Aegis Logistics

Founded in 1956, Aegis Logistics is India’s leading integrated oil, gas, and chemical logistics company. With state-of-the-art terminals across major Indian ports, Aegis is also a top importer and handler of liquefied petroleum gas (LPG) amongst private players.

Why do we like the investment?

Apart from its strong presence in the gas and liquids logistics space, we like the company for its first mover advantage in key ports across India and a decent amount of capacity expansion that is still to come.

Aegis announced a deal in 2021 with Dutch tank storage company, Royal Vopak, which includes a joint venture to operate terminals in strategic ports across India’s eastern and western coastlines. Prior to the deal, Aegis was already an integrated player, from sourcing all the way to distribution.

We think this deal with Vopak gives the company an advantage in terms of when to take cargoes as well as full control of logistics, including management and optimisation. Further, this enhances the growth outlook for Aegis by allowing a greater flex in capital outlay for investments and widens the company's portfolio.

Fundamentally, the company has a strong balance sheet and has been net cash positive since 2018. Management execution and foresight has also been better-than-expected. With the sad and unexpected passing of Anish Chandaria, the company’s vice chairman and managing director at the time and a pivotal member of management, it was remarkable to see how well the company navigated the difficult period to come out stronger. All of this reinforces the view that management quality and bench strength at Aegis are strong.

More broadly, the macro dynamic for the industry Aegis operates in is also attractive given the clear import requirement that India needs when it comes to LPG usage and the push away from dirty fuels. While energy demand is ever increasing, the domestic supply in India is not keeping pace, which has pushed natural gas prices higher, thus benefitting companies like Aegis.

On the ESG front, carbon footprint is a sticking point, given the nature of the industry and the fact India has committed to a net zero emissions target by 2070. Aegis has already demonstrated its commitments by installing floating roofs at its main facilities to reduce vapour emissions and an effluent treatment plant. The company has also formed a committee to oversee this. MSCI in February 2023 upgraded Aegis' ESG rating from BBB to A, assessing that its business segments are less exposed to biodiversity risks than its oil and gas peers while overall governance practices appeared on par with those of global peers.

Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.