adani ports & special economic zone ltd share price Management discussions


Company overview

Adani Ports and Special Economic Zone Limited (APSEZ) is the largest port developer and operator

in India, with a total operating capacity of 558 MMTPA (million metric tonnes per annum) and 11 no. of domestic operating ports and terminals as on 31st March 2023. The company is promoted by the Adani Group and is operating from six maritime states of India namely Gujarat, Maharashtra, Goa, Tamil Nadu, Andhra Pradesh, and Odisha as on 31st March, 2023.. APSEZs domestic ports/terminals account for approximately one-fourth of the countrys total port capacity, and the company manages large volumes of cargo from both coast areas and the hinterland. The company is also developing a container transshipment port at Vizhinjam in Kerala.APSEZs operating ports/ terminals capacity is divided between the west and east coasts of India, with 60% of its capacity located on the west coast and 40% on the east coast.

APSEZ has set an ambitious goal to become Indias largest integrated transport utility company and the worlds largest private port company by 2030. APSEZ is dedicated to achieving carbon neutrality by 2025, demonstrating its commitment to reducing emissions and controlling global warming to 1.5?C above pre-industrial levels. The company aims to become carbon-positive by 2030, further validating its commitment to sustainability and reducing its impact on the environment.

Highlights of FY2022-23 (FY23)

Ports

? Acquired 98.52% stake in Ocean Sparkle Ltd. (OSL), Indias leading third-party marine services provider, through direct acquisition of 74.21% stake of OSL and indirect acquisition of 24.31% stake of OSL (by acquisition of 100% stake of M/s Savi Jana Sea Foods Pvt. Ltd.)

? Consortium of APSEZ and Gadot Group (with 70:30 shareholding) acquired 100% stake in Haifa Port Company (HPC), the operator of Israels largest port.

? Acquired 49.38% stake in Indian Oiltanking Ltd. (IOTL), one of Indias largest third-party liquid tank storage players

? Received LOA from Haldia Port Trust for setting up a 5 MMTPA bulk terminal

? Vizhinjham port is expected to commence operations by March 2024

? APSEZ emerged as the highest bidder for the West Bengal governments greenfield deep-sea port project in Tajpur. In Oct. 2022, APSEZ has received LOIA (Letter of Intent to Award) from

WBIDC for development of deep seaport at Tajpur.

? Gangavaram Port Ltd. (GPL) acquisition completed and consolidated in APSEZ books with effect from

1st April, 2021

Logistics

? ALL awarded "Best Rail Freight Service Provider" and "Best Logistics Infrastructure and Service Provider" under National Logistics Excellence Awards scheme by GOI, Ministry of Commerce and Industry

? Certified as “Authorized Economic Operator (AEO)” by CBIC under its Indian AEO Programme

? Commissioned Taloja MMLP near Mumbai in FY23

? Acquisition of ICD Tumb (near Vapi), one of the

largest ICDs in India with a capacity of 0.5 Mn TEUs. Along with Taloja, Tumb now serves JNPT as well as Hazira Port

? Awarded tenders for ICD Loni and ICD Valvada, taking the overall count of terminals under management to 11 with one more terminal under construction at Virochannagar

? Completed induction of 18 more rakes taking our overall rake count to 93 for FY23

? Placed orders for 38 more rakes, majority of which will be added in FY24

? Acquired ~0.6 Mn sqft. of warehousing space in FY23 to add to our existing warehousing portfolio

? Awarded bids for setting up silos at 70 more location across 8 states with a cumulative capacity of 2.8 MMT.

SEZ, BD & Industrial Zones (IZ)

? Subsequent to signing of Agreement with IOCL to augment crude oil capacity by constructing nine new tanks at Mundra enabling it to handle and blend additional 10 MMTPA crude oil, this project is under progress.

? Laying of Natural Gas distribution network in the Mundra SEZ has been planned which on completion will provide pipeline connectivity for the natural gas requirement.

? Ready to Use Facilities including Built-to-Suit and Standard Design Factories across Mundra SEZ has been planned for SEZ entities, who desire to take on rent such developed infrastructure facilities on a long-term basis.

? Similar to Mundra SEZ, Industrial Zones (IZ) across various Ports of APSEZ are being planned to increase Industry led Port Growth, including at Dhamra Port, a Capesize Port with LNG terminal having potential for attracting various Industries.

? The Mundra SEZ currently houses more than 60 Units in various sectors. Moreover, 19 codevelopers provide various infrastructure facilities. The investment of more than H63,500 crore and employment of more than 26,000 persons (direct & indirect) has already been achieved.

? The cumulative exports have exceeded H40,750 crore, with export of H9,237 crore during FY 2022-23.

? With aim of diversifying the cargo mix and opening of new cargo lines post acquisition of Dighi Port, commencement of Steel & Sugar cargoes were done in FY 22-23 by offering infrastructure solutions to Clients. Plans are afoot for offering new liquid handling infrastructure along with existing assets to the industry to increase traction for Liquid business.

? Long term contract hiring of 45,000 KL tanks done for POL products at Mundra Port Liquid Tank Terminal, out of which 30,000 KL was rehired.

Economic review Global economic overview

Global economic activity is being impacted by tighter financial conditions, as most central banks continued to tighten monetary policy throughout 2022. Financial markets saw volatility with sovereign bond yields fluctuating in response to hopes of a shift towards smaller rate hikes or stronger economic activity and price pressures. In the US, short-term bond yields reached decadal high levels. Metal prices remain firm despite the easing of crude oil and natural gas prices. Supply conditions have improved globally in recent months.

In March, global financial markets were rattled by the banking turmoil in the US and Europe, as well as accompanying concerns about financial stability. Increased risk aversion led to a flight to safety, with investors seeking refuge in sovereign bonds, causing a sharp decline in yields.

In the second half of 2022, global growth exceeded expectations due to pent-up demand, increased household savings, lower energy prices, labor market improvements, and reduced supply bottlenecks. Recent high frequency indicators suggest that the manufacturing sector downturn is easing, and the service sector is seeing an increase in activity in Q1 of 2023 globally.

IMF in its April release of World Economic Outlook (WEO) observed that the global economy experienced a decline in growth from 3.4 percent in 2022 to 2.8 percent in 2023, before it recovers to 3.0 percent in

2024. This slowdown is anticipated to be particularly significant in advanced economies, which are expected to see a decline from 2.7 percent in 2022 to 1.3 percent in 2023. Global headline inflation is expected to decrease from 8.7 percent in 2022 to 7.0 percent in 2023 due to lower commodity prices. However, the core inflation will likely decrease at a slower rate.

The COVID-19 pandemic has resulted in a significant increase in public debt-to-GDP ratios worldwide, and this is anticipated to remain high. Disruptions in supply chains and escalating geopolitical tensions, has become a focal point of policy discussions due to its potential benefits, costs, and risks and this fragmentation can influence the global FDI flows.

Table. IMF World Economic Outlook Projections in Apr-23

(% YoY)

2021 2022 2023 2024

World Output

6.0 3.4 2.8 3.0

Advanced Economies

5.2 2.7 1.3 1.4

United States

5.7 2.1 1.6 1.1

Euro Area

5.2 3.5 0.8 1.4

Germany

2.6 1.8 -0.1 1.1

France

6.8 2.6 0.7 1.3

Italy

6.7 3.7 0.7 0.8

Spain

5.1 5.5 1.5 2.0

Japan

1.7 1.1 1.3 1.0

United Kingdom

7.4 4.0 -0.3 1.0

Canada

4.5 3.4 1.5 1.5

Other Advanced Economies

5.3 2.6 1.8 2.2

Emerging Market and Developing Economies

6.6 4.0 3.9 4.2

Emerging and Developing Asia

7.2 4.4 5.3 5.1

China

8.1 3.0 5.2 4.5

India

8.7 6.8 5.9 6.3

Emerging and Developing Europe

6.8 0.8 1.2 2.5

Russia

4.7 -2.1 0.7 1.3

Latin America and the Caribbean

6.9 4.0 1.6 2.2

Brazil

4.6 2.9 0.9 1.5

Mexico

4.8 3.1 1.8 1.6

Middle East and Central Asia

4.5 5.3 2.9 3.5

Saudi Arabia

3.2 8.7 3.1 3.1

Sub-Saharan Africa

4.7 3.9 3.6 4.2

Nigeria

3.6 3.3 3.2 3.0

South Africa

4.9 2.0 0.1 1.8

(Source: IMF World Economic Outlook)

Performance of major economies

United States: US economy grew by 3.2% (quarter-on- quarter, seasonally adjusted annualized rates (q-o-q, saar)) in Q3 of 2022 and 2.6% in Q4. Overall, growth in 2022 is estimated to be 2.1%. This was driven by various factors such as private inventory investment, consumer spending, non-residential fixed investment, government spending, and exports. The labor market improved significantly, with unemployment rates at a multi-decade low, and nominal wage growth was robust, though there was a slight slowdown recently.

Euro area: Real GDP grew by 1.5% (q-o-q, saar) in Q3 but stagnated in Q4 due to a decline in private consumption and investment, and challenges with high inflation, tightening financial conditions, and geopolitical tensions. Euro area growth in 2022 is projected at 3.5%.

China: Chinas GDP growth increased to 3.9% (year- on-year) in Q3 of 2022 from 0.4% in Q2, aided by policy interventions and a relaxation of COVID-19 restrictions. However, the emergence of new

COVID-19 infections and lockdowns further saw dip in growth to 2.9% (year-on-year) in Q4, resulting in an annual growth of 3.0% for 2022, which fell short of the targeted 5.5%. Chinas real GDP target in 2023 is approximately 5%, the lowest in more than three decades.

United Kingdom: The countrys GDP grew 4.0% in 2022 compared to a 7.4% growth in 2021. High energy and goods prices resulted in a decline in real household incomes, leading to reduced consumer spending. However, the labour market remained strong, with low unemployment rates and substantial wage growth.

Japan: GDP fell by 1.1% (quarter-on-quarter, seasonally adjusted rate) in Q3:2022 and barely avoided recession with a growth of 0.1% in Q4. Weak yen and increased import costs had negative effects on consumption and businesses. Overall, Japan reported growth of 1.1% in 2022 compared to 1.7% in the previous year.

(Source: IMF, RBI, Multiple Country Economic Updates)

Indian economic overview

For FY23, the real GDP growth rate stands at 7.2%, indicating a strong and continued recovery from the economic downturn caused by the pandemic and Ukraine war. The manufacturing, agriculture, and services sectors have played significant roles in this growth. The growth trajectory is further highlighted by the robust nominal GDP growth of 16%, which brings the average per capita income closer to INR two lacs, translating to a potentially strong average household income of around INR ten lacs. This rise in income levels holds the potential to drive and sustain a robust consumer demand, contributing to economic growth.

