity to Economic Growth: A slowdown in India’s GDP growth could negatively impact cargo volumes and revenue.
• Sensitivity to Discount Rates: Impairment testing is sensitive to discount rates.
• Sensitivity to Interest Rates: Increased interest rates could increase financial cost due to floating rate borrowings.
• Sensitivity to Exchange Rates: A 1% appreciation/depreciation in the INR against relevant foreign currencies (USD, AED) will affect profit.

Audit and Regulatory Analysis #

Auditor’s Opinion and Qualifications #

• The Independent Auditor’s Report, issued by Shah Gupta & Co., provides an unmodified (clean) opinion on both the standalone and consolidated financial statements.
• There are no qualifications mentioned in the auditor’s report.

Key Accounting Policies and Changes #

• The financial statements (both standalone and consolidated) are prepared in accordance with Indian Accounting Standards (Ind AS).
• Revenue recognition follows the principle of recognizing revenue when control of goods or services is transferred to the customer.
• Property, plant, and equipment are depreciated using the straight-line method, with useful lives based on Schedule II of the Companies Act, 2013, or technical assessments.
• Leases: A single recognition model is adopted for all leases by lesse, except the short-term lease.
• Financial instruments are classified and measured at amortized cost, fair value through other comprehensive income (OCI), or fair value through profit and loss (FVTPL).
• Impairment of non-financial assets is assessed at each reporting date, with any impairment loss recognized when the carrying amount exceeds the recoverable amount.
• Hedge accounting is applied, designating highly probable forecast revenues as the hedged item and non-derivative foreign currency financial liability as the hedging instrument.
• Business Combinations, if any, are accounted using the acquisition method.
• There were no newly issued accounting pronouncements from the MCA that had a material effect during the reporting year.

Internal Control Effectiveness #

• The auditor’s report includes an opinion on internal financial controls over financial reporting, stating that the Company has adequate internal financial controls in place, which were operating effectively as of March 31, 2024.
• The internal Audit is conducted for different periods, reports are submitted to the audit commitee.
• The Company has a ‘Whistle Blower Policy’ and a ‘Vigil Mechanism’ in place.

Regulatory Compliance Status #

• The Company has complied with the provisions of the Companies Act, 2013, and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
• The Secretarial Audit Report confirms compliance with applicable laws and does not contain any qualifications.
• The Company has complied with Secretarial Standards 1 and 2.
• There are no proceedings pending against the Company under the Insolvency and Bankruptcy Code, 2016.
• No instance of a one-time settlement with any Bank or Financial Institution was reported.
• The company uses SAP Software and features to maintain audit trail of all transactions.

Legal Proceedings and Potential Impact #

• There are contingent liabilities related to claims against the company not acknowledged as debts and disputed income tax liability, disclosed at an aggregated value of ‘13.24 crore in standalone and ‘13.24 crore in consolidated, with further itemization provided.
• The Company has determined that no material incremental tax liabilities are expected in respect of these matters.
• The Company states it does not have any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961

Related Party Transactions #

• Extensive related party transactions are disclosed, including purchases and sales of goods and services, financial guarantees, interest income and expense, loans, and recovery of expenses.
• Transactions with related parties are stated to be made on terms equivalent to those that prevail in arm’s length transactions.
• Key managerial personnel compensation is disclosed.
• Subsidiaries: JSW Jaigarh Port, JSW Dharamtar, JSW Shipyard, Masad Infra are some of many listed.

Subsequent Events #

• The Board of Directors recommended a dividend of ’ 0.55 per equity share for the financial year ended 31st March 2024.
• The Company, through JSW JNPT Liquid Terminal Private Limited (wholly-owned subsidiary), entered into a concession with Jawaharlal Nehru Port.

Accounting Quality and Regulatory Risk Assessment #

• Accounting Quality: The unmodified audit opinion and the auditor’s statement on the effectiveness of internal financial controls suggest a relatively high quality of accounting. The use of Ind AS, detailed disclosures, and adherence to established accounting principles further support this.
• Regulatory Risk: The Company’s disclosures indicate a commitment to regulatory compliance. The absence of reported fraud, pending IBC proceedings, or one-time settlements suggests a lower regulatory risk profile. The listing on BSE and NSE, and compliance with SEBI regulations, indicates a generally robust regulatory standing. The contingent liabilities related to tax disputes represent a potential, but managed, regulatory risk. The consistent use of an internal audit function enhances the regulatory risk profile.