International rating agency Fitch on Monday said Adani Ports and Special Economic Zone (APSEZ) is looking to deleverage further on the back of higher income, loan recoveries and capital expenditure. It would also see a 14 percent annual increase in its cargo volumes over the next four years.
The rating agency has forecast APSEZ's financial leverage as measured by net adjusted debt (including off balance sheet liabilities arising from guarantees) or EBITDA to improve four-fold in the financial year 2018 after already falling to about five times in the first half of the financial year 2017.
The company recorded 12 percent year-on-year growth in cargo volumes to 85.1 million tonnes.
"Leverage was also helped by a recovery of INR 10.4bn of related-party loans and INR 5Bn of deposits with related parties in accordance with management guidance, and a lower group investment spend of around INR11Bn on 1HFY17, about 30 percent of Fitch's full-year forecast," Fitch said.
The Adani Ports Special Economic Zones cargo volume growth was led by a 28 percent increase in containers and 25 percent 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 five percent during the last fiscal (FY2016), which was reined in by an eight percent decline in coal volumes as the country imported less fuel.
"We note that the group registered 9% YoY increase in coal volumes in 2QFY2017 on the back of its new contracts. APSEZ's 1HFY17 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," Fitch added.