Indias status as the fastest growing major economy in the world has been reinforced as it outperformed the governments own early estimates. The expansion in the services sector played a significant role in fueling demand and mitigating the impact of elevated interest rates.

Source: CSO, Internal Calculation

Exhibit: Demand Side of the Economy

Growth, yoy(%)

Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23

Private consumption

10.8 4.7 19.8 8.3 2.2 2.8

Government consumption

5.8 11.8 1.8 -4.1 -0.6 2.3

Gross Capital Formation

5.1 3.0 20.8 6.5 5.2 7.8

Fixed Capital

1.2 4.9 20.4 9.6 8.0 8.9

Exports

27.8 22.4 19.6 12.2 11.1 11.9

Less, Imports

19.7 6.7 33.6 23.1 10.7 4.9

GDP

5.2 4.0 13.1 6.2 4.5 6.1

Source: CSO, Internal Calculations

On the demand side, while government and private consumption expenditure slowed, capex growth has contributed to the positive economic momentum. Indias GDP growth in Q4FY23, soaring at an impressive 6.1% YoY, has exceeded consensus forecasts, underlining the countrys ongoing recovery. Private consumption further strengthened to 2.8% in Q4FY23, even though on a weak base. Growth softening in private consumption is mainly on account of inflationary pressures, moderated consumer sentiment and the fading impact of post pandemic rise in household spending. Government consumption recorded a growth rate of 2.3% in Q4

FY23, reflecting a rebound from the negative growth recorded in the preceding quarters as government spent on infrastructure development, social welfare programs, and other stimulus measures. Fixed capital formation, which represents real investment activities, experienced a notable growth rate of 8.9% in Q4FY23, indicating significant momentum in real estate, roads and other infrastructure activities. Both exports and imports displayed positive growth rates in Q4FY23. Exports grew by 11.9%, reflecting improved global demand and a recovery in international trade. Imports, on the other hand, grew at a slower rate of 4.9%, owing to a moderate rise in domestic demand.

The movement of CPI inflation in the second half of 2022-23 was a result of two factors: volatile food prices and base effects. While there were some periods of inflationary pressure due to positive price momentum, inflation was moderated by favorable base effects and lower food prices in other periods. Over 2022-23, CPI inflation averaged 6.7% with fuel inflation at 10.4% and services inflation at 6.3%. CPI inflation remained above the upper limit of the RBIs tolerance band for nine of the twelve months.

In March 2023, CPI in India fell to 5.7% from 6.4% in February 2023. This is the lowest reading of inflation

seen in the last 15 months. Inflation has eased because of the high base, and aggregate price level increased by 0.2% in March 2023 when compared sequentially. The fall in headline inflation was mainly due to food and fuel prices, mainly from rural areas.

India received 6.49% more rainfall in the monsoon season (June 1-September 30) than the normal rainfall figure of 868.6. However, 188 districts (27%) of the country received deficient (20-59%) rainfall, while seven districts received large deficient rainfall (60-99%).

Net direct tax collections in 2022-23 grew by a strong 17.6% to RS.6.6 trillion from RS.4.1 trillion in 2021-22, according to tentative data released by the Central Board of Direct Taxes (CBDT). Gross collections of GST, which include SGST and full IGST, were RS.8.1 trillion, up 21.4% from 2021-22. Gross tax revenue ratio as a per cent of GDP decelerated by 40 basis points from the budgeted number to stand at 11.1 in FY23.

As of February 2023, the government used 83.4% of the funds allocated for 2022-23. Government expenditure during April 2022-February 2023 was RS.4.9 trillion, which was 11.1% higher than during April 2021-February 2022. Revenue expenditure grew by 9.2% to RS.9 trillion, and capital expenditure showed growth of 21.7% to H5.9 trillion.

As of March 24, 2023, outstanding non-food credit disbursed by scheduled commercial banks (SCBs) showed a cumulative YOY growth of 15.3%. In real term as well, credit growth remains strong at 9.7%, and is considerably higher than the 7% real GDP growth estimated by the government for 2022-23.

Indias deficit in the current account (CAD) showed a significant reduction, decreasing from USD 30.9 billion in the Q2FY23 to USD 18.2 billion in Q3FY23. During the Q4FY23, Indias current account deficit (CAD) saw a significant reduction to USD 1.3 billion, equal to 0.2% of GDP, compared to the preceding quarters USD 16.8 billion or 2% of GDP. In Q4FY22, CAD stood at USD 13.4 billion, or 1.6% of GDP. The sequential decline in CAD in the Q4 was primarily due to a decrease in the trade deficit, which decreased from USD 71.3 billion in Q3FY22 to USD 52.6 billion in the Q4. This reduction was accompanied by robust services exports and favorable terms of trade resulting from corrections in commodity prices. Additionally, strong service trade and resilient remittances contributed to narrowing the CAD in Q4 FY23 compared to the previous quarter. Over FY23, the current account balance recorded a deficit of 2% of GDP compared to a deficit of 1.2% in 2021-22, as the trade deficit expanded to USD 265.3 billion from USD 189.5 billion in the previous year. However, the narrowing of CAD in Q4FY23 helped in containing the CAD for the entire fiscal year.

Indias coal production increased by 14.7% to 893 MMT in FY23 from 778 MT in the previous fiscal. During FY,CIL, SCCL & Captives/ Others registered a growth of 12.9%, 3.3% & 35.1% respectively.

Indias per capita income was estimated to have increased 14.7% from RS..72 lakh in 2021-22 to RS..97 lakh in 2022-23 following a speedy growth in nominal GDP.

Indian economic reforms and Budget 202223 provisions

Union Budget has attempted at fiscal consolidation while continuing to support economic growth through biggest ever public capex push alongside restraint on revenue spending. Assumptions for FY24 taxes appear reasonable: FY24 nominal GDP growth estimate of 10.5% is nearly in-line with consensus, though nominal GDP has potential upside.

Union Budget 2023-24 argued that boost to growth from the reforms of past few years are yet to fructify even as global economic prospects for the next year have been weighed down by the combination of a unique set of challenges expected to impart a few downside risks.

Economic Survey identified four medium-term growth magnets of -

1) Sound and healthy financial system,

2) Efficiency gains from digitization reforms,

3) Evolving geo-politics and global value chains diversifications.

? Capex outlay in the Union Budget 2023-24 has been enhanced by 37% from INR 7.3 lakh crore to INR 10 lakh crore, which takes it to an all-time high of 3% of GDP.

? Effective Capital Expenditure (incl. Internal and Extra Budgetary Resources) of the Centre is budgeted at INR 13.7 lakh crore, 4.5% of GDP.

Outlook

In the medium term, the Indian economy is expected to continue on its path of recovery following the COVID-19 pandemic. The country has already shown signs of a rebound in economic activity, with GDP growth rates increasing steadily lows of contraction in in 2020-21. The government has also implemented several reforms to improve the ease of doing business in the country and attract foreign investment,

However, there are critical priorities that the Indian economy is required to address in the medium term, including the need for continued infrastructure development to support economic growth, which requires significant investment, Last budget allocation for capex at an all-time high of 3% of GDP (4.5% incl Internal and Extra Budgetary Resources) is a step in that direction. The government will need to maintain prudent fiscal and monetary policies to mitigate these risks and maintain macroeconomic stability,

The PLI scheme in India has been successful in promoting the development of a thriving and selfsustaining ecosystem, The schemes focus on advanced technologies is likely to upgrade the skills of the existing labor force, which will help make the manufacturing sector globally competitive by replacing technologically obsolete machinery. Additionally, the schemes efforts to enhance production volumes will cater to the increasing consumer demand, as seen in the telecom and networking sector, where it will enable faster adoption of 4G and 5G products across India.

The PLI schemes inclusion of green technologies can also allow India to pioneer green policy implementation with a reduced carbon footprint. This will create better productivity and free trade agreements, providing better market access. To support this, the government has introduced the PM Gati Shakti

Indias medium term growth outlook (IMF) plan, which provides multimodal connectivity to manufacturing zones across India, making logistics and operations efficient. Cluster parks with plug- and-play infrastructure have also been introduced to support manufacturing in different regions. Overall, the PLI schemes success signals that it is contributing to the development of a thriving and self-sustaining ecosystem in India.

Overall, while the Indian economy is expected to continue its recovery in the medium term, there are still several challenges that will need to be addressed to ensure sustained and inclusive growth.

Industry review

Global ports sector review

International maritime trade experienced a 3.8% decline in 2020 due to the COVID-19 pandemic, but it has since bounced back in 2021 with an estimated growth of 3.2%, resulting in an overall shipment of 11 billion tons. Although this growth is slightly below pre-pandemic levels, it is a significant improvement considering the prolonged pandemic and global logistics disruptions caused by a surge in demand and supply-side capacity shortages. The growth was driven by the increased demand for containerized cargo, while gas and dry bulk shipping also saw increases. However, shipments of crude oil declined during this period.

UNCTADs projection for maritime trade growth in 2022 is 1.4%, with an estimated annual average growth rate of 2.1% from 2023 to 2027. This rate is slower than the previous three-decade average of 3.3%. The containerized trade segment has been the fastest growing for many years, but its growth is expected to be 1.2% in 2022 and only slightly higher at 1.9% in 2023. The projected deceleration is due to not only the lockdowns caused by the pandemic but also strong macroeconomic headwinds and a weakened Chinese economy. Additionally, consumers are spending less due to rising inflation and living costs and are to some extent switching their spending from goods to services.

As per Review of Maritime Transport 2022 by UNCTAD, the outlook for the operating environment in 2022 was challenging. Inflation and living costs rose globally, while Chinas zero-COVID policy caused disruptions in manufacturing, logistics, and supply chains, as it is the worlds largest exporter. Furthermore, the Black Sea ports in Ukraine, which is a major food exporter, closed due to war. Industrial action and labour strikes took place in a number of world ports, including in Germany, South Africa, and the United Kingdom, affecting maritime transport.

In addition, extreme weather events, such as floods, hurricanes, and heatwaves, are taking place across Australia, Brazil, Pakistan, East Africa, Europe, and the United States, causing further difficulties for global supply chains and logistics, as well as for maritime trade. Such challenges are expected to have a negative impact on maritime trade, as disruptions in supply chains and logistics could lead to a decrease in the volume of goods transported,

The global logistics crisis began in late 2020 and continued throughout 2021, with congested ports struggling to keep up with increased demand due to a lack of equipment, labor, and storage facilities, Container schedule delays doubled, and between Q1 2020 and Q4 2021, delays increased from two days to 12 on the Far East and North America routes. The median turnaround time for container ships also increased by 13.7% between 2020 and 2021, according to the Review of Maritime Transport 2022.

