Fitch Ratings Revises Outlook On JSW Infrastructure To Positive

Fitch Ratings has revised its outlook on JSW Infrastructure Ltd. to 'positive' from 'stable', and affirmed the India-based port operator's Long-Term Foreign-Currency Issuer Default Rating at 'BB+'.

The rating agency has also affirmed the $400 million senior unsecured notes, due 2029, rating at 'BB+', and revised the outlook to 'positive' from 'stable'. The bondholders benefit from equity pledges and guarantees from key operating subsidiaries, it said.

The positive outlook reflects JSW Infrastructure's strong financial profile, which is in line with a higher rating level and strengthened further by the completion of its Rs 2800 crore listing on the Indian stock exchange in October 2023.

"Fitch expects JSW Infrastructure to maintain its substantial rating headroom, despite ambitious debt-funded expansion plans in the medium term," the rating agency said.

The positive outlook is also supported by steady increase in third-party cargo contribution to 33% in FY23. The contribution stood at 36% in H1 FY24, up from 27% in FY22. This is expected to increase with volumes growing at two new ports; Paradip East Quay Terminal (EQ) and New Mangalore Container Terminal NMCT), Fitch said.

Both port facilities handle only third-party cargo, which will reduce JSW Infrastructure revenue reliance on JSW group.

The rating reflects JSW Infrastructure's geographically diversified port locations, reasonable tariffs, and long term take-or-pay contracts, that account for about 30% of total revenue, the rating agency said.

"The rating is however moderated by its cargo's high exposure to two commodities, coal and iron ore, as well as customer concentration risk. JSW Steel Ltd. (BB/Stable) contributes more than 50% of JSW Infrastructure cargo volumes, but JSWIL's credit assessment is not linked to that of JSW Steel," it said.

Customer concentration risk is partially mitigated by limited infrastructural constraints at the ports, which are linked to national highways.

JSW Group has demonstrated resilience to commodity and steel price fluctuation historically, Fitch said.

These cargoes are unlikely to be diverted to other ports due to close proximity of JSW Infrastructure's captive ports to the respective industries and the ports' access to multimodal connectivity.

Healthy economic growth and power demand in India, coupled with the government's infrastructure drive will continue to support ongoing local demand for steel and coal, it said.

Shares of the company fell as much as 1.19%, before paring loss to trade 0.87% lower at 1:30 p.m., compared to a 0.66% advance in the benchmark Nifty 50.