- Adani Ports shares sank as much as 13% as investors reacted to Q4 earning
- Adani Ports was the top loser in the blue chip Nifty50 index
- Adani Ports reported muted traffic growth, while its debt rose sharply
Adani Ports and Special Economic Zone shares sank as much as 13 per cent on Wednesday, following the announcement of the company's fourth quarter earnings yesterday. Adani Ports - India's largest port developer - was the top loser in the blue chip Nifty50 index today.
Here are the reasons for the selloff in Adani Ports shares:
1) Q4 below estimates: Adani Ports' consolidated net profit jumped 38 per cent to Rs 914 crore in the March quarter, while its revenue rose 16 per cent to Rs 1,947 crore. Brokerage Elara Capital said Adani Ports' revenue, operating profit and net income were all below its estimates after adjusting for stake sale in Mundra Solar Tech Park.
2) Muted traffic growth: Traffic at Adani's Mundra Port fell 3 per cent year-on-year in the March quarter because of sharp fall in coal volumes. It was the worst traffic performance by the company in the last 10 quarters. According to Investec, Adani Ports witnessed weak traffic growth as it lost market share to major ports. Ramp-up of revenues at other ports was slower than expectations, with consolidated traffic rising only 3 per cent year-on-year in Q4, the brokerage added.
3) Rising debt: Adani Ports' working capital continued to rise in FY16 on account of a sharp increase in loans/advances, which have risen from Rs 300 crore in FY12 to Rs 4,400 crore in FY15 to over Rs 7,000 crore now, said Investec. This was the key contributor to the company's net debt rising by Rs 3,500 crore to Rs 20,000 crore (1.5x equity) in FY16.
4) Equity dilution fears: Traders said worries about equity dilution also hit Adani Ports shares today. Adani Ports on Tuesday said that it will raise up to Rs 10,000 crore by issuing shares.
5) Aggressive capex: For FY17, Adani Ports' management has highlighted aggressive capex plans. This, coupled with the likely acquisition of Kattupalli Port, should result in negative free cash flow in FY17 as well, Investec said.
Despite the sharp fall in share prices, analysts are positive about Adani Ports shares. PhillipCapital said Adani has a virtual monopoly in the Indian ports sector and the company will be the biggest beneficiary of any uptick in the cargo volumes. It maintained a "buy" call on the stock, with a price target of Rs 255. Investec also maintained its "hold" call on the stock.
Adani Ports shares closed 12 per cent lower at Rs 207.25, underperforming the broader Nifty, which ended 0.5 per cent down today.
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