Adani is close to acquiring Gopalpur Ports in Odisha, owned by the Shapoorji Pallonji Group

7 Dec 2023 , 10:15 AM

The largest maritime company in India by market capitalization, Adani Ports and Special Economic Zone, is in advanced negotiations to purchase Gopalpur Ports in Odisha from Shapoorji Pallonji Group (SP) for an equity value of up to Rs 1,100-1,200 crore. This acquisition is part of a strategic plan that entails owning significant facilities along both the eastern and western water margins.

With a capacity of about 247 million tonnes (MT), this would be Adani Port’s sixth acquisition of a multipurpose facility on the eastern coast, if it is successful. ET reported that the due diligence process is presently underway. 56% of Gopalpur Ports are owned by SP Ports Maintenance.

Orissa Stevedores (OSL) owns the remaining portion. SP Imperial Star, which also serves as SP Ports’ guarantor, owns 100% of SP Ports.

News reports cautioned that there is no assurance that the current talks will result in a deal. According to a report by ET on October 26, JSW Infrastructure and the Mistry family were in negotiations for the same asset, valued at an enterprise value of Rs 3,000 crore. According to later reports, private equity firms were contacted as well since the Mistry family was dissatisfied with the valuations that were provided.

The enterprise value of the port is $600-650 million (Rs 5,000 crore), according to a corporate presentation that ET examined. The equity valuation of the SP Group is $240-260 million (Rs 2,000 crore). As of February 2023, the port has long-term bank facilities worth Rs 1,432 crore, according to credit rating agency Care Edge.

A majority 50% share in PNP Maritime Services, which handles five million tonnes of cargo annually (MTPA), was sold earlier this week by SP Group (PNP Port). About 20 nautical miles from Mumbai Anchorage, in the Raigad district of Maharashtra, it runs multipurpose jetties at Shahbaj. The Raigad plant, with an enterprise value of around Rs 700 crore, was purchased by JSW Infrastructure for cash of Rs 270 crore.

The non-convertible debenture (NCD) holders of a Rs 14,300-crore rupee-denominated zero coupon bond that the SP Group had raised in July at an effective yield of 18.75% will be reimbursed with the proceeds from these asset sales. It was one of the most costly borrowings of this kind by an Indian business in recent memory.

By pledging the 9.185% of Tata Sons shares it controls, SP Group was able to collect the funds necessary to prepay Sterling Investment Corp.’s (SICPL) debt, which totaled Rs 3,327 crore ($406 million), and refinancing a loan taken on by Cyrus Investment (CIPL). Additionally, it intended to use Rs 3,000 crore ($363 million) of the earnings to pay down the remaining debt obligations of the firm.

The Mistry family, who are SP Group promoters, have promised lenders and debenture holders certain things in exchange for loans, or ‘covenant terms,’ which include these divestitures. The Mistrys have agreed to sell these assets by March 31 of the following year, in accordance with the conditions of the agreement.

As per the NCD structure, in the event that the principal/interest balance is not redeemed by December 31, 2023, a minimum of Rs 1,500 crore will result in a 2% increase in the Payment-in-Kind Internal Rate of Return (PIK IRR), also known as the coupon rate. The money derived from the sale of SP Imperial Star or other funding sources are subject to this prepayment requirement.

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