Icra Cuts Outlook On Adani Ports, Reaffirms Ratings

Mumbai: Domestic rating agency Icra on Wednesday cut its outlook on Adani Ports and Special Economic Zone's (APSEZ) long-term rating to 'negative' on concerns over higher borrowing, lending to related and unrelated parties, and lower volumes.

The outlook on the long-term rating has been revised to 'negative' from 'stable', it said in a statement.

"The revision in outlook reflects the weakening of key credit metrics due to higher than anticipated leveraging following higher capex, rise in loans and advances to related/unrelated parties, lower than anticipated volume growth in FY16 largely following lower coal volumes and deferment of upfront SEZ income," it explained.

The long-term rating on the Gujarat-based company's Rs 10,200 crore bank facilities and a Rs 6,884 crore non-convertible debenture (NCD) programme have been reaffirmed at 'AA+'. The short-term rating on a Rs 6,700 crore commercial paper/short-term debt programme has also been reaffirmed at 'A1+', the statement said.

The ratings continue to factor in the strong business risk profile of APSEZ, characterised by its favourable operating characteristics, geographically spread out footprint, diversified cargo/geographic mix and long-term customer tie-ups, it said.

However, it said the company - which has seven operational assets of which many depend on coal for growth - may continue to witness pressure on coal volume growth in the near term.

It added that a significant proportion of the APSEZ cargo volume is either supported by committed volume contracts with thermal power/steel plants, or benefits from superior delivered integrated logistics cost for users, which should ensure retention of significant user base in the respective port's hinterland.

Apart from this, iron ore exports and higher fertiliser imports would also support cargo volumes.

On the leveraging front, it said debt at 4.8 times the pre-tax profit was higher for a company in this rating category.

The advances to group and unrelated parties grew by Rs 973 crore during the fiscal year to Rs 4,500 crore, it said.

"ICRA expects leveraging and credit metrics to continue to remain under pressure in FY17, given its substantial capex/acquisition plans," it said.

It will have to fund the construction of the Vizhinjam Port in Kerala for Rs 4,100 crore and the acquisition of the Katupalli port, it said.

Shares in Adani Ports and SEZ, on Wednesday, ended 0.65 per cent lower at Rs 223.30 apiece on the BSE, whose benchmark Sensex index finished down 1.02 per cent.