Adani Ports and Special Economic Zone Ltd. (APSEZ) received a major credit boost on Thursday after S&P Global Ratings upgraded its long-term issuer credit rating to 'BBB' from 'BBB-', citing the company's robust operating cash flows, improving balance sheet and ability to fund an aggressive expansion pipeline without materially weakening its financial profile.
The global ratings agency also upgraded the rating on Adani Ports' senior unsecured notes to 'BBB' and assigned a stable outlook, reflecting its expectation that the company will maintain a net debt-to-EBITDA ratio of around 2.6 times over the next 12 to 24 months despite elevated capital expenditure.
S&P expects Adani Ports to significantly step up investments as it pursues its long-term goal of expanding domestic port capacity to 1 billion metric tonnes by 2030, from the current 653 million metric tonnes. Annual capital expenditure is projected to rise to around Rs 180 billion in FY27 and FY28, before increasing to Rs 200 billion in FY29, compared with about Rs 130 billion in recent years.
Around two-thirds of this spending will be directed toward expanding domestic ports, particularly container terminals, while the remainder will be invested in logistics, marine services and international growth opportunities.
According to S&P, the company's leverage has improved considerably over the past few years, with net debt-to-EBITDA expected to remain around 2.6x, compared with nearly 4x in FY23. The agency also highlighted Adani Ports' tighter leverage policy, noting that management now aims to maintain leverage at around 2.5x, lower than its earlier tolerance range of 3.0-3.5x.
The ratings agency expects earnings growth to be supported by higher cargo volumes, driven by capacity ra
mp-up at the Vizhinjam and Colombo ports, as well as a full-year contribution from the recently acquired North Queensland Export Terminal (NQXT) in Australia. S&P forecasts cargo volumes to grow about 18% in FY27, followed by 7-8% growth over the subsequent two years.
S&P said the stable outlook assumes Adani Ports will continue generating strong operating cash flows, maintain disciplined leverage, avoid significant related-party transactions outside the normal course of business, and pursue growth without materially weakening its credit profile.
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