"The company will sell 100 per cent stake in the Abbot Point terminal to the Adani Family. The equity portion in Abbot Point acquisition was around $235 million and the rest of the amount was debt portion. The entire equity and debt portion will be transferred to the promoter family," said B Ravi, chief financial officer, APSEZ.
The company had made the Abbot Point acquisition through around $2 billion debt (about Rs 11,000 crore). "We expect to raise at least $235 million or Rs 1,300 crore of the enterprise value of Abbot Point from this stake sale. However, the valuation is under process," added Ravi.
The stake sale will also reduce company's debt-to-equity (D/E) ratio significantly from around 3.2:1 to about 1.2:1.
The decision to sell stake comes on the back of a lower rate of return on foreign operations and the strained financial conditions after the Abbot Point acquisition.
"The company will concentrate more on Indian operations. However, it does not mean that it will never venture into any overseas deal," said Ravi.
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In a statement issued on Monday, APSEZ said the board of directors has given in-principle approval for divestment of stake in the Australian venture. The statement, however, did not give any details on the valuations.
The proceeds of the stake sale will also be used to buy Dhamra Port from Larsen & Toubro and Tata Steel for about $1 billion (about Rs 5,500 crore). In a client note dated January 27, Citibank valued Abbott Point at Rs10 a share on a discounted cash flow to equity basis, using a cost of equity of 13 per cent.
“To focus on the high growth Indian ports and logistics sector and maintain its leadership position in India, the board of APSEZ has in-principle decided to divest its significant stake in entities controlling the Abbot Point Coal Terminal in Queensland, Australia to the Adani family, subject to requisite approvals, formalities and clearances, at a valuation determined by an independent valuer,” said B Ravi, chief financial officer of APSEZ, in a statement issued after the board meeting.
“This divestment will further enhance the financial strength of APSEZ in order to pursue its plans to acquire or set up new ports and logistics assets in India,” Ravi added. In 2011, Adani had acquired Abbot Point for a consideration of around AUS$1.8 billion.
APSEZ is a private port located in Gujarat, but is facing roadblocks from the government on its SEZ project as the land parcels are not meeting the SEZ norms. According to analysts, the cargo growth at Mundra Port has outpaced growth at major ports in India. Apart from Australian coal terminal, over the past few years, APSEZ has been developing a number of other ports and terminals such as Dahej, Hazira, Marmugao, Kandla and Vizag.
Soon after the announcement, APSEZ’s stock shot up 4.9 per cent to Rs 137 a share. APSEZ’s stock price has underperformed the BSE Sensex by 14 per cent in CY12 and 31 per cent over the past one year.
Analysts say the key reason behind the underperformance is a sharp increase in leverage and a fall in returns on capital employed. These factors are set to reverse as capex is nearing completion, according to analysts.
Analysts warn that if the company embarks on another round of capacity expansion or undertakes a major acquisition leading to increased debt levels, it will impact its stock performance. According to analysts, slower than expected traffic growth due to weak economic conditions is another key risk.