Jefferies Adjusts JSW Infra Target to ₹395
Global brokerage Jefferies has revised its target price for JSW Infrastructure Ltd (JSW Infra) shares to ₹395, down from its previous estimate of ₹400. Despite this slight reduction, the firm has reiterated its 'Buy' recommendation for the stock. The adjustment comes after a review of JSW Infra's FY26 annual report, which highlighted certain financial shifts.
Jefferies' valuation of JSW Infra is based on 18 times its estimated September 2028 Enterprise Value/EBITDA, a higher multiple compared to 16 times for Adani Ports. This premium reflects JSW Infra's projected 24% EBITDA Compound Annual Growth Rate (CAGR) from FY28E-30, outperforming Adani Ports' anticipated 16% CAGR over the same period.
Key Factors from FY26 Annual Report
Rising Debt and Leverage
The company's standalone debt increased by 32% year-on-year in FY26. This rise was primarily driven by growth-related capital expenditure and an increase in loans and advances extended to its subsidiaries. JSW Infra typically borrows at a standalone level and then lends these funds to its subsidiary entities.
Furthermore, consolidated net working capital saw an increase, reaching 12% of sales in FY26, up from 7% in the previous fiscal year, largely due to tax credits. Consolidated balance sheet leverage also climbed, with the net debt/EBITDA ratio rising to 1.2 times in FY26 from 0.7 times in FY25.
QIP Offers Relief
A significant development noted by Jefferies is JSW Infra's recent qualified institutional placement (QIP), which raised ₹6,500 crore. This capital infusion is expected to play a crucial role in funding the company's ambitious growth capital expenditure plans while keeping its overall leverage in check. The QIP also addresses potential equity supply overhang, as the promoter shareholding now stands below the regulatory threshold of 75%.
Growth Outlook and Risks
Capacity Expansion and Logistics Ambitions
JSW Infra's annual report reaffirms its target to expand port capacity by 2.2 times, aiming for 400 million tonnes per annum (mnt) by FY30E. This growth is expected to be fueled by existing under-development capacity and potential opportunities arising from privatization initiatives. Jefferies confirms that the execution of 61% capacity addition targeted for FY27 remains on schedule.
The company is also actively pursuing its logistics ambitions, with plans to significantly scale up its terminal and rake capacity by four to six times. This strategic focus is anticipated to maintain a strong 25% EBITDA CAGR visibility from FY26-30E, driven by both JSW Infra's and the broader JSW group's capacity expansion plans.
Capex Deployment
In FY26, approximately 85% of JSW Infra's capital expenditure was allocated towards strategic projects. These included the acquisition of railway rakes from a promoter entity, investment in the Odisha slurry pipeline, and expansion projects at Jatadhar port, Jaigarh, and Dharamtar. All these initiatives are targeted for completion by March 2027.
Potential Risks
Despite the positive outlook, Jefferies highlighted potential risks that could impact JSW Infra. Any delays in the group's broader capital expenditure plans or in the expansion of non-core capex projects are identified as key concerns that could affect the company's performance and growth trajectory.