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Business Standard
16-05-2025
- Business
- Business Standard
Adani Ports, JSW Infra make logistics anchor for cargo growth plans
Adani Ports and JSW Infrastructure, India's leading private port operators, are expanding their logistics services to capture extra cargo while they run integrated transport services. 'With incrementally less availability of lucrative port assets that can drive cargo volumes, port operators have naturally shifted their focus on deriving value in the upstream integration, i.e., the logistics space. The synergies being derived through end-to-end service capability for importing or exporting cargo, along with handling of the domestic cargo, are driving port operators to invest in building hinterland assets,' said Varun Gogia, assistant vice-president & sector head, corporate ratings, Icra. Adani Ports and Special Economic Zone (APSEZ), India's top private port operator, has 12 multimodal logistics parks (MMLPs), 132 rakes, more than 3 million square feet of warehousing space, around 6,000 containers, and 937 trailers and tipper trucks. It has 18,250 hectares of industrial land and is building a bank of over 1,528 acres at various industrial clusters, which are integrated with hinterland logistics (like rail and road). APSEZ's management, in earnings' call for Q4 FY25, said it aims to become an integrated transport utility company. The company has a truck-management platform and a freight-forwarding business. 'These are capitalised businesses. They come with very high return on capital employed (ROCE),' said D Muthukumaran, chief financial officer (CFO) of APSEZ, adding that growth in logistics is likely to be inorganic (business growth from acquisitions). JSW Infrastructure (JSW Infra) acquired a majority stake in Navkar Corporation, a logistics firm, for Rs 1,644 crore in FY25. Lalit Singhvi, whole-time director and CFO of JSW Infra, told 'Business Standard' earlier the company is looking for more inorganic opportunities in logistics and has submitted bids to the National Company Law Tribunal for acquisitions. JSW Infra has two Gati Shakti Cargo Terminals (GCT) and plans to participate in more such opportunities to build a nationwide logistics network of 15-20 GCT centres in five years to have an 'industry-leading ROCE'. The company aims to use 100 acres of undeveloped land in Panvel, Maharashtra, and Morbi, Gujarat, for its logistics plans. It seeks a logistics revenue of Rs 8,000 crore and a 25 per cent ebitda margin by FY30, led by adopting an asset-light model via GCTs, synergies with the JSW Group, opportunities in the logistics sector, and major cleanup in accounts, said analysts at Ellara Capital in a note. (Ebitda stand for earnings before interest, taxes, depreciation, and amortisation) The logistics strategies of APSEZ and JSW Infra are a natural extension of their port businesses, according to experts. The companies seek to earn more from customers by offering 'end-to-end solutions', improved port efficiency, and more cargo volumes. Manish Goel, founder and managing director (MD) of Equentis Wealth Advisory Services, said, 'APSEZ benefits from scale, a pan-India port presence, and early investments in multi-modal connectivity and warehousing, making it one of the few players capable of offering genuine end-to-end solutions. Meanwhile, JSW Infra leverages the group's industrial backbone. With steady captive cargo and access to in-house infrastructure, it enjoys operational certainty and volume visibility—two critical ingredients in logistics.' APSEZ's FY25 logistics revenue grew 38.6 per cent to Rs 2,881 crore, while ebitda increased 18.9 per cent to Rs 642 crore. Margins declined to 22 per cent from 26 per cent in FY24. Expansion will reduce overall ebitda percentage but increase ROCE, the company said. It has guided trucking revenue, which was Rs 428 crore in FY25, to grow at least three-fold in FY26. JSW Infra reported a logistics revenue of Rs 250 crore and ebitda of Rs 41 crore in FY25. It has guided FY26 logistics revenue to grow 50 per cent, driven by rake additions, terminals, and GCT initiatives. The expansion plans of the two companies may have mixed financial implications as logistics is a low-margin business, experts said. According to Vijay Agrawal, MD - investment banking at Equirus Capital, ports give ebitda margins of 60-70 per cent and ROCE of 12-17 per cent. Logistics generates lower ebitda (15-25 per cent) and ROCE (12-15 per cent). 