NEW DELHI: Fitch Ratings today said Adani Ports and Special Economic Zone (APSEZ) is looking to deleverage further on the back of higher income, loan recoveries and capital expenditure, and will also see a 14 per cent annual increase in its cargo volume over next four years.
"The agency forecasts Adani Ports and Special Economic Zone Ltd's (APSEZ) financial leverage, as measured by net adjusted debt...to improve to around 4.0x in FY18, after already falling to about 5.0x at the end of first half of FY17 (FY16: 5.6x), after it recorded a 12 per cent Y-o-Y growth in cargo volumes to 85.1 million tonnes," it said in a statement.
Leverage was also helped by a recovery of Rs 10.4 billion of related-party loans and Rs 5 billion of deposits with related parties in accordance with management guidance, and a lower group investment spend of around Rs 11 billion in the the first half of FY 2016-17, about 30 per cent of Fitch's full-year forecast, excluding APSEZ's Kattupalli Port acquisition.
APSEZ's cargo volume growth was led by a 28 per cent increase in containers and 25 per cent rise in other bulk cargo. This cargo volume growth and greater diversification of cargo away from coal supports the company's investment plans and follows consolidated growth of 5 per cent in FY 2015-16, which was reined in by an 8 per cent decline in coal volumes as India imported less of the fuel.
"We note that the group registered 9 per cent Y-o-Y increase in coal volumes in the second quarter of FY2016-17 on the back of its new contracts. APSEZ's first half of FY2016-17 operating profit was further supported by a higher proportion of high-value and high-margin cargo and cost-control initiatives undertaken by the management. These results were in line with our estimates," it said.