Adani Ports And Special Economic Zone fell 0.26% to Rs 389.25 after ICRA placed its ratings on the company's bank facilities and non-convertible debentures under watch with negative implications.Adani Ports and Special Economic Zone (APSEZ) recently announced the acquisition of controlling stake of 75% in Krishnapatnam Port Company (KPCL) from the existing shareholders at a total enterprise value of Rs 13,572 crore, subject to getting applicable statutory approvals. The indicative timeline for completion of the transaction is by April 2020.
Following the news, ICRA has placed the long-term rating of [ICRA] AA+ outstanding on the bank facilities (Rs 10,020 crore) and non-convertible debentures (Rs 7,000 crore) of APSEZ under rating watch with negative implications.
ICRA said that the significant scale of the transaction, which if successfully completed, will result in a gross debt addition of about Rs 6,200 crore and cash outflow of about Rs 5,500 crore for APSEZ at a consolidated level. Effectively, KPCL's acquisition, along with other acquisitions and capex done in the recent past, could result in an increase in the company's net leverage (net debt/OPBDITA) in FY2021 and will push back the anticipated trajectory of improvement in the leveraging levels.
KPCL operates the Krishnapatnam Port in Andhra Pradesh and registered volumes of 54.9 million tonnes in FY2019 and EBITDA of Rs 1,332 crore. The company had a high leverage of 4.6-4.7 times as on 31 March 2019.
ICRA noted that while the acquisition could result in diversification of the target hinterland and cargo profile, consolidation of market share and operational synergies for APSEZ over the long term, however, the company's ability to scale up cargo volumes and improve the performance of the port to more optimal levels, thereby leading to improvement in leveraging levels would be a key monitorable.
APSEZ is the developer and operator of the Mundra port in Gujarat, under a 30-year concession agreement with the Gujarat Maritime Board (GMB), valid till February 2031.
APSEZ reported 74.1% jump in consolidated net profit to Rs 1054.15 crore on a 8.2% increase in net sales to Rs 2821.16 crore in Q2 September 2019 over Q2 September 2018. The rise in profit was backed by one-time tax gain.
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