Billionaire Gautam Adani-led group company Adani Ports and Special Economic Zone (APSEZ), India’s largest private sector port operator, has agreed to buy a 75% stake in Krishnapatnam Port Co (KPCL) at an enterprise value of Rs 13,500 crore.
The move will definitely help Adani Port in more ways besides being the value accretive.
The KPCL purchase will accelerate Adani Ports’ plan to expand its cargo-handling capacity to 400mt by 2025.
This multi-cargo facility port located in southern Andhra Pradesh will not just increase APSEZs’ market share to 27%, but also add a remarkable value to its pan-India footprint.
KPCL handled 54 million tonnes (mt) of cargo in the year ended 31 March 2019.
The acquisition will be funded via internal accruals and existing cash balance.
There are adequate cash resources to fund deal equity.
APSEZ will look to expand cargo volume at KPCL to 100mt in around seven years and will double its Ebidta in about four years.
This is the second acquisition by Adani Ports in the past seven days.
On 27 December, Adani Ports acquired a majority stake in Snowman Logistics for Rs 296 crore to foray into cold chain logistics.
Brimming with the success of turning around acquisitions of Dhamra and Kattupalli ports, APSEZ is confident of harnessing the potential of KPCL and improving returns to stakeholders.
The value-accretive M&A of KPCL will drive scale as well as the acquisition at attractive valuation will solidify APSEZs’ hold over Eastern India Coast.
There is room to scale up margins with the company’s operating efficiency.
Net net we understand that the acquisition of the kridhnapatnam port will be extremely beneficial for the company over the next 2 to 3 years
More importantly, we understand that after this acquisition Adani ports will possibly control around 70% market of the ports share in India which makes it a monopolistic player going ahead.
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