Adani Ports Buys Balance 25% Stake In Krishnapatnam Port For Rs 2,800 Crore
With this acquisition, Krishnapatnam Port will become a wholly-owned subsidiary of Adani Ports.
Adani Ports & Special Economic Zone Ltd. increased its ownership in Krishnapatnam Port Ltd. as the nation’s largest port operator aims to increase its footprint in Andhra Pradesh.
The company signed an agreement with Vishwa Samudra Holdings Pvt. to buy the balance 25% stake in Krishnapatnam Port for Rs 2,800 crore, according to its exchange filing. Adani Ports already owns 75% in Krishnapatnam Port.
After this, Krishnapatnam Port will become a wholly-owned subsidiary of Adani Ports. The acquisition is subject to approvals under applicable laws, including that of the Competition Commission of India. The transaction is expected to be completed within three months.
“The acquisition implies an enterprise value of Rs 13,675 crore, implying an EV/FY21 Ebitda multiple of 10.3x,” the filing said.
How Adani Became India’s Port Tycoon
Krishnapatnam Port is an all-weather, deep water port and has multi-cargo facility. Located on the east coast of India in Nellore district of Andhra Pradesh, the port has a current capacity of 64 MMTPA on 6,800 acres of land. It also has a master plan capacity of 300 MMTPA and a 50-year concession period.
“The port is expected to have volumes of 38 MMT, revenue of Rs 1,840 crore and Ebitda of Rs 1,325 crore in FY21,” Adani Ports said in the filing. Since the acquisition, Krishnapatnam Port has focussed on business process re-engineering, leading to Ebitda margin improving to 72% in FY21 from 57% in FY20.
“The consolidation of our ownership in Krishnapatnam Port reinforces Adani Ports’ stride towards 500 MMT by 2025 and achieving our broader strategy of cargo parity between west and east coasts of India. Krishnapatnam Port is on track to handle double the traffic by 2025 and will deliver high growth through a multi-product and cargo enhancement strategy while enhancing return on capital employed,” Karan Adani, chief executive officer and whole time director at Adani Ports, was quoted as saying in the filing.
According to Adani, the company is confident to be able to double throughput and triple Ebitda at Krishnapatnam Port by 2025. “With its large industrial land, backed with the port, we will transform Krishnapatnam into a manufacturing and industrial hub.”
This move comes after Adani Ports last month signed an agreement with DVS Raju and family to acquire a 58.1% stake in Gangavaram Port Ltd. for Rs 3,604 crore. It also had announced to buy Warburg Pincus’ 31.5% stake in Gangavaram Port, located in the northern part of Andhra Pradesh close to Vizag, on March 3.
Shares of Adani Ports, however, fell as much as 1.5% in early trade on Monday to Rs 725.1 apiece. Of the 26 analysts tracking Adani Ports, 21 have a ‘buy’ rating, four suggest a ‘hold’ and one recommends a ‘sell’, according to Bloomberg data. The average of the 12-month consensus price targets implies an upside of 1.6%.