Good morning, everyone, and welcome to our call. My name is Fatjona Topciu, Head of IR. Our CFO, Michiel Gilsing, will guide you through today's presentation on the AVTL IPO. We will refer to the presentation, which you can follow on screen and download from our website. After the presentation, we will have the opportunity for the Q&A. A replay of the webcast will be made available on our website as well. Before we start, I would like to refer to the disclaimer content of the forward-looking statement, which you are familiar with. I would like to remind you that we may make forward-looking statements during the presentation, which involves certain risks and uncertainties. Accordingly, this is applicable to the entire call, including the answers provided to questions during the Q&A. With that, I would like to hand over the call to Michiel.
Thank you, Fatjona, and a very good morning to all of you joining us for today in this call. We're very pleased, of course, to have successfully listed our joint venture, AVTL, in India. The stock has been trading since this morning in India in two stock exchanges. This IPO highlights AVTL's strategic network of terminals in India, promising growth prospects, and our commitment to create and maximize value for Vopak shareholders. AVTL is our joint venture with Aegis Logistics, specializing in gas and chemical storage infrastructure in India. AVTL currently owns and operates terminals in six ports with a capacity of around 1.7 million cubic meters, strategically located across India's west and east coasts. Since its establishment in 2022, we have committed EUR 121 million to growth investments with attractive returns, which are projected to add approximately 590,000 cubic meters of storage capacity.
Including the initial investment, we have invested around EUR 300 million in India so far. The AVTL IPO involved an offering of around 10.75% newly issued shares. Based on the IPO price, this implies an equity valuation for AVTL of around EUR 2.7 billion. Looking at our network in India in more detail, Vopak stands as India's largest independent storage provider of LPG and chemical products. As shown on the slide, our network is well diversified with terminals equipped with excellent rail, road, and pipeline connectivity to effectively serve our customers nationwide. Also, the customer base of our terminals network is solid, with a large group of customers, including major energy companies in the country. We entered the Indian market in 2011 with the acquisition of one of India's largest independent storage facilities for chemicals and vegetable oils at the port of Kandla.
We joined forces with Aegis Logistics in 2022, leading to the formation of our joint venture, AVTL. The strong local presence of Aegis Logistics, coupled with long-term experience, made this joint venture a success. In the subsequent years, AVTL rapidly scaled its operations, commissioning terminals in Mangalore and Mumbai, while significantly expanding capacity at existing locations. A successful private placement of 3.4% of AVTL shares in 2024 underscored the value the network has. This journey has led us to today's milestone, the successful IPO of AVTL. As a listed company in India, AVTL is required to have 25% of its capital listed within the first three years since the IPO. We remain committed, and we will support the next steps towards this important milestone. Let's have a look at the IPO and what it means for Vopak.
To provide some context, an initial investment of EUR 186 million from Vopak was made in 2022 for a 49% stake in AVTL. This was followed by a EUR 121 million proportional growth commitment, with associated projects now partially commissioned and the remainder under construction. As indicated, we brought around 10.75% of newly issued shares to the market, diluting Vopak's share in AVTL from 47.31% to 42.23%. The offering generated total proceeds of EUR 290 million from these new shares, implying a total market capitalization for AVTL of EUR 2.7 billion, based on the value of newly issued shares. The value of our stake underscores the substantial value created and the significant returns on Vopak's strategic investments in AVTL. AVTL's contribution to Vopak's proportional EBITDA was around EUR 26 million in 2024.
As a result of the IPO, an exceptional dilution gain of around EUR 110 million is expected to be recorded in our Q2 financial results. The use of proceeds from the AVTL IPO includes the repayment of debts and capital expenditure related to growth investments. Finally, with AVTL now able to fund its current and future growth capex from IPO proceeds, Vopak gains increased capital allocation flexibility. These freed-up resources can then be directed towards alternative strategic initiatives, including potential shareholder distributions. We're very excited for the opportunities ahead in the Indian market. India recently surpassed Japan to become the world's fourth-largest economy, and its economic growth is projected to reach 6.5% in 2025. This economic growth has fueled increased energy demand, leading to a 10.9% compound annual growth rate in India's LPG imports between the fiscal years 2014 and 2024.
