Adani Ports' earnings to be driven by capacity ramp-up:Moody's

Moody's Investors Service today said it expects the earnings growth of Adani Ports and Special Economic Zone Limited (APSEZ) to be driven by ramping up capacity at its recently commissioned ports and terminals over next 2-3 years.
"APSEZ (Baa3 negative) results for half year ending September 2016 (H1 FY17) are broadly within Moody's expectations and provide support to its Baa3 issuer rating," it said in a statement.
"APSEZ's H1 FY17 cargo volume grew by a respectable 12 per cent year on year (Y-o-Y), a credit positive, after the company
reported a muted 5 per cent growth in the fiscal year ending March 2016," Abhishek Tyagi, Moody's Vice President and Senior Analyst, said.

In addition, APSEZ reported a decline in the amount of related party transactions, a credit positive, Tyagi added.
APSEZ had yesterday reported a healthy 61 per cent jump in its consolidated net profit at Rs 1,091 crore for the quarter ended September 30, driven by growth in cargo volumes and operational efficiencies.

The Gautam Adani-led firm had clocked a net profit of Rs 678 crore in the year-ago period, it said in a BSE filing.
"APSEZ reduced its loans and advances extended to related parties by approximately Rs 10.4 billion in H1 FY17 which is a credit positive," Moody's Investors Service said.

APSEZ's ratings are predicated on a continued reduction in the company's existing exposure to related parties within the broader Adani group through business advances.
"The ratings outlook is negative, reflecting our expectation of lower volume growth and increased capex spend," it said.
The ratings outlook could revert to 'stable' if the company continues to rebalance its cargo mix to offset the decline in coal volumes, while maintaining profit margins and a financial leverage consistent with its Baa3 ratings category.
"Financial metrics that Moody's would look for in changing the outlook back to stable include an FFO/debt of 18 per cent-25 per cent and a cash interest coverage of 3.0x-4.5x on a consistent basis," it said.