Ind-Ra assigns APSEZ's NCDs final AA-plus with stable outlook
Jun 08, 2020
Mumbai (Maharashtra) [India], June 8 : India Ratings and Research (Ind-Ra) has assigned Adani Ports and Special Economic Zone (APSEZ) Ltd's non-convertible debentures (NCDs) a final rating of AA-plus with a stable outlook.
APSEZ is the largest private port developer and operator in the country with operations across 10 ports (nine operational) in India. It handled around 22 per cent of the country's cargo volumes in FY20, up from about 10 per cent in FY10.
Ind-Ra said the company is well positioned to benefit from structural growth in India's EXIM trade as a predominant portion of its cargo originates from or is destined for India. The company has strategically located high-quality assets with an average remaining concession life of 25 years (except Mundra port).
Its diversified presence along the Indian coastline along with hinterland connectivity and its ability to handle a diverse mix of cargo (bulk, container, crude) together with long-term take or pay contracts with customers, insulates the business from most economic disruptions.
Mundra remains the company's largest port asset, accounting for around 62 per cent of the consolidated volumes as of March 2020. However, according to the management, the concentration risk is likely to decrease with the ramping up of operations at the new ports (Hazira, Dhamra and Katupalli), as well as throug the acquisition of the Krishnapatnam Port Company Ltd (KPCL) in January.
The company is also diversifying operations through its new port under construction in Myanmar.
Ind-Ra said APSEZ's acquisition of KPCL will likely improve the company's business profile backed by an improvement in market share and geographical and revenue diversification.
While the financial profile may weaken in the near term, APSEZ's ability to turnaround KPCL's margin profile and refinance its high-cost debt by FY21 should strengthen the financial profile by FY22.
APSEZ incurred capex of Rs 3,620 crore in FY20 (FY19: Rs 2,940 crore), expanding capacities across all major ports, building up its liquefied petroleum gas and liquefied natural gas capabilities at the Mundra terminal, and expanding the logistics operations.
The company's free cash flows improved to Rs 6,650 crore in FY20 (FY19: Rs 3,440 crore), owing to robust operating cash flows.
APSEZ's comfortable liquidity is driven by the cash-generative nature of its operations as reflected in positive cash flow from operations since FY13 along with cash, cash equivalents and liquid investments of roughly Rs 7,300 crore at FYE20.
Ind-Ra said it believes APSEZ's strong financial flexibility in terms of its access to capital markets boosts its liquidity.
