Adani Ports’ investors cheer Gangavaram Port acquisition; stock hits new high

Two years ago, RBI enabled demat account holders to trade in G-secs through their depository participant bank. Photo: iStock (iStock) — Two years ago, RBI enabled demat account holders to trade in G-secs through their depository participant bank. Photo: iStock **(iStock)**

2 min read . Updated: 04 Mar 2021, 01:15 PM IST Pallavi Pengonda

Adani Ports has also acquired a rail logistics company of the promoter group through a ₹4800 crore share swap transaction at ₹675 per share

Shares of Adani Ports and Special Economic Zone Ltd (APSEZ) were trading about 2% higher in early deals on Thursday on NSE. Investors seem to be pleased with the company’s acquisition of 31.5% stake in Gangavaram Port Ltd (GPL). The consideration for the deal is Rs1954 crore, which translates into a total equity value of ₹6203 crore. APSEZ is also looking to acquire an additional 58.1% stake in GPL from its promoter.

What does the deal bring to the table?

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Gangavaram is the second largest non-major port in Andhra Pradesh and has a capacity of 64 million tonne per annum (mtpa). The Gangavaram deal is ‘value-accretive’ said analysts from Jefferies India Pvt. Ltd. “Gangavaram Ports’ FY20 59% (Ebitda) margin compares reasonably well with Adani Ports’ 63% consolidated port margin. 31.5% share of FY20 Rs516 crore profit is ₹160 crore, implying 8% of the ₹1954 crore consideration for the stake," pointed out a Jefferies report on 3 March. Ebitda is earnings before interest, tax, depreciation and amortization.

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According to Jefferies, Gangavaram acquisition implied EV/Ebitda is 9.3 times FY21E versus Adani Ports' 21 times. EV is short for enterprise value. Adani Ports said, “With a master plan capacity for 250 mtpa with 31 berths, GPL has sufficient headroom to support future growth."

Further, Adani Ports has also acquired a rail logistics company of the promoter group through a Rs4800 crore share swap transaction at Rs675 per share.

“While we are excited with announcements related to Gangavaram port acquisition, we aren't too enthused with the acquisition of the rail assets from the promoter company. However, given the consolidation of the Rail assets is a share swap and not a cash deal comes as a relief," said analysts from Antique Stock Broking Ltd in a report on 4 March.

To be sure, Adani Ports investors are sitting on handsome gains. The stock has appreciated by more than 90% from its pre-covid highs seen in January 2020. On Thursday, the shares hit a new 52-week high.

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