ICRA puts Adani Ports' long-term debentures rating under watch

MUMBAI: Rating agency ICRA has placed the long-term rating of double-A plus on outstanding bank facilities and non-convertible debentures of Adani Ports and Special Economic Zone (APSEZL) under rating watch with negative implications, the agency said on Tuesday.

ICRA said the rating has been put under watch with negative implications after the company announced the acquisition of controlling stake of 75 per cent 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.

It added the negative implication factors in the significant scale of the transaction, which if successfully completed, will result in a gross debt addition of Rs 6,200 crore and cash outflow of Rs 5,500 crore for APSEZL 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," the rating agency said.

The indicative timeline for completion of the transaction is by April 2020.

ICRA said that the acquisition could result in diversification of the target hinterland and cargo profile, consolidation of market share and operational synergies for APSEZL 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.

KPCL operates the Krishnapatnam Port in Andhra Pradesh and registered volumes of 54.9 million tonnes in FY2019 and operating profit of Rs 1,332 crore.