Adani Ports invests Rs 2,800 cr to up stake in Krishnapatnam Port to 100%

Acquires balance 25% Vishwasamudra Holdings' stake

Gautam Adani-led Adani Ports and Special Economic Zone  Ltd (APSEZ) today announced acquisition of the residual 25 per cent stake in Adani Krishnapatnam Port Ltd, (Krishnapatnam Port) for Rs 2,800 cr.

This will result in APSEZ increasing its stake from 75 per cent to 100 per cent in Krishnapatnam Port, the company informed in a release.

Together with the 75 per cent ownership acquired in October 2020, the acquisition implies an enterprise value of Rs 13,675 crore implying an EV/ FY21 EBITDA multiple of 10.3x, it said.

Krishnapatnam Port is located on the east coast of India in Nellore district of Andhra Pradesh (180 km from Chennai Ports) close to the border between Andhra Pradesh and Tamil Nadu.

Krishnapatnam Port is an all-weather, deep water port has multi-cargo facility with a current capacity of 64 million tonne. With a waterfront of 20 km and 6,800 acres of land, Krishnapatnam Port has a master plan capacity of 300 million tonne and a 50-year concession.

The port is expected to have volumes of 38 million tonne, revenues of Rs 1,840 crore and EBITDA of Rs 1,325 crore in FY21.

Since the acquisition, Krishnapatnam Port has focused on business process re-engineering which has resulted in EBITDA margins improving to 72 percent in FY21 from 57 percent in FY20.

“The consolidation of our ownership in Krishnapatnam Port reinforces APSEZ’s stride towards 500 MMT by 2025 and achieving our broader strategy of cargo parity between west and east coasts of India. Krishnapatnam Port is on track to handle double the traffic by 2025 and will deliver high growth through a multi-product and cargo enhancement strategy while enhancing return on capital employed. We are confident that we will be able to double throughput and triple EBITDA at Krishnapatnam Port by 2025,” the release quoted Karan Adani, chief executive officer and whole time director of APSEZ as saying.

Adani Ports and Special Economic Zone Ltd has 12 strategically located ports and terminals — Mundra, Dahej, Tuna and Hazira in Gujarat, Dhamra in Odisha, Mormugao in Goa, Visakhapatnam and Krishnapatnam in Andhra Pradesh, Dighi in Maharashtra and and Kattupalli and Ennore in Chennai— representing 24 percent of the country's total port capacity.

“The company has made efforts to be present at geographically important points on the Indian coast. They had control on the west via Mundra and now it is the south and the east which it has been eyeing,” said Hitesh Avachat, group head-corporate ratings at Care Ratings.

Meanwhile, the company is also developing a transhipment port at Vizhinjam, Kerala.

With a vision to turn carbon neutral by 2025, APSEZ was the first Indian port and third in the world to sign up for Science Based Targets Initiative (SBTi) committing to emission reduction targets to control global warming at 1.5°C above pre-industrial levels.

Last month, Adani Ports acquired controlling stake in Gangavaram Port Limited (GPL) for Rs 3,604 crore. Earlier in the same month, the company had announced acquisition of Warburg Pincus’s 31.5 per cent stake in GPL for Rs 1,954 crore.

“Where ever the stake holders are not masters in port operations (like private equity firms in case of Gangavaram), Adani is eyeing those port entities to improve presence along coast. The private equities would someday want to an exit route and Adani has managed to provide one,” said an analyst with another brokerage on condition of anonymity.