Initially, port congestion was concentrated in China, Northern Europe, and the West Coast of the United States. However, as shipping lines redirected ships

to more profitable routes in the US and China, other countries suffered even more. Developing countries in Africa, Latin America, and the Caribbean lost over 10% of their direct liner shipping connections. These countries faced challenges such as delayed vessel arrivals and container shortages.

In addition, extreme weather events, including floods, hurricanes, and heatwaves, further impacted global supply chains and logistics. The pandemic also disrupted manufacturing, logistics, and supply chains in China, the worlds largest exporter, due to the countrys zero-COVID policy. Overall, the current situation is expected to continue to pose challenges for global supply chains and logistics, and therefore for maritime trade.

International maritime trade, world gross domestic product and maritime trade to GDP ratio, 2006 to 2022 (percentage annual change and ratio)

Comprehensive global recovery in maritime transport: 10 priority action

The Review of Maritime Transport 2022 report identifies 10 priority action areas to address the global logistics logjam and build more resilient and sustainable maritime supply chains.

1. Governments should control the pandemic and mitigate its impact on the most vulnerable by better access to vaccines, testing, and therapies, particularly in developing countries. Governments should minimize lockdowns and restrictions that could unduly penalize recovery in vulnerable economies.

2. Support growth, protect the poorest, and enable trade by promoting economic growth, strengthening macroeconomic frameworks, and reducing financial vulnerability. Governments should help the most vulnerable by promoting food security and reducing poverty, and avoid export and import restrictions that compound disruptions.

3. Tackle supply side infrastructure and services constraints by enhancing transport infrastructure, improving port performance and productivity, enabling connectivity, expanding storage and warehousing space and capabilities, minimizing labor and equipment shortages, and generally making ports and their hinterland connections more efficient and adequate to handle shifts in demand. Governments should develop and upgrade port infrastructure and hinterland connections while involving the private sector and develop regional fleets and shipping services to tackle high transport costs and other challenges faced by developing countries.

4. Implement transport and trade facilitation solutions at ports and borders by speeding up processes through digitalization, particularly pre-arrival processing, electronic payments, and e-documents. Governments should continuously simplify procedures and requirements and remove those no longer needed, choose the least trade restrictive measures, adopt smart and green trade logistics systems, and facilitate crew changes and address the seafarers crew change crisis through collective action by governments and industry.

5. Move to a clean-energy and low-emissions future by establishing a predictable global regulatory framework for investing in the energy transition and decarbonization, raising awareness of the new IMO regulations, and supporting implementation and compliance. Governments should help ports in developing countries harness the energy transition and decarbonization.

6. Encourage digitalization and tapping the opportunities from e-commerce by helping developing countries expand the use of digitalization and e-commerce, adopting smart maritime logistics, and providing more training, particularly for the use of new technology. Governments should upgrade trade facilitation and logistics infrastructure and services, including last-mile logistics.

7. Monitor freight rates and charges by monitoring industry trends and, when necessary, taking action to ensure a level playing field that does not exclude smaller players, including stakeholders in developing countries. Governments should establish monitoring tools and performance measurements, including regional maritime indices and freight observatories, introduce mandatory controls on demurrage charges for containers at ports, and strengthen formal and informal dispute resolution mechanisms.

8. Ensure competitive markets by strengthening the capacity of national regulators, competition and port authorities, especially in Small Island

Indias EXIM Trade

Developing States (SIDS) and Least Developed Countries (LDCs), and introducing more transparent indices for freight costs, similar to those available for the main shipping routes. Competition and port authorities should work together to respond to vertical integration of carriers with measures to protect competition. Governments should also strengthen international cooperation on cross-border, anti-competitive practices in maritime transport, including on the basis of the UN Set of Competition Rules and Principles, and using the expertise of UNCTAD.

9. Build resilience by establishing a long-term vision and resource mobilization strategy for resilient and sustainable maritime supply chains. Governments should help developing countries build capacities to anticipate, prepare for, respond to, and recover from significant multi-hazard threats, by promoting agile and resilient maritime transport systems. They should invest in risk management and emergency preparedness for pandemics and other disruptive events in ports and maritime supply chains, upscale capacitybuilding and affordable infrastructure finance for climate change adaptation and resiliencebuilding of seaports and other critical transport infrastructure in developing countries and employ more women in ports and scale up staff training as a resilience-building strategy.

10. Revitalize multilateral cooperation calls for the establishment of stronger and more effective multilateral cooperation frameworks to address various issues such as conflict and disruptions, global recovery, climate change, and low-carbon growth. This would involve working together on a global scale to find solutions and make progress towards a more sustainable future.

(Source: UNCTAD Review of Maritime Transport 2022)

Significant Growth in Indias EXIM Sector Signals Accelerated Expansion

In 2022-23, Indias merchandise exports achieved a remarkable milestone by reaching a record high of USD 447.46 billion, indicating a growth rate of 6.03%. This surpasses the previous years exports of USD 422.00 billion. Among the 30 key sectors contributing to merchandise exports, 17 sectors experienced positive growth in 2022-23 compared to FY 2021-22.

(USD Bn)

2018-19 2019-20 2020-21 2021-22 2022-23

Exports

330.2 313.2 291.0 422.3 449.9

Oil

46.6 41.2 25.7 67.6 97.3

Non-Oil

283.6 271.9 265.2 354.7 352.6

Imports

514.3 474.2 393.0 613.6 713.4

Oil

141.1 130.5 82.4 162.1 209.3

Non-Oil

373.2 343.6 310.6 451.6 504.0

Overall, the exports of both oil and non-oil products showed an increasing trend, with notable growth in recent years. The export value of oil products witnessed a significant increase in 2022-23. Non-oil exports also demonstrated consistent growth. On the other hand, imports, both oil, and non-oil, increased over the years, with strong growth in 2021-22 and 2022-23.

Unprecedented Growth in Manufacturing Exports

India has witnessed an extraordinary boom in manufacturing exports, contributing significantly to the countrys overall export performance. The manufacturing sector has emerged as a key driver of export growth, fueled by various factors such as increasing competitiveness, improved production capabilities, and a conducive business environment. This surge in manufacturing exports highlights Indias ability to meet global demand for diverse products, ranging from automobiles and machinery to textiles and electronics. The sectors robust growth not only enhances Indias export revenue but also strengthens its position as a global manufacturing hub.

Indias Manufacturing Exports (2018-23)

(USD Bn)

2018-19 2019-20 2020-21 2021-22 2022-23

Manufactured goods

237.9 228.8 213.9 294.9 289.9

Leather & leather manufactures

5.3 4.8 3.5 4.7 5.0

Chemicals & related products

44.5 45.8 49.1 57.3 58.4

Engineering goods

79.2 74.3 72.2 106.3 100.6

Electronic goods

10.0 12.9 12.1 16.9 25.3

Textiles (excl readymade garments)

18.3 16.8 15.9 23.8 18.1

Readymade garments

16.1 15.5 12.2 16.0 16.2

Other manufactured goods

64.4 58.7 48.9 69.8 66.4

The table above presents the export values (in USD billion) of various categories of manufactured goods

over a five-year period. Overall, the export values of manufactured goods experienced a recovery in recent years. Leather and leather manufactures showed a increase, while chemicals and related products demonstrated consistent growth. Engineering goods experienced a significant increase, and electronic goods saw solid growth. Textiles (excluding readymade garments) and readymade garments were also strong.

Specifically, in 2022-23, several sectors demonstrated significant growth in their export performance. Oil Meals experienced a remarkable growth of 55.13%, followed by Electronic Goods at 50.52%. Petroleum Products exhibited a growth rate of 40.1%, while Tobacco recorded a growth of 31.37%. Other sectors that witnessed positive growth include Oil Seeds (20.13%), Rice (15.22%), Cereal Preparations & Miscellaneous Processed Items (14.61%), Coffee (12.29%), Fruits & Vegetables (11.19%), Other Cereals (9.74%), Tea (8.85%), Leather & Leather Products (8.47%), Ceramic Products & Glassware (7.83%), Marine Products (3.93%), Drugs & Pharmaceuticals (3.25%), Organic & Inorganic Chemicals (3.23%), and RMG of all Textiles (1.1%).

The focus on manufacturing-led exports is crucial for India, as it allows for greater participation of the less-skilled workforce in the labor force, providing them with opportunities to benefit from economic activities. The favorable factors of an attractive cost of capital, a low-tax regime, and government initiatives to enhance business conditions are acting as strong tailwinds, driving the export rally in the Indian economy. In recent years, the manufacturing sector in India has been striving to enhance the complexity and sophistication of its manufactured products.

PLI scheme and Growth Ecosystem

Indian government implemented the production- linked incentive (PLI) scheme in 14 key manufacturing sectors, allocating RS..97 lakh crore in November 2020. The scheme aims to encourage investment, increase production volumes, boost exports with domestic value addition, and generate employment. The incentive rates follow a tapering format, motivating industries to unlock their potential and become selfsustaining even after the incentive regime ends. The PLI scheme has shown success in sectors such as electronics, pharmaceuticals, food products, telecom, and drones, attracting significant investments and creating jobs. In electronics manufacturing, 97% of mobile phones sold in India are now made domestically, while pharmaceuticals have developed 35 key chemical inputs domestically. Other sectors, such as food products, telecom, and drones, have also seen increased investments and production. The schemes focus on advanced technologies has enhanced competitiveness, and incentives for green technologies align with sustainability goals. Initiatives for logistical connectivity and inclusive approaches empower industries and artisans. Overall, the PLI scheme has bolstered domestic production, reduced import dependence, created jobs, and positioned India as a resilient player in global value chains.

Foreign Trade Policy 2023 Paves the Way for Exponential Export Growth

India has recently introduced a new foreign trade policy, known as the Foreign Trade Policy (FTP) 2023, which aims to boost rupee trade, enhance outbound shipments to USD 2 trillion by 2030, and foster e-commerce exports in the face of global uncertainties. Unlike previous 5-year FTPs, this policy is designed to be "dynamic and responsive," without a fixed end date, and will be updated based on the evolving global scenario.

Key Features of Foreign Trade Policy 2023:

? Trade facilitation through digitalization and faster online approvals

? Reduction of application fees for MSME exporters

? Revamping the e-Certificate of Origin (COO) process

? Paperless filing of export obligation discharge applications

? Focus on grassroots exports and development of district-specific action plans

? Promotion of merchanting trade to establish Indiaas an intermediate trading hub

? Emphasis on e-commerce and the creation of national e-commerce export hubs

? Invoicing, payment, and settlement of exports and imports in Indian Rupee (INR)

? Potential acceptance of INR as a global currency for trade

The FTP 2023 adopts a shift from an incentive-based regime to a remission-based one, with a focus on encouraging collaboration among exporters, states, districts, and Indian Missions. It seeks to reduce transaction costs and facilitate the development of additional export hubs across the country. The flexible nature of this policy allows it to adapt to emerging needs and challenges over time, ensuring its relevance and effectiveness.

