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S&P rates APSEZ's proposed US$750 million senior unsecured notes at BBB-minus

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Business | July 26, 2021 4:15:19 PM IST
S&P Global Ratings has assigned BBB-minus long-term issue rating to Adani Ports and Special Economic Zone Ltd's (APSEZ's) proposed USD 750 million (about Rs 5,550 crore) senior unsecured notes.

The company intends to use part of the issuance proceeds to fund Rs 3,000 crore to 3,500 crore of planned capital expenditure in fiscal 2022 (year ending March 31, 2022) and the remainder for general corporate purposes.

"We expect APSEZ to maintain its credit profile in line with the issuer credit rating," said S&P.

The company's financial ratios are likely to improve, driven by organic growth as well as the completion of its announced acquisitions, including that of Krishnapatnam Port Co Ltd, Sarguja Rail Corp and Gangavaram Port. These acquisitions were funded using cash or equity.

S&P expects APSEZ's ratio of funds from operations (FFO) to debt to remain above 15 per cent in fiscal 2022.

APSEZ's earnings are supported by the port's strategic location, long-term contracted revenue, tariff flexibility and good operating efficiency. During fiscal 2021, the company handled cargo of 142 million metric tonens (up 7.4 per cent) and container traffic of 7.2 million twenty-foot equivalent unit (TEU) (up 15.9 per cent).

This was against an overall decline of 5 per cent for all Indian ports. APSEZ was also able to maintain its operations through India's Covid-19 lockdowns.

S&P said APSEZ's leverage will improve and the FFO-to-debt ratio will exceed 20 per cent from fiscal 2023.

"We expect management to protect the company's investment-grade credit profile by adjusting its capital expenditure, inorganic growth appetite or dividend distributions such that the FFO-to-debt ratio is more than 15 per cent on a sustainable basis."

S&P further expects APSEZ to refrain from any significant related party transactions outside the normal course of business.

The agency said that stable outlook on APSEZ reflects its expectation that the company's capital structure can accommodate any headwinds, given management's ability to adjust growth aspirations, shareholder distribution and investments.

"We estimate APSEZ's ratio of adjusted net debt to EBITDA will be below 4.0x over fiscals 2022 and 2023 compared with 4.2x in fiscal 2021." (ANI)

 
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