Aegis Vopak Terminal IPO: Robust fundamentals, rich valuation

The ₹2,800-crore Initial Public Offering (IPO) of Aegis Vopak Terminal Ltd (AVTL), India’s leading third-party container storage terminal owner and operator for liquid and gas, will open on Monday. The company owns and operates 18 terminals across six major Indian ports for liquid storage (both edible and non-edible) and two terminals in two ports for LPG.

While the business is well poised for strong growth over the next two-three years—driven by capacity expansion at Pipavav Port and Mangaluru, and the setting up of an ammonia storage terminal, among other initiatives—the IPO (entirely fresh issue) appears to be priced to perfection, leaving very limited upside in the near term.

Rich valuation

At the upper end of the band of ₹235, the stock is valued at about 55 times and 56 times its FY25-estimated EBITDA (EV/ EBITDA) on a pre- and post-issue basis respectively.

Its comparable peers in the listed space—Adani Ports and SEZ and JSW Infrastructure—trade at 17.9 times and 27.7 times FY25-reported EBITDA. Interestingly, AVPL’s Netherlands-based parent, Vopak, currently trades at 11.6 times its trailing EBITDA, while its Indian parent, Aegis Logistics, trades at 29.4 times its trailing twelve-month EBITDA (EV computed using September 2024 debt and cash).

However, given the company’s robust long-term prospects, any weakness in the stock price post-listing—possibly due to a market-wide correction—could present a good buying opportunity for long-term investors.

Business segments

Aegis Vopak is a joint venture between India’s leading oil and gas logistics player, Aegis Logistics, and the Netherlands-based independent tank storage company Koninklijke Vopak N.V. (read as Royal Vopak and referred to hereafter as Vopak). Aegis, with five decades of experience in the petrochemical logistics space, currently holds a 50.1 per cent stake, which will reduce after the IPO. The Netherlands-based Vopak, with a legacy of over four centuries, holds 47.31 per cent in AVTL.

AVTL’s business can be broadly segmented into liquids, which contributed 54.36 per cent of revenue for the first nine months of FY25, and LPG gas storage, which accounted for 45.64 per cent. The gas segment commands the highest operating profit margin at 88.3 per cent during the 9MFY25 period, while the margin in the liquid segment stood at 68.2 per cent over the same period.

Liquids utilisation to improve

AVTL currently operates 18 terminals across ports at Kandla and Pipavav in Gujarat, Mangaluru in Karnataka, Kochi in Kerala, Haldia in West Bengal and JNPT in Mumbai for liquid storage. These terminals store both edible liquids, such as cooking oil and non-edible liquids, including crude and chemicals. The company can handle over 30 chemicals, with a 48-hour downtime to switch between products, and over 10 products in the edible and non-edible oil category.

The current capacity for liquids is about 1.7 million cubic metres, with utilisation as of December 2024 at 62 per cent (this includes capacity added after December 2024). This leaves room for growth through higher volumes in the current fiscal. Additionally, the company is focusing on optimising its product mix, which should lead to an improvement in operating profit margins. For instance, average realisations on chemicals such as acids are higher by as much as four-five times compared with crude-based products.

Given the 48-hour switching time between products, the company could meaningfully improve margins by achieving a better product mix, going forward. This should support both revenue and profit growth from FY26.

LPG, the big driver

In the liquefied petroleum gas (LPG) storage division, the company is targeting significant capacity addition in FY26. AVTL is adding a cryogenic LPG storage tank of 48,000 metric tonnes at Pipavav and cryogenic LPG storage tanks of 82,000 metric tonnes at Mangaluru. This will enable AVTL to more than double its overall LPG capacity to 2,00,800 metric tonnes per annum.

In addition, the company is setting up its first ammonia terminal with a capacity of 25,000 metric tonnes per annum at the Pipavav terminal in Gujarat. This is likely to be completed by FY26-end. The completion of the Kandla-Gorakhpur pipeline by the three PSU oil marketing companies—IOCL, BPCL and HPCL—by June 2025 will also lead to a significant improvement in utilisation at Aegis Vopak’s Kandla terminal, currently operating at less than a third of its capacity.

The company has earmarked ₹671.3 crore from the overall IPO proceeds of ₹2,800 crore for the Mangaluru LPG expansion.

Further, the proposed repayment of ₹2,016 crore from the IPO proceeds will help deleverage the balance sheet and enable the company to raise additional debt capital for future projects with greater ease.

Key risks

While the strong parentage of Aegis Logistics and Vopak is a major positive for AVTL, the dependency on Aegis Logistics is also worth noting. Aegis Logistics will be responsible for the construction of the proposed expansion projects, including tank terminals, though transactions between the related parties will be conducted at arm’s length. Significant portion of the proposed ₹671.3 crore for capex may accrue to group companies of Aegis Logistics. Any delays in the ongoing projects, either on the parent’s side or at AVTL’s end, could postpone or affect the company’s growth timeline.

During the first nine months of FY25, the company’s revenue and operating profit grew 24 per cent and 36 per cent year on year to ₹464 crore and ₹89 crore respectively. This led to an operating profit margin expansion of 7 percentage points, reaching 74 per cent compared with the same period in FY24. Net profit rose 19 times to ₹89 crore, aided by stronger operating performance and lower depreciation.

AVTL is well positioned to benefit from the ongoing growth cycle over the next few years. With expansion plans, an improved product mix and higher utilisation in play, it may be worth tracking the stock post listing for a potentially attractive entry point.