The FTP 2023 focuses on effective trade facilitation to support Indian exporters in leveraging existing and upcoming free trade agreements (FTAs). The emphasis is on digitalizing cross-border processes, logistics, and transportation. However, it highlights the need for alignment between digitalization efforts at the border and behind the border to avoid discrepancies. The FTP promotes district exports and intermediary merchanting facilities while acknowledging the importance of e-commerce and on-border trade facilitation. Settlements in Indian Rupees (INR) are being explored, and the FTP recognizes the impressive growth of services exports. However, it falls short in providing specific measures to enhance services exports, despite their significant contribution to overall exports.

India Aims for Trade Expansion: Growing List of FTAs in Focus

India has been actively engaged in discussions and negotiations for free trade agreements (FTAs) with various partners, both on a bilateral and regional level, in recent past. The primary objective of these agreements is to stimulate the growth of export- oriented domestic manufacturing in India. Recently, the stakes have been raised even higher, as India has set ambitious goals for the next 25 years. India aims to achieve a remarkable milestone of USD 2 trillion in exports of goods and services by the year 2030. Furthermore, India has set its sights on becoming a USD 30 trillion economy by 2047, with a significant 25 percent share in global exports. As a result, securing early harvest deals and forging free trade pacts have become crucial priorities for India, despite traditionally adopting a more cautious approach to international trade.

At present, there is an expanding list of countries and regional blocs that are engaged in negotiations for trade agreements with India. These include the United Kingdom, Canada, the Gulf Cooperation Council (GCC), Bangladesh, Israel, the European Union, and the Southern African Customs Union. Notably, India has already concluded trade deals with the United Arab Emirates (UAE) and Australia, demonstrating its commitment to fostering mutually beneficial trade relationships.

Indian ports sector review

EXIM trade between various nations drives economic growth. Ports are the entry points for EXIM trade and play a vital part in Indias international trade. According to the Ministry of Shipping, around 95% of the nations trade by volume and 70% by value are transported through maritime transport. In line with the fragile growth in EXIM trade, Indias port volumes have not been strong. In spite of the headwind growth potential of cargo volumes, Indian ports reported extraordinary growth.

Cargo traffic at Indias 12 major ports during FY23 showed a growth of 8.8% to 783.5 MMT from 720.3 MMT cargo throughput in FY22. EXIM cargo handled at Major Ports increased by 9.1% from 550.0 MMT during FY22 to 599.9 MMT in FY23. The Coastal Cargo handled at Major port also increased by 7.8% from 170.3 MMT during FY22 to 183.5 MMT handled during FY23. Cargo traffic at Non-Major Ports during FY23 increased by 8.5% to 649.9 MMT from 599.1 MMT handled in FY22. EXIM cargo traffic handled at Non-Major Ports in FY23 increased by 4.3% to 530.9 MMT from 509.1 MMT during FY22. The coastal cargo traffic handled at Non-Major Ports during FY23 increased by 32.1% to 119.0 MMT from 90.1 MMT handled during FY22.

Key ports performance

Paradip Port recorded highest growth of 16.6% in traffic handled at Major Ports during FY23 and was followed by SMP Haldia (13.4%), Kamarajar (12.6%), VOC (11.1%), JNPA (10.4%), SMP Kolkata (9.6%), Deendayal Port (7.7%), Visakhapatnam (6.8%), Mumbai (6.2%), New Mangalore (5.4%), Cochin (2.0%) and Chennai (0.8%). The only Major Ports that recorded negative growth in traffic was Mormugao (6.2%) in FY23. Broadly at the commodity level, cargo mix for major

ports were as follow: container led the overall mix a share of 21.7% followed by POL-Crude (20.6%), Thermal coal (13.6%), Others commodities (10.0%), POL Products (7.3%), Iron ore/Pellets (5.9%), Other coal (5.4%), Coking coal (4.9%), LPG/LNG (2.0%), Edible oil (1.5%), Iron & Steel (1.2%), FRM Dry(1.1%), Fertilizer & Other Ores (1.0%) each, FRM liquid (0.9%), Food grains excluding Pulses (0.8%), Cement & Sugar (0.4%) each and Project Cargo (0.1%) during FY23.

During FY23, EXIM Cargo in Major Ports was led by Deendayal Port: 123.9 MMT [share of 20.6%] followed by JNPA (13.2%), Paradip (12.9%), Visakhapatnam (9.1%), Chennai (7.2%), SMP Haldia (7.2%), Mumbai (6.8%), NMPA (5.3%), Kamarajar (4.3%), VOC (4.2%), Cochin (3.9%), SMP Kolkata (2.7%) and Mormugao (2.6%). For coastal cargo, Paradip Port handled the maximum cargo of 58.1 MMT [share of 31.6%] followed by Mumbai Port (12.3%), Visakhapatnam (10.3%), Kamarajar (9.6%), Deendayal (7.5%), VOC (6.9%), Cochin (6.6%), NMPA (5.2%), Chennai (3.2%), SMP Haldia (2.9%), JNPA (2.7%), Mormugao (0.9%) and SMP Kolkata (0.2%).

For Non-Major Ports amongst the State Maritime/

State Directorate, Gujarat Maritime Board led with 416.3 MMT [share of 64.1%] followed by Andhra

Trends in All India Cargo Handling (2017-23)

Pradesh Maritime Board (15.6%), Maharashtra Maritime Board (10.6%), Directorate of Ports, Odisha (6.0%), Tamil Nadu Maritime Board (1.7%), Directorate of Ports, Puducherry (1.6%) and Others (0.5%) in FY23.

In FY23 for Non-Major Ports, following growth was seen in key commodities: Iron Ore (27.0%), Thermal Coal (22.1%), Foodgrains excluding Pulses (17.7%), FRM Liquid (10.5%), Edible Oil (9.9%), Coking Coal (6.9%), Fertilizer (6.4%), Cement (4.4%), Containers (4.1%), Other Commodities (1.2%) and POL Crude (1.1%), Iron and Steel (-37.1%), LPG or LNG (-8.8%), and POL Products (-0.1%).

Amongst the Non-Major Ports, Gujarat Maritime Board led the handling of EXIM Cargo of 370 MMT with a share of 69.7% followed by Andhra Pradesh Maritime Board (14.8%), Directorate of Ports, Odisha (6.7%), Maharashtra Maritime Board (4.7%), Tamil Nadu Maritime Board (2.0%) in FY23. In coastal cargo, Gujarat Maritime Board again led with 46.4 MMT [share of 39.0%] followed by Maharashtra Maritime Board (36.9%), Andhra Pradesh Maritime Board (19.3%), Directorate of Ports, Odisha (2.6%), A&N Islands (1.4%), Tamil Nadu Maritime Board (0.5%), and Others (0.3%).

(Source: Transport Research Wing of Ministry of Ports, Shipping and Waterways)

All India Cargo

FY17 FY18 FY19 FY20 FY21 FY22 FY23 CAGR

Major Ports

EXIM 514.1 524.7 532.8 537.8 524.1 550.0 600.0 2.6%
Coastal 134.4 154.7 166.4 166.7 147.7 170.3 183.5 5.3%
Total 648.5 679.5 699.2 704.6 671.8 720.3 783.5 3.2%

Non-Major Ports

EXIM 418.5 450.8 486.3 522.6 500.0 509.0 530.9 4.0%
Coastal 66.7 78.3 96.3 90.6 75.0 90.1 119.0 10.1%
Total 485.2 529.1 582.6 613.2 575.0 599.1 649.9 5.0%

All India Ports

EXIM 932.6 975.5 1019.1 1060.4 1023.7 1058.6 1130.9 3.3%
Coastal 201.1 233.0 262.7 257.3 222.5 260.3 302.5 7.0%
Total 1134 1208.6 1281.8 1317.7 1246.2 1319.4 1433.4 4.0%

At all India levels, thermal and other coal recorded highest growth in cargo handling at 30.5% followed by Project cargo at 17.1%, coking coal at 9.9%, food grains at 9.6%, Other cargos at 9.4%, Crude at 7.4%, edible oil at 7.1%, iron ore at 7.0% and fertilizers (incl FRM) at 4.4%.

Trends in All India Commodity-wise Cargo Handling (2021-23)

Commodity

Major Ports

Non-Major Ports

All India Ports

FY21 FY22 FY23 FY21 FY22 FY23 FY21 FY22 FY23

POL Crude

136.6 144.6 161.1 84.3 90.3 91.3 220.9 234.9 252.4

POL Products

54.1 61.0 57.4 67.2 72.6 72.5 121.2 133.6 129.9

LPG or LNG

14.7 15.7 15.8 25.2 22.0 20.1 39.8 37.7 35.9

Edible Oil

10.0 11.2 11.9 3.4 3.2 3.5 13.4 14.4 15.4

Iron Ore Pellets/ Fine

71.4 51.3 46.5 41.6 41.8 53.1 113.0 93.1 99.6

Other Minerals

5.3 8.1 7.7 2.5 1.8 1.5 7.8 9.9 9.2

 

Commodity

Major Ports

Non-Major Ports

All India Ports

FY21 FY22 FY23 FY21 FY22 FY23 FY21 FY22 FY23

Thermal and Other Coal

94.6 114.2 148.8 110.9 107.3 140.1 205.5 221.5 288.9

Coking Coal

37.3 34.1 38.6 33.8 36.8 39.4 71.0 71.0 78.0

Fertilizers and FRM

24.1 22.2 22.9 15.1 14.9 15.8 39.2 37.1 38.7

Food Grains

2.7 7.2 7.3 3.2 4.8 5.9 5.9 12.0 13.2

Iron and Steel

11.0 11.4 9.4 6.6 7.5 4.7 17.6 18.9 14.1

Project Cargo

0.6 0.8 0.9 0.2 0.2 0.3 0.8 1.0 1.2

Container

(Tonnes)

143.7 166.9 170.3 105.0 112.6 117.1 248.7 279.4 287.4

Container

(mTEUs*)

9.6 11.2 11.4 8.0 8.3 8.7 17.6 19.5 20.08

Others

65.9 71.6 85.0 76.1 83.4 84.5 142.0 154.9 169.5

Total

671.8 720.3 783.5 575.0 599.1 649.9 1246.9 1319.4 1433.4

Mechanization and efficiency: The ports industry is witnessing rapid transformation due to increased priority in efficiency and mechanization. Along with non-major ports, major ports are also concentrating on efficiency improvements. The Sagarmala program is a prime initiative in this direction for major ports.

Capacity utilization at Indian Major Ports: Capacity utilization at key ports is witnessing a downward trajectory over a period. In FY 2022-23, capacity at major ports stood at around 1617 MMTPA.

