Karaikal Port Acquisition Can Help Improve Adani Ports' Profitability, Says Morgan Stanley

Adani Ports and Special Economic Zone Ltd.'s acquisition of Puducherry-based Karaikal Port Pvt. can become a value-adding deal with an improvement in the port's profitability over the next two years, according to Morgan Stanley.

The Karaikal Port's Ebitda per million tonne of cargo handled was Rs 186 in the financial year 2021–22, while the number was Rs 292 for India's largest private port operator, the brokerage said.

The port's revenue declined to Rs 2,473 crore in FY22 from Rs 3,222 crore in FY21 and Rs 4,141 crore in FY20.

The Adani Group company plans to invest Rs 850 crore to upgrade infrastructure to double its capacity over the next five years and add a container terminal to make it a multi-purpose port, Karan Adani, chief executive officer of Adani Ports, said in a statement on Saturday.

The company completed the acquisition of Karaikal Port after a bankruptcy tribunal approved its resolution plan to pay Rs 1,485 crore to the financial creditors.

Karaikal is an all-weather deep-water port that mostly handles coal, cement, fertiliser, limestone, steel, and liquids. It has five operational berths, three railway sidings, large cargo storage facilities, warehouses, and other important infrastructure on 600 hectares of land.

"It is the only major port between Chennai and Tuticorin, and its strategic location allows the port easy access to the industrially rich hinterland of Central Tamil Nadu," Adani Port said in the release. The upcoming 9 MMTPA new refinery of Chennai Petroleum Corp. Ltd. at Nagapattinam in Tamil Nadu will give the port an opportunity to handle an additional large volume of liquid cargo, it said.

Morgan Stanley is ‘overweight' on Adani Ports with a target price of Rs 697.

Shares of Adani Port declined 0.89% to Rs 626.25 apeice as of 10:10 a.m., compared with a flat benchmark Nifty 50.

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