The acquisition of Sarguja Rail and a 31.5 per cent stake in Gangavaram Port by Adani Ports and Special Economic Zone (APSEZ) will not materially affect credit quality, Moody’s Investor Service said on Tuesday.
On 3 March, APSEZ had announced the acquisition of a 31.5 per cent stake in Gangavaram Port Limited (GPL) at an enterprise value of Rs 5,650 crore along with a composite scheme of arrangement to fully acquire Sarguja Rail Corridor Private Limited (SRCPL) at an enterprise value of Rs 5,980 crore.
The GPL acquisition is likely to be completed within 45 days, subject to regulatory approvals, while the SRCPL transaction requires approvals from minority shareholders, creditors and regulatory authorities.
“The deals will not materially affect the company’s credit quality because its leverage, as measured by funds from operations/debt, will remain above the rating tolerance level of 14 per cent even after absorbing these two transactions,” Moody’s Investors Service said.
The addition of GPL, a multi-cargo port that handles a mix of dry and bulk commodities, and SRCPL will enhance APSEZ’s cargo mix, geographical service areas and off-taker quality, as well as increase its market share to 30 per cent, it added.
APSEZ will acquire the minority equity in GPL from Warburg Pincus for around Rs 1,950 crore, using its existing cash balance and internal accruals, it said.
GPL does not have any debt on its balance sheet, it added.
APSEZ is also in discussions to acquire the majority shareholder’s 58.1 per cent stake in GPL.
The acquisition of GPL will complement APSEZ’s recent acquisition of Krishnapatnam Port Company Limited, which serves the hinterland of south and central Andhra Pradesh and allow APSEZ achieve greater diversification by increasing volume from India’s east coast.