Last 10 Years Capacity Utilization at Indian Major Ports, (in %)

Year

Major port Capacity in MMT Major port Traffic Handled in MMT Major Port Capacity Utilization in %

FY 13

745 545.7 73%

FY 14

801 555.5 69%

FY 15

872 581.3 67%

FY 16

966 606.5 63%

FY 17

1066 648.4 61%

FY 18

1451 679.4 47%

FY 19

1514 699.1 46%

FY 20

1535 704.9 46%

FY 21

1561 672.7 43%

FY 22

1598 720 45%

FY 23

1617 783.5 48%

Source: Ports in India 2023 by India infrastructure report, Ministry of Shipping FY 2022-23 annual report, APSEZ Internal Estimate

? The extension of the manufacturing hub associated with global supply chains could enhance demand for the ports sector industry for cargo commodities like iron ore and fertilizers. Iron ore and finished fertilizers shipments have seen a growing trend, ensuring that major ports tide over decreasing volumes in coal and miscellaneous cargo.

? The Union Government permitted Foreign Direct Investment (FDI) of up to 100% under the automatic route for port and harbor construction and maintenance projects.

? New business opportunities are being generated in the natural gas segment and managing container traffic at the domestic level.

Average output per ship berth day in Tonnes at major ports: Technological advancements and increased efficiency at key ports under the Sagarmala initiative (project UNNATI), enabled key ports increase efficiency in berth productivity. On an average, output per ship berth day witnessed substantial growth from 12,458 Tonnes in FY 2014-15 to 17239 Tonnes in FY 2022-23.

Recent developments of importance for the Indian ports sector

? Pandemic and the China Plus One strategy followed by an opportunity for the Indian ports sector as companies shift their plants from China to other less-developed countries generating a new wave of industrialization.

? Better rural connectivity, port advancements, moderation of logistics costs and lower turnaround time are anticipated to enhance revenues.

? Increasing demand for port infrastructure owing to rising import (crude/coal) and containerization could make public ports inadequate, an opportunity for private ports.

? Sharp rise in coastal movement owing to power demand on shore-based power plants and movement of domestic coal from Paradip apart from rise in coastal POL movements.

? Operation and maintenance services such as pilotage, dredging, harboring and provision of marine assessments such as barges and dredgers are anticipated to grow. Growing investment and cargo traffic marks a healthy prospect for port support services.

Logistics industry Review

The logistics sector in India is highly fragmented, with unorganized players dominating the market. Organized players make up only around 10% of the total logistics market share. Given the large customer base, substantial investments are required to develop the sector. To accelerate approvals, streamline coordination with multiple agencies, and promote a tech-driven approach, a clear and comprehensive logistics policy was needed to strengthen the sector, and NLP 2022 goes a long way in accomplishing the same.

The sector employs around 22 million people and is expected to create another 1.2 Mn jobs by 2025. India currently spends around 13-14% of its GDP on logistics costs. Being in the early stages of automation in the sector, logistics companies in India are a bit behind in adopting global levels of transparency and real time data. Road holds the highest modal share (~60%) while rail and water occupy a much smaller share. But recent initiatives and investments from the government as well as the private sector have inspired growth in the industry.

Key Trends in the Industry

? Digitization - Low penetration of technology in the sector give a lot of scope for it to be implemented across spheres. Many players are deploying new technologies such as Big Data and

AI for efficiencies and better asset deployment, The government has also shifted its focus toward digitalization of the sector as can be seen in the development of ULIP. Digitalization of the sector has the potential to make great inroads towards making logistics an efficient ecosystem in our country.

? Sustainable freight transportation - Logistics sector is expected to contribute the highest amount of carbon emissions by 2050. Thus, players are actively looking for sustainable means in terms of modes and transport systems as well as digitization for reduction of emissions and ecological impact.

? Effective Last mile deliveries - As the number of door-to-door deliveries has increased, especially on the retail front, new technical solutions are being explored for quick and efficient deliveries,

? Focus on workforce - NLP has put back the focus on developing talent and boosting employment for the sector which traditionally relies on a lot on un-trained workforce. With renewed focus of training infrastructure, the sector will likely gain right talent and could see new models embracing the landscape to address the issues.

? Resilience through supply chain diversification

- Post the pandemic and the recent geopolitical events, industries and players have constantly made efforts to diversify their supply chains, which includes suppliers, consumers as well as the countries of origins. As per the EY Industrial Supply Chain Survey, 77% of respondents stated that they are increasing the number of suppliers and 63% are expanding their suppliers to more countries.

Future Prospects

Logistics sector has been growing with healthy 1012% growth rate YoY and is expected to reach $380bn by FY25. The growth is being driven by a number of factors -

? Strong demand from different industries (led by policies such as Make in India, PLI etc.) and need for efficiency in the new demand

? Rising preferences for integrated supply chain services and efficiency solutions such as inventory optimization and analytics

? Increasing demand for e-commerce and online shopping leading to new solutions for the optimizing operations

? Government policies such as NLP, PM Gati Shakti NMP for improving infrastructure and reducing inefficiencies in the processes,

? Ever evolving technologies and organized private participation in the industry fueling disruptive solutions and automated processes.

And in line with the nations progress, we believe that logistics in India will become a growth engine for other sectors and we are fully committed to make that vision a reality.

Government initiatives

To meet the ever-increasing trade requirements of the country, Indian Government has taken multiple initiatives to improve infrastructure development linked to ports & overall logistics segment. While focusing on global standard ports & related efficient infrastructure development, Maritime India Vision (MIV) 2030 was launched in November 2020. MIV 2030, estimates investments of RS.,00,000-1,25,000 crore for capacity augmentation and development of world-class infrastructure at Indian Ports. The policy covers more than 150 initiatives across the ports, shipping and waterway modes to transform the countrys logistical effectiveness.

Government of India has identified that higher logistics cost in India when compared to countries like China, US & European countries act as one of the impediments in Indias exports. Hence, Indian Government undertook various initiatives to improve infrastructure development linked to ports, vital to fulfill growing trade requirements, some of them are enumerated below.

a. National Logistic Policy, 2022:

Logistics efficiency is a function of infrastructure, services (digital systems / processes /regulatory framework) and human resource. PM GatiShakti National Master Plan (NMP) for multimodal connectivity infrastructure to various economic zones, has been launched. While development of integrated infrastructure and network planning is envisaged to be addressed through the PM GatiShakti National Master Plan, for efficiency in services (processes, digital systems, regulatory framework) and human resource, the National Logistics Policy is the logical next step, which was launched in Sept. 2022. This policy provides a comprehensive agenda for development of entire logistics ecosystem in India. Post announcement of the National Logistics Policy, multiple states have brought forward their own State Logistics Policies in line with the NLP with the rest in draft stage currently.

Policy Vision: "To develop a technologically enabled, integrated, cost-efficient, resilient, sustainable and trusted logistics ecosystem in the country for accelerated and inclusive growth".

Comprehensive Logistics Action Plan (CLAP): The

Policy will be implemented through a Comprehensive Logistics Action Plan (CLAP). The interventions proposed under the CLAP are divided into eight key action areas

I. Integrated Digital Logistics Systems: Develop a system of unified logistics interface to link multiple data sources and develop cross sectoral use cases for logistics stakeholders.

II. Standardization of physical assets & benchmarking service quality standards: Enhance interoperability, minimize handling risks, undertake process optimization, and improve ease of doing business, through standardization of physical assets and benchmarking of service quality standards in logistics.

III. Logistics Human Resources Development and

Capacity Building: Develop an overarching logistics human resource strategy and under its guiding principles, line ministries to develop action plans to address skill development related and internal capacity building challenges in the respective sector.

IV. State Engagement: Provide support for development of state/city level logistics plans, set up institutional framework to take action at city/ state level, measure and monitor action by states and rank them.

V. EXIM (Export-Import) Logistics: Addressing infrastructure and procedural gaps in Indias EXIM connectivity and create efficient and reliable logistics network, with transparent and streamlined cross-border trade facilitation, for improved trade competitiveness and greater integration of India with regional and global value chains.

VI. Service Improvement framework: Improving regulatory interface to enable seamlessness between sectors, promote standardization, formalization, interoperability: eliminate fragmentation in documentation, formats, processes and liability regimes: reduce gaps in regulatory architecture.

VII. Sectoral Plan for Efficient Logistics: Sectoral Plans for Efficient Logistics (SPEL) aligned with

PM GatiShakti, will be developed for each sector with underlying philosophies of inter-operability, resiliency, sustainability, and innovation. Specifically, SPEL would (i) address logistics issues pertaining to infrastructure, processes, digital improvements, policies and regulatory reforms, and capacity building for better workforce, and ii) prioritize cross-sectoral cooperation to complement and not duplicate efforts and focus on optimization of modal mix.

VIII. Facilitation of Development of Logistics Parks: Logistics parks (eg. Multi Modal Logistics Parks, Air Freight Stations, Inland Container Depots, Container Freight Stations, cargo terminals, etc.) are hubs for intermediary activities (storage, handling, value addition, inter-modal transfers, etc.) in the supply chain connected by a transportation network. It is envisaged to take following steps to facilitate development of logistics parks:

? Draft framework guidelines to facilitate development of Logistics Parks in the country

with focus on encouraging private investment.

? Create a network of logistics parks by mapping them on the PM GatiShakti NMP, for enhanced visibility, improved logistics efficiency, optimum utilization and connectivity.

Key Targets of National Logistic Policy 2022

? Logistics costs have to be cut by half to be near global benchmarks by 2030 by reducing the cost of logistics from 14-18% of GDP to global best practices of 8%. Countries like the US, South Korea, Singapore, and certain European nations have such a low logistics cost-to-GDP ratio.

? Being the 5th largest economy in the world, India aims to be among the top 25 in the LPI (Logistics Performance Index) by 2030. It has to match the pace of South Korea (In 2018, India ranked 44th while it ranked 38th in 2023 LPI).

? Creating data-driven Decision Support Systems (DSS) to enable an efficient logistics ecosystem.