As a result, we continue to expect significant growth in demand for storage infrastructure in India. That brings us to the last slide. Let me summarize the key messages of today. Through AVTL, Vopak has a market-leading position in the strategically vital Indian market, which offers strong fundamentals and considerable growth prospects. This is reflected in the current market value of our stake. Looking ahead, Vopak is committed to utilize the value of this strategic asset to maximize value creation for our shareholders. I would like to ask the operator to open the line for Q&A.
Thank you. To ask a question, please press star 1, 1 on your telephone and wait for your name to be announced. To whisper your question, please press star 1, and 1 again. Please stand by while we compile the Q&A roster. We will now take the first question. From the line of Thijs Berkelder from ABN AMRO ODDO BHF, please go ahead.
Yeah. Good morning, Michiel. Congrats.
Morning, Thais.
Congrats with the transaction.
Thank you.
Did I hear it right that you plan to use proceeds coming back for potential shareholder distributions? I guess you get repaid the shareholder loan. Can you remind us how large the shareholder loan was and what you get repaid?
The shareholder loan is around EUR 45 million. That needs to still be approved by the Indian authority to redistribute that money back to the Netherlands. That process will take normally a few months, I would say, if everything goes well. Yeah, what it effectively does, this IPO, is it gives us the opportunity to fund growth opportunities in India directly from an Indian source. No longer there is a requirement from the shareholders to put additional money into the joint venture. Also, the joint venture will be debt-free. In the longer run, we should be able to also reestablish some leverage in the joint venture at healthy levels. That means that the cash need from Vopak as a holding will be less going forward to fund the growth journey in India.
That will free up money effectively to either do other growth opportunities somewhere in the world, which obviously is preferred if at attractive returns. It will also indeed lead to maybe potentially shareholder distributions in line with our capital allocation policy. Every year, we will look at what is the room to do additional shareholder distributions, like we already did this year with the additional share buyback.
Yeah. Okay. You told us earlier that an IPO in India requires to have 25% free float within three years.
Correct.
You talked about potential acquisitions. Are there potential acquisitions now already on the radar screen or not?
We're always in the market to do acquisitions. Indeed, yeah, there are always opportunities, but too early to tell. Once, let's say, there will be serious options, we will definitely inform the market. This will give us a more solid base to do acquisitions in India. If you compare the trading multiple of Vopak versus the trading multiple in India, then obviously the trading multiple in India gives much more room to acquire companies than what we have today with our trading multiple at Vopak. That definitely gives an opportunity.
Okay. Thanks.
You're welcome.
Thank you. We will now take the next question from the line of Quirijn Mulder from ING. Please go ahead.
Yeah. Good morning, everyone. A couple of questions from my side. First of all, your initial investment is EUR 186 million for the joint venture. Is that including Kandla, let me say, which you will have, of course, let me say, put into this joint venture? How did it work? Secondly, on this EUR 110 million, it's a little bit unclear to me because how it exactly works out that you get EUR 210 million book gain and, in fact, the cash income, as I see it. My third question is about the market for LPG in India. If you look at the prospectus, then you see that the market is a little bit fragmented for storage of LPG. I think you are one of the leaders.
Do you think there are opportunities, let me say, to connect with Thijs' question for acquisitions in that market, or are you looking for other markets as well?
Let me start with the first question. The EUR 186 million was effectively the additional money on top of, let's say, the investment we brought in, Thijs. We had indeed the Kandla terminals, which we acquired in 2011. The Kandla terminal plus, let's say, the EUR 186 million that was brought into the joint venture. I do not know exactly the original acquisition price of the Kandla terminals, but it was in the tens of millions. It is a long time ago. You need to add effectively then Kandla plus the EUR 186 million. Yeah. On the book gain, I think that is something we will explain in more detail in the Q2. It is quite a complicated calculation. One part of it is that the part we effectively dilute is for which we get an exceptional gain.
