JSW Infrastructure is working on setting up a greenfield port in Odisha with a cargo handling capacity of 52 million tonnes that will primarily cater to the requirements of group company JSW Steel’s proposed 8 million tonnes pellet plant in the state.
The pellet plant would be coming up in about three years and the port will also likely be ready by that time. JSW Infrastructure’s joint MD and CEO Arun Maheshwari told businessline that the capital requirements for this would be sourced through internal accruals and debt. Currently the company generates about Rs 1300-1400 crore every year, that has the potential to go up as its operations grow.
JSW Infrastructure’s initial public offering is opening on September 25 with a price band of ₹113-119 and this will be the third company in the group to be listed after flagship JSW Steel and JSW Energy. It is raising ₹2800 crore of which ₹1200 crore is earmarked for capex. This includes expansion of Jaigarh Port and Mangalore Container Terminal. Its current cargo handling capacity is just over 158 million tonnes.
The company’s port portfolio consists of 7 terminals and two ports. It operates two greenfield ports - Jaigarh and Dharamtar, while the remaining are terminals that it has taken on concessions from the government, which is privatising ports and terminals across the country.
It is looking at adding to its port capacity mainly through bidding for more port concessions. Maheshwari said that the terminals business had a lower gestation period of 6 months to a year compared to setting up a greenfield port that would take more time as well as being more capital intensive. He said that in taking up a terminal it had access to a ready customer base, as well as existing infrastructure. All it required was to expand and modernise the terminal according to requirements.
Royalty payable to the government under the port concession agreements range between 18 and 56 per cent (for existing terminals operated by it), depending on the location, the type of cargo handled, growth prospects and a number of related factors. There are around three more port concessions that the company is currently bidding for.
Maheshwari said that the company was also in the process of evaluating two port acquisitions - one on the east coast and one on the west. He declined to give details saying that negotiations were still on.
Over 80 per cent of the cargo handled by the company is coal and iron ore. Maheswari pointed out that globally the shipping trade was dominated by containers, crude and coal. He said that for the next three decades, at least, coal would be a major driver in India’s energy growth, until alternative fuels became more commercially widespread. “There is no viable alternative today.” For a port operator coal and iron ore provided the volumes required. “If you have to move volumes, then you have to have these kinds of products,” he added.
The company is also adding capacities in LPG, LNG, container cargo and urea, but they still account for low volumes in the total cargo share.