Adani Ports and Special Economic Zone Ltd (APSEZ) shares turned volatile on Monday after the company announced that it would buy controlling stake in the Krishnapatnam Port Co. Ltd.
At 2:25pm, shares of Adani Ports were trading down nearly 1% at Rs 379.20, after continuously swinging between positive and negative territories. The stock performance has remained muted on a yearly basis as well, with the price inching up just 0.2% in the last one year compared with nearly 14% rise in the benchmark Nifty 50 index.
In a press release dated 3 January, Adani Ports said that it intended to acquire 75% stake of Krishnapatnam Port from the existing shareholders of the latter. The acquisition is subject to approvals under applicable laws, including approval of the Competition Commission of India.
The estimated enterprise value for the proposed acquisition is Rs 13,572 crore and the transaction is expected to be completed within 120 days.
Brokerage firm CLSA said that the value-accretive merger and acquisition of Krishnapatnam Port is likely to drive scale for APSEZ. The said acquisition at attractive valuation is going to solidify its hold over eastern India coast and is likely to improve its earnings quality, it added. CLSA gave a ‘buy’ call on the Adani Ports stock with a target price of Rs 485.
JPMorgan was also ‘overweight’ on Adani Ports after the Krishnapatnam Port acquisition, with a target price of Rs 475 per share. The research house believes that the cash resources are sufficient to fund the deal equity, while the deal is itself EPS (earnings per share) and RoE (return on equity) accretive.
Another brokerage firm Axis Capital also said that the acquisition is likely to drive synergy benefits for Adani Ports and expected the company to grow ahead of the industry given its network benefits. It gave a ‘buy’ call on the stock with a target of Rs 490 per share.
Krishnapatnam Port is located in the southern part of Andhra Pradesh and is a multi-cargo facility which handled 54 million tonnes in FY19. “Given the best-in-class infrastructure and the distinct hinterland catered by KPCL, this acquisition will not just increase our market share to 27% but also add remarkable value to our pan-India footprint,” Karan Adani, chief executive officer and whole-time director of APSEZ, had said while announcing the acquisition.