Analysts remained bullish on Adani Ports and Special Economic Zone Ltd. after it agreed to buy a Rs 1,954-crore stake in the Gangavaram Port from Warburg Pincus.
Windy Lakeside Investment, an affiliate of the private equity firm, will sell its 31.5% in the port to the Adani Group firm, according to an exchange filing.
Adani Ports is also in talks with promoters DVS Raju and Family for their 58.1% stake in the Gangavaram Port. The other 10.4% stake is held by the Government of Andhra Pradesh.
In FY20, the port handled cargo volume of 34.5 MMT, and generated revenue worth Rs 1,082 crore. Its operating income stood at Rs 634 crore, while margin and net profit were at 59% and Rs 516 crore, respectively. The port is also debt free and has a cash balance of Rs 500 crore.
Based on FY20 numbers, the transaction implies an EV/Ebitda multiple of 8.9 times and a P/E multiple of 12 times.
Adani Ports also announced consolidation of its rail track assets under one single entity.
While analysts said the acquisition of the Gangavaram Port stake was done at an attractive valuation, some were not enthused by the railway announcement. But the fact that it was not an all-cash deal gave them comfort.
Shares of Adani Ports gained as much as 10% pre-market open on Thursday but cooled off in the early minutes of trade. The stock is trading 1.7% higher as of 10 a.m. at Rs 741.95 apiece, and is up for the fourth straight session.
Of the 26 analysts tracking the company, 22 have a ‘buy’ rating and four suggest a ‘hold’, according to Bloomberg data. The stock is trading 17% higher than its 12-month consensus price target of Rs 666.9 apiece.