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Research Announcement:

Moody's - Adani Ports’ acquisition of stake in Krishnapatnam port has no immediate rating impact

07 January 2020


Singapore, January 07, 2020 --

Moody's Investors Service says in a new report that the addition of Krishnapatnam Port Company Limited (KPCL) to Adani Ports and Special Economic Zone Limited's (APSEZ, Baa3 stable) portfolio will increase APSEZ's market share and its diversity, both geographically and in its cargo composition.

Moody's points out that APSEZ's leverage — as measured by funds from operations/debt — should remain above 15%-18% after the acquisition; a result which would be within the parameters of the company's Baa3 ratings level.

"While APSEZ's outstanding consolidated debt will significantly increase by 18%-20% as a result of the acquisition, the refinancing risk is manageable because of the cash flow visibility from the group's assets, staggered nature of the debt maturities and diversified funding sources," says Abhishek Tyagi, a Moody's Vice President and Senior Analyst.

"In addition, the slightly weaker metrics post acquisition will be counterbalanced by KPCL's strong positioning and market share on the east coast of India," adds Tyagi.

Moody's analysis comes after APSEZ announced on 3 January 2020, its INR55 billion acquisition of a 75% share in KPCL. Moody's understands that the acquisition will likely complete within 120 days, subject to regulatory approvals.

APSEZ will acquire the equity stake using its existing cash balance and internal accruals. Moody's explains that APSEZ reported a cash balance of INR72.6 billion as of 30 September 2019. KPCL has about INR62 billion of existing asset-level debt.

KPCL is the second-largest private port in India by volume — after APSEZ's Mundra port — and is located in the state of Andhra Pradesh. It is a multi-cargo port that registered throughput volumes of 54.4 million metric tonnes (MMT) and EBITDA of INR13.3 billion in the fiscal year ended March 2019 (fiscal 2019). It has a remaining concession life of 20 years, which can be automatically extended for another 20 years in two blocks of 10 years each.

KPCL has established road and rail connectivity, and there is potential for capacity expansion.

With the acquisition, APSEZ will add a new economic hinterland of Andhra Pradesh, which is currently not served by its existing ports. Moody's explains that the acquisition is in line with APSEZ's target of throughput volumes of 400 MMT by fiscal 2025.

Subscribers can access "Adani Ports and Special Economic Zone Limited: Acquisition of stake in Krishnapatnam port will not affect credit profile" at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1209221

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Abhishek Tyagi
VP-Senior Analyst
Project & Infrastructure Finance
Moody's Investors Service Singapore Pte. Ltd.
JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

Ian Lewis
Associate Managing Director
Project & Infrastructure Finance
Moody's Investors Service Pty. Ltd.
JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

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JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

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