? The policys target is to ensure that logistical issues are minimized, exports grow manifold, and small industries and the people working in them benefit significantly.

b. Model Concession Agreements (MCA): Reduce arbitration and litigation in the sector

? The MoPSW launched a new model concession agreement (MCA) in November 2021 to reduce arbitration and litigation in the sector. A provision has been made that gives concessionaires the flexibility to fix their tariffs based on market conditions, which will create a level playing fields, allowing private terminals at major ports to compete with private ports for cargo.

c. "Policy for Management of Railway Land" issued on 04.10.2022

? To enable integrated development of infrastructure aligned with PM Gati Shakti framework and to attract more cargo to rail, the extant policies for leasing, licensing and Right of Way (ROW) of railway land have been simplified. The detailed guidelines on Policy for Management of Railway Land” superseding all previous policies/guidelines/instructions about lease / license/Way Leave (Right of Way). The revised policy on railway land has lowered the annual rental on leased land and extended the period of leases. As a result, more investment is expected in infrastructure facilities, including cargo terminals and public utilities. According to the changes, which were approved by the Union cabinet, the railway land lease fee has been cut to 1.5% of the market value of land per acre from the existing 6%. The lease period has been extended from the present five years to 35 years. The policy allows long-term leasing of railway land for cargo- related activities. It will also provide land at a nominal fee of per square meter per year for setting up public services such as schools, health services under PPP mode. "Existing users of land will have the option to switch to the new regime after a competitive and transparent bidding process.

d. Age restriction imposed on the ships that can be acquired or operated to India

The government has decided to imposing age restrictions on the ships that can be acquired or operated to India. Ships over age of 25 will be withdrawn from service, which includes oil tanker, bulker barges, bulk carriers, general cargo ships except for container vessels, mini bulk carrier, roll- on/roll-off, anchor handling tugs, and some classes of offshore vessels. Most other classes, including container vessels, gas carriers, and tugs, have to be withdrawn by age 30, besides, dredgers will have lifespan of up to 40 years.

e. PM Gati-Shakti- National Master Plan

Prime Minister launched PM Gati-Shakti National Master Plan (NMP) for multimodal connectivity on October 13, 2021. It is a giant stride in Indias ambitious goal of achieving US $5 trillion economy. PM Gati- Shakti focuses on Indias citizens, industries,

manufacturers, farmers, and villages among others. The PM Gati-Shakti NMP is aimed at breaking departmental silos and bringing in more holistic and integrated planning and execution of projects with a view to addressing the issues of multi-modal connectivity and last-mile connectivity. PM Gati- Shakti & National Logistics Policy are a transformative approach for economic growth and sustainable development.

The approach is driven by seven engines, namely

? Roads

• Railways

• Airports

• Ports

• Mass Transport

• Waterways

• Logistics Infrastructure

PM Gati Shakti is based on six pillars:

Comprehensiveness: It will include all the existing and planned initiatives of various Ministries and Departments with one centralized portal. Each and every Department will now have visibility of each others activities providing critical data while planning & execution of projects in a comprehensive manner.

Prioritization: Through this, different Departments will be able to prioritize their projects through crosssectoral interactions.

Optimization: The National Master Plan will assist different ministries in planning for projects after identification of critical gaps. For the transportation of the goods from one place to another, the plan will help in selecting the most optimum route in terms of time and cost.

Synchronization: Individual Ministries and

Departments often work in silos. There is lack of coordination in planning and implementation of the project resulting in delays. PM Gati-Shakti will help in synchronizing the activities of each department, as well as of different layers of governance, in a holistic manner by ensuring coordination of work between them.

Analytical: The plan will provide the entire data at one place with GIS based spatial planning and analytical tools having 200+ layers, enabling better visibility to the executing agency.

Dynamic: All Ministries and Departments will now be able to visualize, review and monitor the progress of cross-sectoral projects, through the GIS platform, as the satellite imagery will give on-ground progress periodically and progress of the projects will be updated on a regular basis on the portal. It will help in identifying the vital interventions for enhancing and updating the master plan.

Under the PM Gati Shakti-National Master Plan for Multi-Modal Connectivity and the Bharatmala Pariyojana project, the government intends to create 35 MMLPs (Multi-Modal Logistics Parks) to improve logistics facilities in the country and construct transportation hubs in the nation for seamless connectivity via road, rail, and water. This involves a tripartite agreement between NHAI, IWAI and RVNL. Of the 35, 4 MMLPs were brought out for PPP tenders in FY23 while 6-7 more are lined up to be put up for bidding in FY24. We have been heavily involved in these projects in evaluating these proposals and intend to keep track of all these proposals. ALL has also been able to notify most of its facilities as Gati Shakti Cargo Terminals (GCTs) and extend the benefits of the policy to the industry

f. Sagarmala Pariyojana: Sagarmala Pariyojana, launched in 2015, focuses on enhancing the performance of the logistics sector in India by setting up new mega ports, modernising existing ports, and developing 14 Coastal Employment Zones (CEZs) and Coastal Employment Units. More than 605 projects having a total cost of 8.8 lakh crore have been identified under Sagarmala. Of these, 89 projects worth 0.14 lakh crore are completed and 443 projects worth 4.32 lakh crore are under various stages of implementation and development.

The project aims to promote port-led development with a view to reduce logistics cost for EXIM and domestic trade.

Sagarmala Update: 218 projects worth RS..1 trillion by 2024

Sagarmala project is planned to achieve port modernization & new port development, port connectivity enhancement, port-led industrialization and coastal community development. On the seventh anniversary of Sagarmala project, government has underlined that it has identified a total of 802 projects (123 under PPP framework) under the program at an estimated cost of Rs 5.48 trillion. Center has already executed 194 projects worth H99,000 crore under the project till now of which 29 were under PPP framework. Over the rest of the tenure of current government, center aims to complete 218 on-going projects worth 2.1 trillion of which 31 are under PPP framework. Projects under the PPP model are to be executed at an estimated cost of 50,000 crores.

Stage

Amount (RS crore) Number of Projects Number of PPP

Completed

99,000 194 29

In Progress

212,801 218 31

Sanctioned

104,947 157 13

Detailed Project Report

56,429 138 25

Under Concept

76,004 95 25

Total

549,181 802 123

By 2024, more than half of Sagarmala projects in numbers and in value would have been compelled. Over the next stage of Sagarmala, Central government is targeting to build 14 new ports worth Rs 1.25 trillion.

g. National Monetization Pipeline & Opportunities to private sector: Union Minister for Finance and Corporate Affairs, launched the asset monetization pipeline of Central ministries and public sector entities. National Monetization Pipeline, NITI Aayog has developed the pipeline, in consultation with infrastructure line ministries, based on the mandate for Asset Monetization under Union Budget 2021-22. NMP estimates aggregate monetization potential of Rs 6.0 lakh crores through core assets of the Central Government, over a four-year period, from FY 2022 to FY 2025. This asset monetization, based on the philosophy of Creation through Monetization, is aimed at tapping private sector investment for new infrastructure creation.

NMP in Ports: As per NMP scheme, the total estimated capex towards 31 identified projects considered for monetization is estimated at Rs 14,483 crore for FY 2022-25. Out of 31 projects, 13 projects with expected capex of H6,924 crore was envisaged to be tendered out in FY 2022, followed by another 10 projects with expected capex of H4,680 crores are envisaged to be tendered out in FY23.

FY23 to FY25 - A total of 18 projects adding up to Rs 7,168 crore are expected to be awarded during the period. The phasing represents the year in which a certain project is envisaged to be tendered out; the actual capex investment is likely to happen in phases during the envisaged concession period.

In FY 24, the Centre has set a target of Rs 67 billion from asset monetization in the ports and shipping sector. Key projects include Rs 20 billion berths at the Kandla port, H9.8 billion container terminals at Haldia complex and RS..6 billion dry dock in Vadinar, Gujarat. So far, the government has managed to raise around H50 billion from asset monetization in FY 23. Meanwhile, the government is also looking to iron out issues in the land leasing policy of ports to better utilize vacant land with Indian ports. As per the pipeline, 31 projects in nine major ports are expected to be offered for private sector participation.

Digitization of ports: Significant efforts have been made to digitize major EXIM processes at key ports. The government has introduced digitization for processes such as Electronic Invoice (e-Invoice), Electronic Payment (e-Payment), and Electronic Delivery Order (e-DO) for the physical release of cargo by custodians. The generation of electronic Bill of Lading (e-BL) has also been implemented, along with the digitization of the Letter of Credit (LC) process. The government is working towards achieving complete integration between PCS 1x, a cloud-based new generation technology, and Indian Customs EDI Gateway (ICEGATE) for seamless data exchange. Additionally, RFID solutions have been implemented at all key ports to facilitate uninterrupted movement of traffic across port gates and reduce the need for extensive documentation checks. The Ministry of Ports, Shipping and Waterways has set up an Enterprise Business System (EBS) at five major ports in India (Mumbai, Chennai, Deendayal, Paradip, and Kolkata, including Haldia Port), with an estimated cost of RS.20 crore. The EBS aims to provide a digital port ecosystem that adopts leading international practices while remaining aligned with local needs. As part of the EBS implementation, a total of 2,474 processes were standardized, resulting in a final count of 162 redesigned processes.

Dedicated freight corridor: The Dedicated Freight

Corridor (DFC) project, being executed by the Ministry of Railways, aims to plan, develop, mobilize financial resources, construct, maintain, and operate rail corridors dedicated to freight transportation across India. The Dedicated Freight Corridor Corporation of India Ltd. is responsible for this project, and its primary mission includes:

? The Dedicated Freight Corridor (DFC) project aims to construct corridors equipped with relevant technology that would enable Indian Railways to recapture their market share of freight transport by developing additional capacity and ensuring effective, dependable, secured, and economical options for mobility to their customers.

? Multimodal logistic parks are being constructed along the Dedicated Freight Corridor to provide customers with a complete transport solution.

? Promoting the use of railways as the most ecofriendly mode of transportation and supporting the governments initiatives towards ecological sustainability.

The DFC project comprises of two corridors: the Eastern Corridor and the Western Corridor. These corridors span a total of 3,360 kilometers with the Eastern DFC stretching from Ludhiana in Punjab to Dankuni in West Bengal and the Western DFC from Jawaharlal Nehru Port in Mumbai to Dadri in Uttar Pradesh. The impact of the DFCs is already visible in the sections where operations have started as can be seen in reduced transit times of freight times and increased running speeds. APSEZ has considerable focus on the freight corridors and running double stack trains on the DFC on a daily basis. We have 2 terminals (ICD Patli and ICD Tumb) notified for direct connectivity to the WDFC and more terminals are planned at strategic locations on the DFC.

More corridors are being proposed namely - East Coast Corridor, East-West corridor and the North South Corridor seeing the success of the WDFC and EDFC. These corridors are expected to enhance

the connectivity between various clusters and thus improve logistics efficiency for the industry

Logistics Ease Across Different States 2022 (LEADS)

At the National level, the Department for Promotion of Industry and Internal Trade (DPIIT) has been conducting LEADS (Logistics Ease Across Different States) study since 2018 which helps to identify and resolve logistics inefficiencies and improve trade facilitation across supply chains. The survey assesses views of the users and stakeholders across the value chain of the industry to understand the pillars as well as the hiccups in the logistics ecosystem of the country

LEADS 2022 has adopted a classification-based grading, unlike the ranking system used till now, and states have been now classified under four categories viz coastal states, hinterland/landlocked states, north-eastern states, and Union Territories. The report has also identified key action areas for each state to improve the logistics ecosystem in the within the state. These areas include ease of storage & goods movement, regulatory and operational environment and so on. The report provides 3 performance categories - Achievers (states and UTs achieving 90 per cent or more), Fast Movers (states and UTs scoring between 80 and 90 per cent), and Aspirers (states and UTs with percentage scoring below 80 per cent).

