Increase In Adani Ports’ Related-Party Loans May Lead To Ratings Downgrade, S&P Warns

Adani Ports & Special Economic Zone Ltd. is expected to limit its related-party transactions over the next one to two years and maintain consistent operating performance, global rating agency Standard & Poor said on Thursday, newswire PTI reported.

It also revised the outlook for the company to ‘stable’ from ‘negative’.

The agency affirmed its rating 'BBB-' as it expects the company, which runs the largest private sector operator port in Mundra in Gujarat, will sustain its improved operating performance supported by healthy revenue growth and strong pre-tax margins at 63-65 per cent levels.

It, however, warned that it will lower the rating if there is an increase in related-party loans or advances outside the normal course of business, which exposes the company to the credit quality of the Adani group.

The company should also commit to maintain the funds from operations to debt ratio at 15-20 per cent, it added.

Adani Ports & SEZ is part of the diversified group, which also has interests in stressed sectors like power and realty. The agency said it expects a growth in container traffic with a new terminal expected to be operational this fiscal and stabilising coal volumes, and gradually reducing high dependence on the Mundra Port.

Adani Ports’ long-term loans reduced by 43.3 percent to Rs 2,542 crore in 2016-17 over the previous year. The company reduced its overall long-term loan to nil from Rs 2,914 crore in 2015-16. However, its short-term loan book rose by 11.5 percent to Rs 1,748 crore.

Shares of Adani Ports & Special Economic Zone ended flat compared to a 0.3 percent fall in the benchmark Sensex Index.