Gopalpur Ports' credit rating upgraded 6 notches post-acquisition by APSEZ

The upgrade by CareEdge Ratings follows subsequent prepayment of 64 per cent of external debt supported by funds infusion from APSEZ

Rating firm CareEdge has revised Gopalpur Ports Limited’s (GPL) credit rating from “BBB” (RWP) to “AA/Stable”, upgrading it by six notches, post-acquisition by the Adani Ports and Special Economic Zone (APSEZ) in March this year.

 

The upgrade is following the subsequent prepayment of 64 per cent of external debt supported by funds infusion from APSEZ. GPL’s term loans of Rs 443.70 crore and Rs 413.30 crore from Canara Bank and Yes Bank, respectively, have been fully prepaid, strengthening its debt coverage indicators.

 

At the end of the financial year 2023-2024 (FY24), GPL had an outstanding total debt of Rs 1,438 crore, with about 87 per cent held in the form of external term debt. Post-acquisition, APSEZ infused Rs 1,225 crore in the form of optionally convertible debentures in the third quarter of FY25 (Q3 FY25), which has been utilised to prepay GPL’s external debts worth around Rs 795 crore and towards other liabilities.

 

 

“The stable outlook reflects CARE Ratings’ expectations of ramp up of cargo volumes post-acquisition by APSEZ leading to improvement in operational performance and lower leverage,” said the ratings agency.

 

The rating revision also factors in the strong parentage of APSEZ, the largest port developer and operator in India with operations across 10 ports (including GPL) and three terminals handling about 27 per cent of seaborne cargo in India.

 

The agency is banking on the APSEZ’s established track record of successfully turning around port assets, including Dhamra port, post-acquisition through a combination of logistics solutions offering, partnering with prominent shipping lines, and enhancing operating efficiency.

 

“Furthermore, a large fleet of rakes and logistical equipment of APSEZ is expected to uplift GPL’s operational efficiency and address evacuation challenges,” the agency added.

 

The rating is also supported by the favourable port location, tariff flexibility, favourable industry outlook of the ports, and strong liquidity profile with the creation of a debt service reserve account (DSRA) for one quarter of the debt servicing. Located in Odisha, the deep-sea port faces competition from ports, including Paradip and Vizag, among others, all having a longer operational track record compared to GPL.

 

However, the concerns are cargo and client concentration risks, besides evacuation challenges reflected from the operational performance of H1FY25. GPL mainly handles coastal cargo for limestone and overseas cargo for iron ore and coal. Clientele comprises reputed names, including JSW Steel, Jindal Steel & Power Limited, Steel Authority of India Limited, Rungta Sons Private Limited, and National Steel Company, among others.

 

The agency also noted that it will “closely monitor” events unfolding in the near term considering the indictment and civil complaint filed by the United States Department of Justice (DoJ) and United States Securities and Exchange Commission (SEC), respectively, against individuals of Adani group.

 

Stating there is no jurisdiction against the defendants, these allegations have been refuted by Adani group.

 

Additionally, on March 25, APSEZ entered a definitive agreement to acquire 95 per cent stake of GPL from its existing shareholders. The port-to-power conglomerate acquired a 56 per cent stake from Shapoorji Pallonji Port Maintenance Private and a 39 per cent stake from Orissa Stevedores Limited. The transaction was completed on October 11, 2024. 

 

Concession for the port was signed in September 2006 and is valid for 30 years and extendable by another 20 years, based on mutual consent between the Government of Odisha and the concessionaire. According to the concession agreement (CA), GPL has revenue sharing of 7.5 per cent of the total revenue with the Government of Odisha.