'For example, APSEZ's logistics contribute 12 per cent of revenue but only 4 per cent of ebitda. JSW Infra is better positioned with low leverage and a 54 per cent margin at the group level, though logistics returns are yet to materialise fully.' APSEZ plans a multi-year capital expenditure of Rs 20,000 crore to Rs 20,500 crore in land, new trucks, agriculture silos, trains, MMLPs, and warehouses. JSW Infra has earmarked Rs 9,000 crore for expanding its logistics business between FY25 and FY30. Goel believes that such huge capital outlays by operators is a risk. 'For APSEZ, logistics yields around 18 per cent ebitda margin — lower than core port operations. As capital intensity rises, this margin pressure could dilute overall profitability. The company's net debt-to-Ebitda ratio is also expected to increase, adding to financial strain.' There are challenges like a volatile trade environment, potential delays in land acquisition, regulatory clearances and scarcity of skilled human capital. However, the experts believe the two companies' logistics plans are worth it, as they are long-term investments with strategic methods of expansion. Pratik Mundhada, director at India Ratings & Research, said, most port operators follow an asset-light model for positive impact on ROCE. APSEZ and JSW Infra aim to use logistics for better cargo movement and eliminating middlemen and agents. Agrawal, of Equirus Capital, believes the companies' plans may dilute short-term returns, but are viable for the long term due to India's logistics demand and policy support. "These investments will yield results on an overall basis with increased throughput at the port, operational efficiencies, and top line."
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Business Standard
16-05-2025
- Business
- Business Standard
Adani Ports, JSW Infra bet big on logistics to boost cargo volumes
The top two private port operators in India are betting big on their logistics expansions to capture extra cargo while offering integrated transport services. 'With incrementally less availability of lucrative port assets that can drive cargo volumes, port operators have naturally shifted their focus on deriving value in the upstream integration, i.e. the logistics space. The synergies being derived through end-to-end service capability for importing or exporting cargo, along with handling of the domestic cargo, are driving the port operators to invest in building hinterland assets,' said Varun Gogia, assistant vice-president and sector head, corporate ratings, Icra. Adani Ports and Special Economic Zone (APSEZ), India's top private port operator, operates 12 multimodal logistics parks (MMLPs), 132 rakes, over 3.1 million square feet of warehousing space, more than 6,000 containers, and 937 trailers and tipper trucks. The company has 18,250 hectares of industrial land and is also building a land bank of over 1,528 acres in and around different industrial clusters across India, integrated with hinterland logistics (rail, road, etc.). During the Q4 FY25 earnings call, the company's management expressed its ambition to exhibit custody over cargo rather than just control and become an integrated transport utility company. In logistics, APSEZ has a truck management platform and a freight forwarding business. 'These are capitalised businesses. They come with very high return on capital employed (ROCE),' said D. Muthukumaran, CFO, APSEZ, adding that the growth in logistics may come inorganically. Meanwhile, JSW Infrastructure (JSW Infra) is keen to pursue an asset-light, inorganic model for its logistics expansions. In FY25, the company acquired a majority stake in Navkar Corporation, a logistics firm, for Rs 1,644 crore. Lalit Singhvi, whole-time director and CFO at JSW Infra, stated that the company is looking for more inorganic logistics growth opportunities and has submitted bids to the National Company Law Tribunal for certain acquisitions. The company aims to leverage acquisitions of container freight stations and inland container depot businesses. JSW Infra has two Gati Shakti Cargo Terminals (GCT). It is planning to participate in more such opportunities to build a pan-India logistics network, creating 15–20 GCT centres in the next five years to achieve industry-leading ROCE. The company has 100 acres of undeveloped land in Panvel and Morbi. It also aims to leverage the land being given under the Gati Shakti programme. The company is targeting a