Aegis Vopak Terminals Ltd. IPO Opens for Subscription: Here’s What Investors Should Know

AVTL, a key player in India’s tank storage infrastructure for LPG and liquid products, has opened its IPO

AVTL, a key player in India’s tank storage infrastructure for LPG and liquid products, has opened its IPO. Despite its scale, does the company offer enough stability and value to justify investor interest? 

About the Issue:  

Aegis Vopak Terminals Ltd. is preparing to launch its Initial Public Offering (IPO) for equity shares. See the issue details below.

Objects of the Issue

The net proceeds from the IPO will be used for:

• Repayment/prepayment of certain outstanding borrowings – approx ₹2,016 crore.
• Capital expenditure for acquiring a cryogenic LPG terminal at Mangalore – approx ₹671 crore.
• General corporate purposes – approx ₹113 crore.

Promoter holding 

The promoters of Aegis Vopak Terminals Limited include Aegis Logistics Limited, Huron Holdings Limited, Trans Asia Petroleum INC, Asia Infrastructure Investment Limited, Vopak India B.V., and Koninklijke Vopak N.V. The promoter and promoter group collectively hold 100% pre-issue stake in the company, which will dilute post listing.

Company Profile

AVTL is India’s largest third-party owner and operator of tank storage terminals for LPG and liquid products, holding 11.5% of the nation’s static LPG capacity and 25.5% of third-party liquid product storage as of December 31, 2024. The company manages 20 terminals across six key Indian ports—including Kandla, Pipavav, Haldia, Kochi, and Mangalore—strategically located to handle a significant portion of India’s import volumes (23% of liquid and 61% of LPG).

The business is divided into two main verticals:

Gas Terminal Division: Focused on the storage and handling of LPG (propane and butane), with a static capacity of 70,800 MT.

Liquid Terminal Division: Handles a diverse range of over 30 petroleum, chemical, and edible/non-edible oil products, with a total static capacity of approx. 1.5 million CBM.

AVTL has built an expansive international network with operations linked to 77 terminals in 23 countries, serving over 250 products, 500 industrial connections, and 400 jetties and berths.

Financials 

For the nine months ended December 31, 2024 (9MFY25), Aegis Vopak Terminals Limited reported a 23.6% YoY growth in revenue from operations, driven by steady performance across its terminals. The company posted a robust EBITDA margin of 74.21%. However, its PAT margin stood at 18.04%, which is notably lower than the industry average PAT margin of approximately 32%, indicating relatively weaker bottom-line efficiency compared to its peers.

The company’s operations are split between two key segments: the Gas Terminal Division, which contributed 46% of the revenue from operations and delivered an impressive EBITDA margin of 88%, and the Liquid Terminal Division, contributing the remaining 54% of revenue with an EBITDA margin of 68%.

The company generated ₹198.12 crore in revenue from its top five customers, accounting for 30.72% of its total revenue from operations. Revenue from the top ten customers stood at ₹250.31 crore, contributing 44.56% to the total revenue. Additionally, repeat customers contributed ₹489.14 crore, contributing 87.07% of the revenue from operations. Moreover, over 90% of AVTL’s revenue comes from terminals on the west coast of India, exposing it to geographical concentration risk.

Listed Peer Comparison 

*Calculations are performed (as March 31st 2024)

Aegis Vopak Terminals Limited stands out in this peer comparison due to its significantly higher financial leverage and lower profitability. For FY24, its Net Debt to Operating EBITDA of 6.24 times and Total Debt to Equity of 2.59 times are substantially higher than Adani Ports (2.44 and 0.85, respectively) and JSW Infrastructure (0.15 and 0.53, respectively), indicating a much greater reliance on debt financing. Furthermore, its Return on Equity (RoE) at 8.68% and Return on Capital Employed (RoCE) at 8.39% are the lowest among the three companies, suggesting less efficient utilization of capital to generate profits. The Capital Expenditure to Operating EBITDA at 119.50% also points to high investment needs relative to operational earnings.

Given these financial characteristics, recommending Aegis Vopak Terminals Limited for purchase would be challenging. The high debt levels and lower profitability metrics signal higher financial risk and potentially weaker operational performance compared to its peers. The exceptionally high P/E ratio of 259, significantly above Adani Ports' 37.48 and JSW Infrastructure's 49.02, which is nearly six times the industry average of 43.25, the company appears significantly overvalued relative to its earnings and the broader industry.

The company currently has a total debt of around ₹2,486 crore. Post-IPO, the debt is expected to reduce to below ₹500 crore, bringing the leverage ratio down to under 0.5 and significantly lowering the finance cost, which currently stands at 6% of the total debt. This will result in a healthier balance sheet. However, given the ongoing legal cases and the capital-intensive nature of the business, the company may require additional funds for future expansion. With the current capacity utilization at 73% for the Liquid Terminal Division, further expansion could lead to an increase in the leverage ratio.

Sector Dynamics and Legal Risks

Operating in a capital-intensive sector, the company depends heavily on external funding. Compounding the concerns are ongoing legal and regulatory proceedings involving its promoters, and subsidiaries, which further add to little uncertainty.

Conclusion

Given the combination of high financial leverage, low returns, elevated valuation, and legal overhang, Aegis Vopak Terminals Limited appears to be a high-risk investment. Investors are advised to avoid participating in this IPO.