You also need to recirculate some of the translation losses, which are still in the equity for that part, which we are effectively diluting. It is a combination of factors. One factor is effectively the step-up in value for the part we dilute, plus, let's say, the foreign exchange currency impact, which was already in the equity, but then needs to be reported as part of the exceptional gain.
In fact, no cash involved here.
No, there's no cash involved. No, correct. There's no cash coming back to the holding. You need to report, let's say, the gain you make over, let's say, the part you effectively dilute. There is no cash. Cash will only come in.
No, no. That's it.
You have effective.
It's also important for your cash distribution, let me say, for your distribution to shares, in my view.
There's twofold. One would be indeed if we would sell shares, but that's a secondary issue. This is a primary issue. There's no sale of shares, although we get to a lower percentage. What it does, it will give less pressure on the holding to fund growth investments. India is our fastest-growing country at the moment. We have been providing shareholder loans. If you look at, let's say, the plans we have, the growth ambitions we have, that would mean even more shareholder loans going forward if we would not have done the IPO. Now we have the IPO. We have proceeds of the IPO. We will repay those shareholder loans. Effectively, it will also lead to cash available to basically already pay for the assets and the construction.
Going forward, we can tap into the IPO market to effectively fund our growth. That will lower the cash requirements of Vopak Holding. As a result, it will free up cash, which otherwise would go into India, but can now go somewhere else.
Okay. You have to take some time there.
Yeah, that takes time. Although, yeah, some of the investments were also going quite fast. It takes time, but year by year, it will lead to less pressure on the holding.
What's your question with the fragmented market?
Yeah. Yeah, it is a fragmented market. If you see the pace of growth we already have shown in the last three years, we're quite successful in finding new locations, building new LPG infrastructure. On the LPG side, yeah, there are definitely still opportunities to build new infrastructure because the LPG market is still growing. If there's opportunities to acquire companies, yeah, to be seen. There might be opportunities. The same for the chemical space in which we are active. We see opportunities to build new infrastructure for chemicals. There might also be opportunities to acquire for chemicals. We are busy with ammonia. India looks pretty attractive from an ammonia point of view. That is an opportunity which arises. There is no intention to move into oil, for example, in India.
It will be purely a player around LPG, chemicals, and some liquid gases like LPG and ammonia.
My final question then, given the underlying growth for LPG and your strategic locations on the, let me say, on the West Coast for Pipavav and Kandla, it looks to me that organic growth is the main leading here in going forward. Let me say, acquisitions are, okay, fine, if they come along, but it looks like your organic growth is more important now.
At the moment, there's more organic growth indeed than acquisitions. We did a smaller acquisition in India, but the organic growth also comes at EBITDA multiples, which are around like four or five times maximum. These are quite attractive investments. Anywhere we could build new infrastructure in greenfields, that would be very attractive. That is more attractive than acquisitions. With the trading multiple in India at a significantly higher value, there could also be opportunities to acquire companies still at a multiple, which should be accretive for the shareholders of AVTL. That is too early to tell. Are these going to be big acquisitions or small acquisitions? I can't give you any indication at the moment. The IPO definitely gives an opening to look continuously at potential acquisitions as well on top of the attractive greenfields.
Thank you.
You're welcome.
Thank you. As a reminder, if you wish to ask a question, please press star one and one. We will now take the next question from the line of Jeremy Kincaid from Van Lanschot Kempen. Please go ahead.
Good morning, all. Congratulations on the deal. I just have one more follow-up question. Obviously, you talk about the 25% of the AVTL shares which need to be trading within three years. We can obviously speculate as to how you might get to that level. Should you not be able to issue new shares for whatever reason and you have to sell your existing stake, what's the structure or the deal that you've signed with the other shareholders? Would all shareholders have to sell down equally, or has one shareholder agreed to sell down more in the event that you can't issue new shares?