logistics revenue of Rs 8,000 crore and a 25 per cent Ebitda margin by FY30, led by adopting an asset-light model via GCTs, synergies with the JSW Group, opportunities in the logistics sector, and major cleanup in accounts, analysts at Ellara Capital noted. Industry experts believe that the integration strategy of APSEZ and JSW Infra is a natural extension of their port businesses. The firms are eyeing a higher customer wallet share by offering end-to-end solutions, which tend to increase customer stickiness, improve port efficiency, and eventually boost cargo volumes and revenue diversification in a traditionally fragmented field. Manish Goel, founder and managing director, Equentis Wealth Advisory Services, said, 'APSEZ benefits from scale, a pan-India port presence, and early investments in multimodal connectivity and warehousing, making it one of the few players capable of offering genuine end-to-end solutions. Meanwhile, JSW Infra leverages the group's industrial backbone. With steady captive cargo and access to in-house infrastructure, it enjoys operational certainty and volume visibility—two critical ingredients in logistics.' APSEZ's logistics revenue in FY25 grew by 38.6 per cent to Rs 2,881 crore, while its Ebitda increased by 18.9 per cent to Rs 642 crore. The margins, however, declined to 22 per cent in FY25 from 26 per cent in FY24. The expansion plans are set to reduce APSEZ's overall Ebitda percentage but increase ROCE, being capital-light businesses, the company said. It has guided the trucking revenue, which stood at Rs 428 crore in FY25, to grow by 3–4 times in FY26. Meanwhile, JSW Infra reported a logistics revenue of Rs 250 crore and an Ebitda of Rs 41 crore. For FY26, the company has guided the logistics revenue to grow by 50 per cent year-on-year, driven by rake additions, terminals, and GCT initiatives. However, the strategic logistics expansions by the port operators may have mixed financial implications, as logistics is a low-margin business. According to Vijay Agrawal, managing director – investment banking, Equirus, ports deliver high Ebitda margins (60–70 per cent) and ROCE (12–17 per cent), while logistics generates lower margins (15–25 per cent) with ROCE (12–15 per cent). 'For example, APSEZ's logistics contribute 12 per cent of revenue but only 4 per cent of Ebitda. JSW Infra is better positioned with low leverage and a 54 per cent margin at the group level, though logistics returns are yet to materialise fully.' APSEZ has planned a capex of Rs 20,000–20,500 crore to invest in land, new trucks to enhance last-mile connectivity, agri-silos, trains, MMLPs, and warehouses, while JSW Infra has earmarked Rs 9,000 crore for expanding its logistics business between FY25 and FY30. Goel believes that huge capital outlays by operators pose a clear risk to return metrics. 'For APSEZ, logistics yields around 18 per cent Ebitda margin—lower than core port operations. As capital intensity rises, this margin pressure could dilute overall profitability. The company's net debt-to-Ebitda ratio is also expected to increase, adding to financial strain.' Moreover, challenges like a volatile trade environment amid global uncertainties such as tariffs and geopolitical tensions, difficulties in execution amid potential delays in land acquisition, regulatory clearances, or construction, and scarcity of skilled human capital also persist. However, experts believe that the operators' logistics plans can still be worth it, as these are long-term investments with strategic methods of expansion, such as using asset-light and inorganic models. Pratik Mundhada, director, India Ratings & Research, said, 'Most of the port operators are adopting asset-light model, which would have positive impact on ROCE, even with a lower operating margin in the downstream logistics business. However, incremental operating profit would continue to support the valuation.' With their logistics play, the port operators aim to control the cargo movement with better coordination and direct access to the beneficial cargo owners by eliminating the middlemen and agents, saving costs for the owners. Additionally, Agrawal believes that, despite thinner profitability, these bets are viable long-term plays due to India's logistics demand, policy support, and integration benefits—but they may dilute short-term returns. 'These investments will yield results on an overall basis with increased throughput at the port, operational efficiencies, and top line.'
