 "Karan Adani")
India’s largest port operator Adani Ports and Special Economic Zone (APSEZ) has expanded its presence on India’s coastline after buying 95 per cent in Odisha’s Gopalpur Port Ltd (GPL) at an enterprise value of Rs 3,080 crore.
“Its (Gopalpur Port) location will allow us unprecedented access to the mining hubs of Odisha and neighbouring states and allow us to expand our hinterland logistics footprint. GPL will add to the Adani group’s pan-India port network, significantly enhance overall cargo volume, and strengthen APSEZ’s integrated logistics approach,” said Karan Adani, chief executive officer, Adani Ports & Special Economic Zone Ltd. The Adani group company, which already owns ports like Dhamra and Gangavaram on the eastern coast, will acquire the stake in brownfield GPL by purchasing 56 per cent from the Shapoorji Pallonji (SP) Group and 39 per cent from Odisha Stevedores Ltd, which will continue as the JV partner post the acquisition.
The deal is expected to be completed in the first quarter of 2024-25 (FY25). In addition to the enterprise value of Rs 3,080 crore, there is a contingent consideration of Rs 270 crore estimated to be payable after 5.5 years, taking the total to
Rs 3,350 crore.
The sale of GPL is the second port divestment in the past few months from the SP group, a diversified construction and infrastructure, real estate and energy conglomerate. It had earlier divested its Dharamtar Port in Maharashtra to JSW Infrastructure for an enterprise value of Rs 710 crore.
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“These divestments are key milestones in our road map to reduce group debt and set the stage for growth, taking advantage of the macro trends for demand in our core businesses, both in India and overseas,” said a SP group spokesperson. The SP group has been looking at several ways to reduce its debt, which has been reported to be around Rs 20,000 crore.
The equity value of the transaction is Rs 1,420 crore.
In FY24, GPL is estimated to handle about 11.3 million tonne cargo (up 52 per cent Y-o-Y) and earn a revenue of Rs 520 crore (up 39 per cent) and achieve earnings before interest, taxes, depreciation, and amortisation of Rs 232 cr (up 65 per cent).
“In our view, the Gopalpur Port is all set for strong growth and margin expansion in FY25 with opportunities already identified for achieving higher operational efficiencies and infra debottlenecking,” APSEZ said.
Strategic significance
The presence of large crude steel plants in the eastern hinterland will fuel coking coal and limestone imports, while the potential to tap thermal coastal coal movements in Gopalpur’s hinterland presents an upside potential.
“New railway lines under evaluation will further enhance connectivity of Gopalpur Port with its hinterland. Gopalpur to be the least cost port for upcoming facilities in TATA SEZ in the hinterland,” the company’s exchange filing said.
Gopalpur Port handles primarily dry bulk cargo, including iron ore, coal, limestone, ilmenite, and alumina.
The port was awarded in 2006 for thirty years, with the provision of two extensions of 10 years each. The concessionaire has the flexibility to expand the port capacity beyond the existing capacity of 20 million tonnes. The port has already received leased land of over 500 acres with the option to receive additional land on lease for future development.
Planned divestment
Deutsche Bank was the financial advisor to SP Group on this deal. “This deal underscores our thesis on the prominence of Indian strategics as best placed to buy Indian assets,” said Muffazal Arsiwalla, head of M&A at Deutsche Bank, India. “Domestic consolidation remains a key theme for quality assets to expand their presence and leadership in core markets. Additionally, this transaction reinforces continued confidence in the India Infra growth story,” he said.