Categories

Achievers

Fast movers

Aspirers

Landlocked states

Haryana, Himachal Pradesh, Punjab, Telangana, Uttar Pradesh, Uttarakhand,

Madhya Pradesh, Rajasthan

Bihar, Chhattisgarh, Jharkhand

Coastal states

Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Odisha, Tamil Nadu

Kerala

Goa, West Bengal

North-Eastern Region

Assam

Sikkim, Tripura

Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland

UTs

Chandigarh, Delhi

Puducherry

Andaman & Nicobar, Daman-Diu, Dadra & Nagar Haveli, Jammu & Kashmir, Ladakh, Lakshadweep

Logistics Performance Index 2023

The growth of the logistics sector in India and the enablers are also reflected in the Logistics Performance Index 2023. India has climbed 6 places to Rank 38 out of 139 countries in the 7th edition of Logistics Performance Index (LPI 2023). India has seen improvement in all the parameters while on 4 out of 6 LPI indicators India has seen remarkable improvement on the back of various initiatives being implemented over the past few years.

This is a strong indicator of Indias global positioning, with this development being powered by the administrations focus on reforms for improving logistics infrastructure.

India at LPI 2023

Year

2023 2007

Rank

38 44

Overall

3.4 3.2

Customs

3.0 3.0

Infrastructure

3.2 2.9

International shipments

3.5 3.2

Logistics competence

3.5 3.1

Tracking & tracing

3.4 3.3

Timeliness

3.6 3.5

Roadmap for the future

The ports and logistics industry has been a key driver of socio-economic transformation, experiencing significant growth through the implementation of new policies, amendments to existing policies, increased cargo traffic, private sector participation, and the development of new greenfield ports/ terminals infrastructure.

Performance overview

During the year under review, APSEZ performance was good & promising with cargo volumes witnessing 9% YoY growth. The Company dominated on all fronts; Mundra port retained its top position as the largest port in India, handling 155.4 MMT of cargo in FY23. The total cargo handled across all Adani ports was 339.2 MMT, including 2.61 MMT cargo handled at Haifa Port, Israel. In India, APSEZ ports have handled 336.6 MMT cargo, through our 11 operating ports/ Terminals. APSEZ India ports portfolio has witnessed around 8 % YoY volumes growth. Dry cargo volume crossed 176 MMT mark, registering 11% YoY growth. Key growth commodities in dry cargo were Coal, Fertilizers, Iron ore, other certain minerals and agri commodities. Coastal coal has witnessed massive 110% YoY growth (19.1 MMT in FY 23 against 9.11 MMT in FY 22). In India, APSEZ ports container volume reached 8.6 MTEUs volume against 8.2 MTEUs in FY 22, registering 5% YoY growth. APSEZ Mundra port has maintained its top position in container volume handling, Mundra has handled 6.64 MTEUs in FY 23 against 6.51 MTEUs in FY 22, registering 2% YoY volume growth. In FY23, Mundra port has witnessed 11.5% YoY growth in Car export volumes. Port exported 2,08,516 no. of cars against 1,87,090 cars exported in FY 22. Out of APSEZs 11 operating ports, 10 ports have witnessed YoY volume growth. Mundra port has witnessed more than 3% YOY volume growth, handled 155.4 MMT; Tuna port has handled 8.2 MMT, with 17.1% YoY growth; Dahej port has handled 11.4 MMT cargo, registering 41% YoY growth, Hazira port has handled 25.3 MMT cargo, with 1.6% YoY growth; Dighi has handled 0.24 MMT cargo; Goa terminal has handled 4.44 MMT cargo registering 10% YoY growth; Ennore container terminal has handled 8.23 MMT cargo, with 17.4% YoY volume growth; Kattupalli port has witnessed 55% YoY growth, handled 11.5 MMT cargo, Krishnapatnam port has handled 48.3 MMT cargo, with 20.3% YoY growth, Gangavaram port has handled 32.44 MMT cargo, registering 8% YoY growth; however, Dhamra port has handled 31.3 MMT cargo, with a YoY 6.5% degrowth. Progressively, non- Mundra ports volume sharein APSEZ ports portfolio is growing. In FY 23, Mundra port market share in APSEZ total ports portfolio (excluding Haifa) was 46%, which was 48% in FY 22. Similar trends were also witnessed in APSEZ ports container volumes, Mundra share in APSEZ total container volumes has come down to 77.3%, from 79.4% in FY 22. APSEZ is continuously focusing on volume diversification and reduce concentration risk.

Operational highlights Port business

? APSEZ continued to dominate ports market. During FY23, APSEZ ports has handled 339.2 MMT of cargo against 312 MMT cargo volumes in FY22, registering 9 % YoY volume growth.

? APSEZ all India ports volume has witnessed 8% YoY growth; company has handled 336.6 MMT in FY23 against 312.4 MMT volumes in FY22.

? APSEZ following ports/terminals has handled all time highest cargo in FY 23: Mundra Port, Tuna Terminal, Hazira Port, Mormugao Terminal, Kattupalli Port and Ennore Container Terminal.

? Recently acquired Haifa ports in Israel, has handled 2.16 MMT cargo(from date of acquisition).

? At APSEZ, the growth in ports cargo volume was led by dry cargo (11 % increase), followed by containers (+5%).

? I n dry cargo, coastal coal volume has witnessed around 110% YoY growth: APSEZ has handled 19.1 MMT of coastal coal volumes in FY 23 against 9.1 MMT in FY 22. Overall coal volumes (EXIM + Coastal) have witnessed around 19% YoY growth. In FY23, APSEZ ports have handled around 123 MMT coal cargo. Similarly in operating year FY23, APSEZ ports have handled 5.3 MMT Agri commodities against 2.7 MMT in FY 22, registering 96% YoY volume growth.

? In liquid cargo handling in FY23, APSEZ ports have witnessed 5% YoY growth in Veg oil, 15% growth in chemicals. Similarly, LPG volumes have witnessed more than 50% YoY growth.

? Containers volumes have witnessed 5 % YoY growth. In FY 23, APSEZ ports has handled 8.6 MTEUs container volumes against 8.2 MTEUs in FY 22. APSEZ ports have exported 208,516 no. of cars in FY 23 against 187,090 no. in FY 22, registering 11.5% YoY volume growth.

? In FY 23, at APSEZ Ports/Terminals, total 21 no. of new container services have been added, which has resulted in addition of 0.3 MTEUs volumes.

Mundra has added total 12 new container services followed by 4 new services at Hazira port, 2 at Kattupalli, 2 at Krishnapatnam and 1 at Gangavaram.

? APSEZ continued to focus on achieving east coast versus west coast parity. Cargo volumes on the eastern ports grew by 11.6% and those on the west grew by 5.4%, improving the cargo handling ratio (%) between the west coast and east coast to 61:39 (from 62:38 in FY 22).

? Progressively, APSEZ ports are witnessing higher rail dispatch/receipt volumes. In FY 23, total rail- based volumes at APSEZ ports were 121 MMT against 99 MMT in FY 22. Rail volumes have witnessed 22% growth, Rail share in FY 23 has grown to 39% from 35% in FY 22.

? Rail volumes YoY growth(receipt/dispatch) at APSEZ ports/terminals: Mundra (10%), Tuna (53%), Dahej(210%), Mormugao Terminal(23%), Ennore

Container Terminal (22%), Krishnapatnam(78%), Gangavaram(32%). Dhamra has witnessed 2 % YoY degrowth in rail volumes.

? In FY 23, our ports capacity utilization has crossed 60% mark: In FY 22, our port capacity utilizations was around 58%. Total operating port capacity of APSEZ Indian portfolio in March 2023 was close to 558 MMTPA, excluding recently acquired Karaikal Port.

? In FY 23, Mundra continued to be the largest container handling port in India: Mundra has handled 6.64 million TEUs which was 0.6 million TEUs higher than JNPT.

? APSEZ Mundra port & Ennore container terminal

have handled all time highest container volumes in FY 23.

? I n August 2022, APSEZ has inaugurated a new container terminal at Gangavaram port with a capacity of 0.6 MTEUs/annum. The Container Berth has the permissible draft of 15.5 mtr. and can handle up to 80000 DWT vessel. Terminal is operating with 3 no. of STS crane and 8 no. of RTGs.

? In FY23, at Krishnapatnam port, 6 MMTPA liquid cargo capacity has been added. Further mechanization of berth no. 6 at Krishnapatnam port has also added additional 5 MMTPA dry bulk

cargo capacity.

? Kattupalli port has added around 6 MMTPA capacity through non-marine infrastructure addition at port. This includes addition of liquid

tanks, expansion of container terminal yard, paved yard, equipment and 1 no of STS crane.

Logistics business

? Registered a 24% Y-o-Y growth in rail volume to

500,446 TEUs.

? GPWIS cargo volumes grew by 63% Y-o-Y to 14.35 MMT.

? Terminal volumes of 358,863 TEUs reflect 19%

Y-o-Y growth.

? Added Taloja MMLP, Tumb ICD, Loni ICD and

Valvada ICD to terminal portfolio taking total number of MMLPs under management to 11 with one more terminal under construction at Virochannagar.

? I ncreased owned Grade-A warehousing space to ~1.6 Mn sqft area from ~0.8 Mn sqft in FY22

? In the Agri business, operational silo capacity

has been increased to ~1.1 MMT spread over 18 locations with 0.1 MMT capacity in project stage across 2 locations.

? Expanded rolling stock by adding 1 container rake

and 17 new bulk rakes under the GPWIS scheme, taking the total number of rakes to 93.

Financial highlights Revenue

? Consolidated revenue grew by 22% to RS.0,852 crore on the back of well-rounded growth registered by three key business segments - port, logistics and SEZ.

? Cargo volume growth, improved realization, and addition of OSL and Haifa port, enabled port revenue increase of 22% to RS.7,304 crore.

? Revenue from the logistics business stood at RS.,744 crore, a growth of 44% on account of acquisition of Tumb ICD, induction of new rakes

in GPWIS and addition in warehousing capacity.

EBITDA

? Consolidated EBITDA grew by 21% to RS.2,833 crore on the back of a 22% growth in revenue.

? Port EBITDA grew 21% to RS.2,039 crore on the back of growth in port revenues.

? Logistics business EBIDTA grew by 52% to H487 crore on account of acquisition of Tumb ICD, induction of new rakes in GPWIS and addition in warehousing capacity.

Balance Sheet and cash flow

? FY23 net debt-to-EBIDTA stood at 3.1x, within the guided range of 3.0-3.5x.

