Adani Port SEZ (APSEZ) will sell most of its stake in its Australian port terminal to the Adani family. This will reduce APSEZ’s Rs 11,000 crore debt and improve profitability.
By selling off almost the entire stake in the Australian asset, APSEZ will be able to reduce the debt equity ratio to 1.2 from 2.3, APSEZ’s CFO B Ravi told Business Line. The move will help improve the profitability of the company and also help the firm expand its footprint in India, he added.
To fund the acquisition of Abbott Point Terminal, a port in Australia which will carry coal from Adani’s coal mines in Australia, APSEZ had a loan of Rs 11,000 crore.
Out of the total loan, APSEZ had provided a corporate guarantee for Rs 4,500 crore while the remaining loan was backed by port assets.
On how the company will expand in India given the security concerns, Ravi said, “We have already represented to the Government on the security issue. We expect them to be addressed soon. Moreover, we have terminal expansion plans for Goa, Visakhapatnam and Kandla ports over next few years, the rights of which APSEZ has already won.”
Analysts meanwhile, stated that this could be a signal of Adani’s potential interest in Odisha’s Dhamra Port from where L&T has stated its intent to exit.
CONFLICT QUERIES
On conflict of interest issues given that the Adani family, which promotes APSEZ Port, is the buyer, Ravi said that the valuation of the Australian port asset will be done by “independent valuers” selected by a committee of independent directors of APSEZ.
The promoter directors were not present in the Board meeting held on Monday, when the issue was discussed.
On whether APSEZ could have got a better price for the Australian terminal through a competitive bid, Ravi said that a good price for the port could have only come from somebody who had similar mining rights in Australia.
VALUATION IS KEY
Initial reaction from analysts remained positive, with a rider on the valuation for the sale. Devanshu Saluja, Senior Research Associate, Drewry, stated, “In our view, it is a move to de-leverage Adani Port's balance sheet, and reduce the financial expense burden which ballooned post the $2 billion acquisition of Abbot Point. It will give headroom to acquire further assets, if any.”
Saluja added: “However, it will depend on the final terms and conditions of transaction. Its speculated that Adani is interested in the asset purchase on the east coast of India.”
”With regards to selling it to Adani Group- Abbot Point is a strategic asset given India's burgeoning coal imports. It is to be noted that the Group also has mining rights in Australia and Indonesia. Hence, it integrates operations from owing mining rights in Australia, port terminal in Australia (export point) to port terminal in India (import point) for power generation units such ultra mega power plants owned by Tata's and Adani Power"
STOCK SHOOTS UP
On BSE, APSEZ stock went up by 4.86 per cent on Monday, when APSEZ also announced a positive set of results. Incidentally, the rising stock will also benefit the Adani family in another way. The promoters have to reduce the stake in APSEZ to 75 per cent from 77.5 per cent to meet the RBI guidelines.