S&P Revises Adani Ports Outlook To Positive; Affirms BBB- Ratings

S&P Global Ratings revised Adani Ports & Special Economic Zone Ltd.’s (APSEZ) outlook to Positive from Stable on the company’s improving scale and diversification and affirmed its BBB- ratings.

The Indian port operator’s larger and more diversified portfolio of assets than peers' underpins its earnings quality, S&P said in a statement.

The rating agency also said APSEZ’s strong asset quality and a growing strategic network of ports across the east and west coasts of India will continue to support steady cargo volume growth of 8%-12% over the next two years.

APSEZ’s improving financials and leverage can accommodate high capital expenditure (capex) and the company will remain acquisitive, given its growth aspirations, it noted.

S&P affirmed its BBB- long-term issuer credit rating on APSEZ and the BBB- issue ratings on its senior unsecured notes.

Other key highlights from S&P’s view on APSEZ are:

IMPROVED FINANCIALS

• APSEZ's improved financials can accommodate high growth spending.

• Strong cargo volumes and revenue growth of about 28% in the fiscal year ended 31 March 2024 (FY24), as well as lower gross debt, led to deleveraging during the year.

• APSEZ is likely to maintain a steady improvement in leverage with a ratio of net debt to EBITDA of 2.7x-2.9x over fiscal years 2025 and 2026, compared with 2.8x in FY24.

• The improvement in leverage will be supported by the robust earnings growth in the company's ports and logistics businesses, led by higher cargo volumes, tariff escalations, and commissioning of new projects.

CAPEX OUTLOOK

• S&P projected capex of about 166 billion rupees ($2 billion) in FY25 toward APSEZ's domestic port expansion, logistics business, its under-construction Sri Lanka West Container Terminal project, and acquisition of Gopalpur Port Ltd.

• Growth capex over FY26 and FY27 will likely remain high at 120 billion-130 billion rupees per year (including discretionary spending) due to the company's growth aspirations.

S&P said the Positive outlook over the next 18-24 months reflects its view that APSEZ's strong competitive position and diversification will support healthy cash flows.

Note: $1 = 83.4439 Indian rupees

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