Continuing its acquisition spree in the ports space, Adani Group on Friday announced acquisition of 75 per cent stake in debt-laden Krishnapatnam Port in Andhra Pradesh for Rs 5,625 crore in an all-cash deal.
The deal, the largest acquisition by Adani Ports & SEZ, gives it presence across the country straddling from the West Coast to East, stretching from Mundra in Gujarat to Dhamra in Odisha, making it the largest private ports operator within 20 years of inception with 11 ports and terminals.
The group, which has recently acquired six state-run airports and is in a dog-fight with rival GVK Group to control the Mumbai airport, is already constructing a port at Vizhijnam in Kerala, which is billed as the country's largest trans-shipment terminal.
The company is also into shipping and dredging as well as logistics and is developing a container terminal in Myanmar.
With the Krishnapatnam deal, the group will be operating 45 berths and 14 terminals with a capacity to handle of over 300 million tonnes cargo per annum.
Krishnapatnam Port has a capacity of 54 mt and is the second largest private sector port in the country, after the group's flagship Mundra Port. A majority 60 per cent of the capacity is coal handling, 20 per cent containers and other cargo constitutes the remaining capacity.
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Krishnapatnam Port is promoted by the Hyderabad-based CVR Group which has Navayuga Engineering as the flagship entity headed by group chairman C Visweswara Rao. However, the Adani statement did not disclose whose stake it is buying.
The port had clocked a turnover of Rs 2,394 crore in FY19 and a pre-tax profit of Rs 1,350 crore and Adanis hope to double it over the next few years, the Adani statement said.
The Adani group has set a target to have a port portfolio of 400 mt capacity by 2025 and the deal increases its market share to 27 per cent from the present 22 per cent, Adani Ports chief executive Karan Adani said in the statement.
Over Rs 6,000 crore of debt will stay back with the company, while Adanis will be paying Rs 5,625 crore in cash to the CVR Group, officials explained, adding the total enterprise value, including the debt, is Rs 13,500 crore.
Adanis will be refinancing the port's debt and are eyeing to save over Rs 400 crore in annual interest payments as they will be able to crimp the interest cost to 7 per cent as against the 11.5 per cent now, the official added.
"Given the modern infrastructure and the distinct hinterland catered by Krishnapatnam, the acquisition will not just increase our market share to 27 per cent but also add remarkable value to our national footprint," Karan Adani said, adding the deal will be funded by internal accruals.
He also said the acquisition will accelerate the company's targeted capacity of 400 mt by 2025. In FY2018-19, it handled 200 mt, which is slated to cross 230 mt this year and adding 54 mt from the deal will take the capacity to close to 300 mt this year, he added.
"With the experience of successfully turning around acquisitions of Dhamra and Kattupalli ports, we are confident of harnessing the potential of KPCL and improve returns to stakeholders," Adani added.
He further said they will target to enhance cargo volume at Krishnapatnam to 100 mt in seven years and will double its pre-tax profit in four years through its process improvements and industry best practices.
The acquisition, which is subject to regulatory approvals, is expected to be completed in four months.
The net debt to pre-tax profit of consolidated Adani Ports, including Krishnapatnam in FY21 is expected to be around 3.2 times, which is in line with the pre-acquisition of net to equity of 3.1 times in FY19.