Thanks, Jeremy. Good morning. Yeah, there is indeed a requirement to get to the 25% within three years. That is what we aim for. We have not a scenario in mind where we will not be successful with the 25%. As such, selling down in what kind of form, we have not discussed.
Okay. Sure. Thank you.
You're welcome.
Thank you. We will now take the next question from the line of Kristof Samoy from KBC Securities. Please go ahead.
Good morning, Michiel, Fatjona. Congratulations with the successful IPO. I had some, let's say, technical issues to log in. Probably my questions have already been answered. Pardon me if this is the case. Regarding the timeline to go to a free float of 25%, can you give me an update on that? What's the exact legal requirements in India? Could you give an update on the potential use of the IPO proceeds and whether this will enable growth acceleration and what those could be in India? Thank you.
Yeah. Good morning, Kristof. Sorry to hear that. Hopefully, you still will be able to watch it later on. On your first question, more than happy to answer, of course. There is a three-year period to get to the 25% as a primary issue. Yeah, another three years to go to increase from today to 10.75% to 25%. Secondly, the proceeds of the IPO will be used to repay some of the debt to shareholders. A major part goes to Aegis, and some of it will go to Vopak, although we still need to get approval from the Indian authorities to redistribute that money from India back to the Netherlands. That is approximately EUR 45 million, which would then be cash in for Vopak.
Part of the IPO proceeds will be used to effectively fund the existing ongoing growth already because we have a few locations where we are constructing. At commissioning date, we need to pay the outstandings for those assets that will be used by the IPO as well. Yeah. Yeah. Overall, we will use the vehicle, as I said earlier, we will use the vehicle to fund growth in India going forward. It may give us an opportunity to further accelerate the growth opportunities in India with the IPO because it makes effectively on top of greenfield investments, it makes acquisitions with the present valuation more attractive. That is something we are seriously looking at together with our partner, Aegis.
Okay. And greenfields will be centered around chemicals and LPG initially, or?
Yeah. Initially, it will be indeed chemicals and then, I would say, liquid gases. LPG, but also we are constructing for ammonia. India has also quite some opportunities in the space of ammonia. We will not move into oil, for example. That is not the intention. These are the key products, I would say, liquid gases and chemicals.
Okay. Thank you very much.
You're welcome, Kristof.
No more questions from my end for now.
Thanks a lot.
Thank you. We will now take the next question from the line of Quirijn Mulder from ING. Please go ahead.
Yeah. Yes, Quirijn again. If I remember the original press release in 2022 when the Indians announced the joint venture with Vopak, I remember they mentioned LNG. I have not heard anything about it. It might be a long-term plan, but yeah, given your experience in LNG and the news in Australia was positive in my view. What are the opportunities there in your view?
You're right. Very good memory, Quirijn. LNG, we looked at it as well. Is it a, I would say, from a strategic point of view, it's probably a bit more remote at the moment. Because also the opportunities for LNG in India are quite hard at the moment. If you look at some of the infrastructure which has been built already and still to be built, we consider it not attractive enough for us to step into that. It was indeed part, and it is still part of the original scope of the joint venture. Never say never. If you have to put it in the perspective of opportunities, I would say chemicals, LPG, and ammonia have a much higher likelihood than LNG. It is still part of the scope of the joint venture.
I would put it at the bottom of the list at the moment.
Yeah. Okay. Okay. What is the current leverage of the joint venture of the AVTL?
AVTL?
IPO included.
After the IPO, it's zero effectively. There is no debt left. It also means if you look at the interest percentages in India, they are somewhere between 7-9%, depending on the exact debt profile. That effectively is going to lead to an increase in the profit of AVTL as a result of the IPO. Dividend yields in the Indian market are somewhere between 1-2%. Effectively, equity is a cheaper option at the moment than debt. If you purely look at the percentages, of course, equity then still has an opportunity to increase in value, and you have to share the value with others. From an interest percentage point of view, refinancing debt by this IPO is also attractive.
Okay. Thank you.
You're welcome.