? Free cash flow from operations after adjusting working capital changes, capex and net interest cost was RS.,416 crore compared to H6,554 crore in FY22. This was mainly due to capex increasing by H5,311 crore in FY23.

? The Board recommended a dividend of H5 per share, a payout of around RS.,080 crore, and 20% of the reported PAT

ESG highlights

? The Company is aligned with Adani Groups vision to plant 100 million trees by 2030.

? Achievement against FY23 ESG targets: The emission intensity and water intensity have improved from last year and achieved the FY23 targets.

? Progress on fuel switch: Achieved switch from fossil fuel to electricity with purchase of 338 electric ITVs for Mundra, Hazira, Kattupalli & Ennore operations. Other equipment like RTGs and quay cranes have been fully electrified.

? Progress on renewable energy sourcing: The company has around 34MW of installed renewable capacity of captive/PPA solar and wind power. An Additional around 250MW of renewable capacity will be commissioned in the next couple of years.

? Carbon offsetting: APSEZ has enhanced its ambition of additional mangrove plantation to 2000 hectares of which 1000 hectares have been completed by FY23 end. Bio-shield of 20 hectares was developed in Bharuch district in which plantation of mangroves and pilu (salvadora persica) have been done to prevent soil erosion as well as conserve marine life and provide fodder for the cattle of nearby villages.

? Stakeholder engagements: Different levels of engagement conducted with customers, employees, suppliers, and communities on ESG- related matters which ensured adoption of best practices and global standards.

? Net-zero planning process: The company has formulated its net zero plan, which will be announced in the second half of the year. This is in line with the commitment made to the Science Based Target Initiative (SBTi).

? Climate adaptation plan: Adaptation measures were identified based on detailed risk and vulnerability assessment done for 12 port sites.

? ESG Investments: In FY 2022-23, we invested Rs 767.4 crore, in projects related to electrification of equipment, rail infra, energy efficiency, emission reduction, environment protection, water management, waste treatment and adaptation to climate change. Overall, RS.84 crore was spent on electrification of equipment of which RS.47.7 crore alone was spent to purchase of electric ITVs and develop infrastructure for its charging and maintenance. Around RS.31 crore was spent on different rail projects like electrification and upgradation of existing lines and equipment, which helped reduce energy use though modal shift and efficiency improvements.

Special Economic Zone

Mundra SEZ is the largest multi-sector SEZ in India. It covers an area of 8,234 hectares. Excellent multimodal connectivity makes the SEZ an attractive investment destination. Cluster-based development approach has been adopted. Mundra SEZ contains an electronics manufacturing cluster, a textile park as well as a chemical cluster. The SEZ currently houses more than 60 Units in various sectors. Moreover, 19 co-developers provide various infrastructure facilities.

The cumulative exports have exceeded H40,750 crore, with exports of H9237 crore during FY 202223. The investment of more than H63,500 crore and employment of more than 26,000 persons (direct & indirect) has already been achieved.

Mundra SEZ is working ceaselessly for attracting new investments in excess of RS.5,000 crore over the next 5 years.

Strategy

? The Company has achieved a constant increase in shareholder yield, market leadership, and growth by improving its capital allotment, diversifying its cargo, securing long-term contracts, increasing efficiency, utilizing capacity better, creating new capacities, and expanding its ports network.

? The Company aims to become a customer-centric transport utility across the port and hinterland with a pan-India integrated logistics footprint, by expanding its logistics portfolio to include rail, logistics parks, warehouses, cold-storage facilities, air freight stations, grain silos, inland waterways, and trucking.

? The Company is focused on anchoring world- class facilities, skills, technology, and a digitized logistics value chain that leverages visibility, analytics, and automation.

? The Company is dedicated to improving environmental conservation and creating a safer society through its Environment, Social, and Governance (ESG) and safety initiatives.

Risks and concerns

APSEZ established an Enterprise Risk Management (ERM) framework for identifying, assessing,evaluating, and managing risks. The framework involves identifying risks, examining consequences, introducing mitigation strategies, and implementing corrective actions. The scope of the ERM framework at APSEZ was as follows:

Strategic and economic risk: The Company faces various challenges, including economic uncertainty,

a potential slowdown, government policies, excessive concentration of business with a few shipping lines or customers, and the need for geographical expansion.

Operational risk: The Company faces various operational risks, such as penalties, theft of shipments,changes in cargo dimensions, damage to assets, and other potential hazards.

Growth risk: The Company faces intense global and domestic competition, which can lead to inconsistent pricing and commercial terms, conflicts with allied infrastructure, challenges in project implementation, and difficulties with mergers and acquisitions (M&A) and integration.

Reputational risk: The Company may face a cynical perspective from stakeholders, particularly in the event of any unforeseen event, accident, or hazard.

Profitability & liquidity risk: The Company faces financial risks such as forex fluctuations, interest rate volatility, difficulties in procuring funds at the right cost, and challenges associated with capital-intensive and lengthy incubation period projects.

ESG risk: The Company faces risks arising from increasing sea levels, natural calamities, fatalities, and noncompliance with foreign standards of governance.

Technology risk: The Company faces risks related to data recovery, system interruptions, cyber security breaches, and the implementation of artificial intelligence and robotic process automation.

People risk: The Company faces risks related to workforce management, including the retentionof existing talented employees, attracting new talent, labour strikes, and excessive dependence on contractual workforce.

Projects completion-related risks: The company faces risks related to regional crisis, pandemic, material and manpower availability.

APSEZs Audit Committee regularly reviewed the risk management report and suggested corrective actions. Risk evaluation was done as per OHSAS 18001 standards and reviewed periodically. APSEZ manages risks through cargo diversification, strategic capacities, long-term contracts, operational efficiency, cost optimization and integrated logistics services.

Human resource development

APSEZ considers its people and culture as a competitive advantage, offering a superior proposition to customers and career opportunities to its employees. The company aims to enhance its businesses and expand into new areas while providing a conducive work environment.

APSEZ focused on building capacity at three levels: the organization, teams, and individuals. It continually improved related systems, processes, and people management practices to enhance employee capabilities.

The Companys average employee age was 41, marked by youth, energy and dynamism. 88% of workforce were engineers or specialized /professional degree holders. The Company motivated employees through continuous re-learning; improved performance was rewarded.

APSEZ has been named the Best Place to Work in the Nation Builder category for three consecutive years. The organization provides excellent career opportunities and offers various interventions for talent and capability building. Professional growth is encouraged through empowerment and decisionmaking opportunities, resulting in improved business responsiveness.

Financial overview

Consolidated financial performance

The Company recorded a total income of RS.2,405 crore during FY23 compared to RS.9,343 crore in theprevious financial year.

The Company generated Earnings before Interest, Depreciation and Tax (EBIDTA) (excluding foreign exchange gain/loss) from operational income of RS.2,833 crore during FY23, compared to RS.0,607 crore in the previous year.

Profit before Tax (PBT) for FY23 stood at H5,489 crore. Net profit for FY 2022-23 was H5,393 crore compared to H4,953 crore in the previous financial year.

Total comprehensive income attributable to equity holders of the parent for FY 2022-23 was H4,774 crore, compared to H4,811 crore in the previous financial year.

Earnings per Share (EPS) stood at RS.4.58 on a face value of RS. each.

Key financial ratios and return on net worth

The key financial ratios compared to the last financial year are as under:

Particulars

Current FY ended March 31, 2023 Current FY ended March 31, 2022

Changes between FY and previous FY

Debtors Turnover

7.63 7.43 3%

Interest Service Coverage Ratio

5.20 4.54 15%

Current Ratio

1.36 1.46 -7%

Debt Equity Ratio

1.09 1.08 1%

Operating Profit Margin (%)

62% 61% 1%

Net Profit Margin (%)

26% 29% -3%

Return on Avg Net-Worth (%)

12% 13% -1%

Notes:

a. The above ratios were based on Consolidated Financial Statements of the Company.

b. Definitions of ratios:

1. Debtors turnover: The revenue from operations divided by the average accounts receivable.

2. Interest coverage ratio: earnings available for debt service (PAT + Interest cost+ Foreign Exchange Loss or (Gain) (net)+Depreciation) to interest cost.

3. Current ratio: Current assets by current liabilities.

4. Debt-equity ratio: Total debt by shareholders equity.

5. Operating profit margin: EBITDA (Excluding Foreign Exchange Loss or (Gain) (net) and exceptional item) by Revenue from Operations.

6. Net profit margin: Profit after tax by Revenue from Operations.

7. Return on average net worth: Profit for the year by average net worth for the year.

9. Operating EBIDTA means operating income less operating expenses, employee costs and other/administrative expenses, excluding foreign exchange gain/loss.

Internal control systems and their adequacy

The Company has put in place strong internal control systems and best in class processes commensurate with its size and scale of operations.

There is a well-established multidisciplinary

Management Audit & Assurance Services (MA&AS) that consists of professionally qualified accountants, certified internal auditors, engineers, MBAs, and SAP experienced executives who carry out audits through the year across all functional areas and submit reports to Management and Audit Committee about the compliance with internal controls, efficiency & effectiveness of operations and key processes risks.

Some key features of the Companys internal controls system comprised:

? Adequate documentation of policies and guidelines.

? Preparation & monitoring of Annual Budgets through monthly reviews of all operating & service functions.

? MA&AS department prepared risk-based internal audit plan with a frequency of audit based on risk ratings of areas / functions. Scope is discussed amongst MA&AS team, functional heads / process owners / CEO & CFO. The audit plan is formally reviewed and approved by Audit Committee of the Board.

? Internal audit process is automated and managed on a documentation platform - Audit Management

System.

? The Company has a strong compliance management system, underpinned by an online monitoring system.

? The Company practices delegation of power with authority limits for approving revenue & capex expenditure.

? The Company uses Enterprise Resource Planning (ERP) System (SAP) to record data for accounting,

consolidation and management information purposes.

? The Company engages external experts to conduct independent reviews of the effectiveness of business processes.

? The Internal Audit is carried out in accordance with auditing standards to review design effectiveness of internal control system & procedures to manage risks, operation of monitoring control, compliance with relevant policies & procedure and recommend improvement in processes and procedure.

The Audit Committee reviews the execution of audit plan and internal audit recommendations including those relating to strengthening the Companys policies & systems on a periodic basis.

Cautionary statement

The discussion hereunder covers the performance of APSEZ and its business outlook for the future. This outlook is based on assessment of the current business environment and government policies. The change in future economic and other developments is likely to cause a variation in this outlook. Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations and others may constitute forwardlooking statements within the meaning of applicable securities, laws and regulations. Actual results may differ from those expressed or implied. Several factors that could significantly impact the Companys operations include economic conditions affecting demand, supply and price conditions in the domestic and overseas markets, changes in the government regulations, tax laws and other statutes, climatic conditions and such incidental factors over which the Company does not have any control. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.