Fitch Affirms Adani Ports at 'BBB-'; Outlook Negative

Fitch Ratings has affirmed Adani Ports and Special Economic Zone Limited's (APSEZ) Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB-'. The Outlook is Negative, says the rating agency.

"About 56% of APSEZ's cargo is sticky, which includes contractual take-or-pay cargo, cargo that is unlikely to be diverted to other ports due to infrastructure restrictions, such as the lack of facilities to handle crude oil, and cargo from joint-venture (JV) partners. APSEZ has timing flexibility in its expansion projects. Management has budgeted about INR30 billion-40 billion for capex in FY22, but this could be cut down to INR8 billion for maintenance only.

"We believe APSEZ has adequate liquidity to weather near-term challenges. The company had a readily available cash balance of about INR53 billion at FYE21, against operating expenses of INR33 billion and interest cost of about INR21 billion. APSEZ has INR14 billion due in FY22 to be repaid or refinanced. The company, as a member of one the largest conglomerates in India spanning different sectors, has strong banking relationships and established access to the capital markets," the ratings agency has said. Fitch's rating case projects adjusted net debt/EBITDAR will average 3.6x in FY22-FY26.

The ratio can also drop below 3.0x if management is able to maintain consolidated EBITDA margins of 65%, the rating agency has said.