Adani Ports Buys Warburg’s Rs 1,954-Crore Stake In Gangavaram Port

Adani Ports and Special Economic Zones Ltd. agreed to buy a Rs 1,954-crore stake in Gangavaram Port Ltd. from Warburg Pincus.

Windy Lakeside Investment, an affiliate of the private equity firm, will sell its 31.5% in the port to the Adani Group firm, according to an exchange filing. The transaction is subject to regulatory approvals.

Adani Ports is also in talks with promoters DVS Raju and Family for their 58.1% stake (about 30 crore shares) in the port. The remaining 10.4% is held by the Government of Andhra Pradesh.

The port, located in the northern part of the state close to Vizag, has a capacity of 64 million metric tonnes. It was established under concession from the state that extends till 2059.

Gangavaram is an all-weather, deep water, multi-purpose port capable of handling fully-laden super-cape sized vessels of up to 200,000 deadweight tonnage. It's a gateway to eight states across eastern, western, southern and central India.

According to the filing:

• In FY20, the port handled cargo volume of 34.5 MMT, generated revenue of Rs 1,082 crore, operating income of Rs 634 crore, margin of 59% and a net profit of Rs 516 crore.

• GPL is debt free with a cash balance of over Rs 500 crore.

• Adani Ports is acquiring about 16.3 crore shares at Rs 120 apiece, which works out to Rs 1,954 crore.

• Based on FY20 numbers, the transaction implies EV/Ebitda multiple of 8.9 times and a P/E multiple of 12 times.

Concall Highlights

In an analyst call after announcing the deal, Adani Ports said:

• Warburg Pincus has been trying to sell the port for the last five years.

• The PE firm was looking to sell due to end of life of their invested funds.

• It was also considering IPO or sale of to other PE funds, strategic partners.

• Raju & family weren't interested in the controlling stake in port.

Consolidation Of Rail Assets

Adani Ports also signed a scheme of arrangement with group subsidiaries Brahmi Tracks Management Services, Adani Tracks Management Services, Sarguja Rail Corridor, according to another filing.

The scheme provides for:

• Amalgamation of Brahmi with Adani Ports with effect from April 1.

• Merger of Adani Tracks with Sarguja with effect from the April 2.

• Transfer of the Mundra Rail Business (Divestment Business Undertaking) as a going concern on a slump sale basis with effect from April 2 by Adani Ports To Sarguja for a lump sum consideration.

The objective of the scheme is to consolidate the rail assets under one entity; tap private partnership opportunity for developing the first-mile, last-mile connectivity and increasing the network capacity for rail transport, the company said.

Share Swap

• Adani Ports will credit 100 shares for 708 equity shares of the face value by held by Brahmi.

• Sarguja would credit 100 shares for every 2522 equity shares held by Adani Tracks.

• Sarguja shall pay a lump sum consideration of Rs 188.65 crore to Adani Ports for transfer of the Mundra Rail Business.