APSEZ committed to investment-grade rating

Adani Ports and Special Economic Zone Ltd (APSEZ) is expected to maintain its ratio of funds from operations to debt at more than 15% following its acquisition of 75% of Krishnapatnam Port Co Ltd for an enterprise valuation of Rs.135 billion (US$1.9 billion).

APSEZ’s strong financial performance and flexibility in adjusting capital expenditure (capex) and dividends, and earnings contribution from Krishnapatnam will allow it to maintain its leverage within our rating threshold, said S&P Global Ratings in its comments on the acquisition.

APSEZ’s leverage is likely to be about 15% in fiscal 2021 (year ending March 2021) as a result of the acquisition, compared with our previous estimate of about 18%.

Leverage will then revert to 15%-17% in fiscal 2022 and beyond with higher operating cash flows and lower capex supporting deleveraging.

“We do not factor any improvement in margins of the acquired business or changes to APSEZ’s dividends and capex plans,” said S&P.

“We forecast the company’s annual dividends to trend at the lower end of Rs.20 billion-Rs.30 billion and annual capex to be Rs.30 billion-Rs.40 billion.

“We believe APSEZ remains committed to an investment-grade rating and will appropriately adjust spending,” said S&P.

APSEZ will benefit from greater diversity through the acquisition. fiinews.com