Rationale

 For arriving at the ratings, ICRA has taken a consolidated view of JSW Infrastructure Ltd (JSWIL) and its subsidiaries due to the significant operational and managerial linkages between them, and will henceforth be referred to as JSW Infra Group. The JSW Infra Group entities are mainly engaged in port operations and are strategically important to broader JSW Group entities, such as JSW Steel Limited (JSW Steel; rated [ICRA]AA(Stable)/A1+) and JSW Energy Limited, for handling their critical cargo (coal, iron ore and other materials) due to the favourable location near the manufacturing facilities. The assigned rating considers the healthy business risk profile of JSWIL, marked by its favourable operating characteristics, geographical footprint and contracts with JSW Group entities, with a take-or-pay provision for minimum guaranteed volumes. The rating also considers the experienced management and the benefits accruing to JSWIL as part of the diversified JSW Group, including healthy financial flexibility with lenders and expected growth in cargo volumes of JSW Steel and JSW Energy Limited, due to expansion projects undertaken. ICRA also notes the gradual increase in third-party cargo to ~30% in FY2021 from only 6% in FY2018. The same expected to increase to ~40% in the medium term with the acquisition of three terminals from the Chettinad Group in FY2021, as well as commissioning of a coal terminal at Paradip Port in November 2021. Despite FY2021 being impacted by Covid-19, the consolidated cargo volume increased to 45.55 million metric tonne (MMT) from 34.0 MMT in FY2020, driven by the commissioning of the iron ore terminal at Paradip, Odisha, which witnessed healthy ramp up and incremental cargo from acquired assets for part of the year. Moreover, Jaigarh Port also handled 4.47 MMT transshipment cargo for JSW Steel, leading to the total volumes handled of 50.02 MMT in FY2021. ICRA also notes anticipated cargo volume growth in FY2022 following expected increase in cargo requirement for JSW Steel, benefit of the full year operations for the three acquired terminals and commencement of coal terminal at Paradip from November 2021. The cargo volume has witnessed improvement in Q1 FY2022 to 17.34 MMT, on a consolidated basis. The rating also considers the healthy profitability of JSWIL, which enables it to maintain an adequate liquidity position. The net leveraging (net debt/OPBDITA), on a consolidated basis, remained high at 4.4 times as on March 31, 2021, due to additional debt of Rs. 700 crore towards acquisition of three terminals in November 2020 along with the ongoing debt-funded capex at different ports. ICRA expects the leveraging and credit metrics to improve with realisation of operating profit from recent acquisitions, higher cash flow generation as the cargo volumes ramp up at its various ports/terminals and no major capex plans beyond FY2022. ICRA notes that ~93% of JSWIL's equity shares have been pledged against the debt raised by the promoter group entities; however, the risk is mitigated by the strong credit profile and financial flexibility of the broader JSW Group. Further, JSWIL faces risk from restrictions on specific cargo segments as well as susceptibility of performance to volatility in demand for coal and iron ore from steel and power sectors, which are the largest commodities handled by JSWIL. The Stable outlook reflects ICRA's expectations that given the favourable long-term outlook for growth in cargo volumes and the upside potential from recently completed acquisitions and capex programmes, JSWIL's revenue and profitability growth is expected to be robust supporting its overall credit profile.