Adani To Consider Airports Spinoff Once Navi Mumbai Is Operational, Says Cantor

Adani Group will spin off its airport business as it's expected to grow multifold in the coming years, riding on the expanding aviation market in India, according to Cantor Fitzgerald & Co.

Once the Navi Mumbai airport is fully completed and operational, Adani Enterprises Ltd. will begin to consider demerging its arm Adani Airports Holdings Ltd., according to the brokerage firm, which initiated coverage on the company with an 'overweight' rating. The research firm cited airports among key businesses—including roads, solar, wind, and electrolysers—for its positive view on the group flagship.

The brokerage firm said it expects a spin off of the airports segment, as well as Adani's data center joint venture with EdgeConneX—AdaniConneX—and its new energy ecosystem segment, which consists of solar and wind manufacturing and green hydrogen (Adani New Industries Ltd).

Cantor has a 12-month price target of Rs 4,368 apiece for Adani Enterprises, implying a potential upside of 51%.

The company currently owns eight airports, seven of which are operational, accounting for about 25% of passenger traffic and about 33% of cargo capacity. Navi Mumbai International Airport, which is under development, is expected to have a maximum capacity of 90 million passengers. That, Cantor said, will make it twice as big as the largest airport in the U.S. in Atlanta.

“Coupling this with air travel in India, where only 3-4% penetrated amongst the population, compared to 15-20% or more in developed countries, we believe this segment will be multiples larger in the coming years,” Cantor said in a note.

Here are the key highlights of Cantor's view on Adani's airport business:

• The next business that will be demerged will be the airports, once Navi Mumbai airport is fully completed and operational.

• Forecasts passengers to grow at a CAGR of 21.2%.

• Expects revenue per passenger to grow at a CAGR of 5.1%.

• Expects a revenue CAGR of 27.5% from FY24 to FY26.

• An investor owning 5% of Adani Enterprises will get a 5% ownership stake in the airportq business.

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