JSW Group makes another attempt to scale-up cement, port business

Sajjan Jindal’s JSW Group is making yet another attempt to turn its cement and ports businesses into success stories. Both have a history of missed timelines. While the ports business has made headway, analysts remain uncertain about the prospects of the cement subsidiary.

The ports vertical, JSW Infrastructure, closed its Rs 2,800 crore initial public offering (IPO) on Wednesday, and was subscribed 37.37 times. For JSW Group, this was a third IPO -- JSW Steel and JSW Energy are already listed companies and among top players in their sectors.

The group’s last IPO, of JSW Energy, had come in December 2009. However, the gap of more than 13 years between the IPOs of JSW Energy and JSW Infrastructure was unintentional.

In 2017, Jindal had informed reporters about his plans to list the ports business. “(The listing may happen) in 2019 or 2020, after the capacity utilisation for the ports business reaches at least 100 million tonnes per annum (mtpa),” the group chairman was quoted in news reports.

Similarly, IPO plans for JSW’s cement business have been discussed in the past. Parth Jindal, managing director of JSW Cement, had indicated the listing of the cement business in FY20, according to past media reports. In an interview with Business Standard in 2019, Parth Jindal had shared his plans to list the business in 2021. The business remains unlisted so far. In August this year, the younger Jindal gave a new listing timeline of FY25.

Capacity expansion targets for both these businesses have shown a similar trend.

In its FY23 annual report, JSW Infrastructure said it aimed to achieve 300 mtpa capacity by 2030. The company’s earlier stated target of 200 mtpa, originally to be met by 2020 according to previous annual reports, is yet to be materialised.

As of March 2023, JSW Infrastructure’s total capacity was 158 mtpa, and volume handled of 93 mt, at 56.88 per cent utilisation. The port company started operations in 1999, but more than half of the current capacity was added in the last five years, also helped by the acquisition of Chettinad Group of companies’ port business in 2020.

In August, Parth Jindal also shared his plans to triple JSW Cement’s capacity to 60 mtpa in the next five years from the current 19 mtpa.

In March, Crisil stated in a note: “Given the size of capex relative to existing operations, JSWCL is exposed to risks related to project execution and ability to ramp up new capacities. Timely commencement of commercial operations, within budgeted cost, will remain a key monitorable.”

Cement sector analysts voice similar concerns.

However, JSW Cement, responding to Business Standard, said: “Our targeted growth is entirely organic and we are confident of meeting these targets. We will continue to evaluate inorganic growth opportunities as they arise, but this is over and above the organic growth target.”

The company added that it had sufficient limestone reserves to support its expansion plans.

Limestone is an important raw material to make clinker, which is ground to make cement.

“There seems to be a change in the model from importing clinker to now producing the clinker domestically,” said Satyadeep Jain, a cement analyst with Ambit Capital. “The target sounds ambitious both in terms of balance sheet and execution.”

JSW Cement in its response said that the expansion plan would see the company expand to markets in North and Central India, beyond its current presence in South East and West India. “In addition, we will continue with brownfield expansion at our current sites, depending on market conditions,” the company said.