Adani Group’s Subsidiary Acquires Krishnapatnam Port Company Ltd for INR 13,500 Crore

The Indian multinational conglomerate firm, Adani Group is presently seizing deals in the port industry. In the East Coast, the company holds several ports viz. Vizag, Kattupalli, Dhamra, Kamarajar, Krishnapatnam, and Kattupalli.

Recently, the conglomerate firm has added another port in its share. Adani Ports and Special Economic Zone Ltd (APSEZ) has acquired Krishnapatnam Port Company Ltd in Andhra Pradesh for INR 13,500 crore, The Hindu BusinessLine reported. 

With this acquisition, the traders are tensed that the Gujarat-based firm will dominant in the East coast of India. The situation, in turn, leads to a monopoly of Adani Group in the offing. 

“The KPCL acquisition will accelerate the company’s fiscal 2025 vision of handling 400 mt of cargo.” Karan Adani, CEO at APSEZ, said in the company’s official statement.

“With the experience of successfully turning around acquisitions of Dhamra and Kattupalli ports, the company is confident of harnessing the potential of KPCL,” Adani added.

Why is APSEZ’s Latest Acquisition Worrisome for Industry Traders ?

Over the last two decades, the subsidiary of Adani Group, APSEZ has largely increased, thus, enhancing its overall market share.  According to the cited media report, the company holds approximately 27 per cent share in India’s aggregate port traffic of more than 1,200 million tonnes. Its market share has plummeted upward from 22 per cent to the recent 27 per cent, prior to KPCL’s procurement.  

“Consolidation by private port companies will create a monopoly situation. While the 12 major ports are operating under different entities and competing with each other, the private ports are consolidating their positions and taking cargo from government ports,” an industry source said in an interview with Hellenic Shipping News.

Another thing that strains the industry traders is growing presence of APSEZ in the east coast. The company eyed the east coast eight years ago  and so far, has held five eastern ports--Vizag, Kamarajar, Dhamra, Kattupalli and Krishnapatnam. It has invested INR 22,000 crore in aggregate for the acquisition of the eastern ports. According to BusinessLine, the MNC conglomerate firm, Adani Group decides to infuse more than INR 50,000 crore at Kattupalli, Tamil Nadu in order to secure its place in the long run.

By acquiring KPCL, the company will have an additional benefit as a single ship will move goods and other commodities from Dhamra port, Orissa to Mundra, Gujarat and also, touch nine ports--Dhamra, Ennore, Vizag, Kattupalli, Hazira,  Vizhinjam, Mormugao, Dahej, Mundra and Tuna. In all these ports, the company carries out its operations extensively.

Future Plans 

Besides Kattupalli’s acquisition, the parent company of APSEZ has strategic planning to handle coal through its big coal mine project in Australia. Under the new project, the company will develop coal mine as well as railway to the port named Abbots Point. From this port, the coal will be shipped by Very Large Bulk Carriers to the eastern coast. Earlier on, Kattupalli was decided to be discharging port.

However, that involved building a very expensive outer harbour and breakwater to cater to the deep drafted VLBC. There are protests due to beach erosion and environmental issues. Krishnapatnam provides a better and far cheaper alternative. Some of the coal will also go to Dhamra for the Jharkhand/Odisha market, an industry source said in an interview with the cited media agency. 

In the last year, KPCL administered approximately 41 megatonne plumetted upward from 33 megatonne (in 2017-18). New power projects establishing close to Krishnapatnam port will require coal in over 40 mtpa. Further, KPCL is a center for managing edible oils as several edible oil manufacturing units are rooted there like Adani Wilmar, Edible Oils and Emami Foods.

“Acquisition of KPCL complements APSEZ’s existing port portfolio by diversifying its concentration away from the west coast of India. The company management say that the ratio of cargo volume in the western and eastern coasts will shift from the current 80:20 to a more balanced 55:45 following the acquisition. The transaction will also enable the company to tap the coastal cargo market such as shipping of coal from Dhamra to Krishnapatnam,” Fitch Ratings said in an interview with The Hindu BusinessLine. 

By procuring KPCL, APSEZ’s market share will surge and in turn, increase diversity--geographically and cargo structure. Further, the company will address the needs of remote areas of Andhra Pradesh that are not offered services by the current ports.  

In a recent deal, Adani Group’s logistics arm, Adani Logistics acquired Adani Agri Logistics from Adani Enterprises in an all cash deal; Adani Agri Logistics was valued at INR 1,662 crore. The transaction led an increase of 8 per cent in APSEZ’s share.

“The acquisition raises many an eyebrow on the related-party transaction. Historically, APSEZ has had related-party transactions involving loans and advances towards other group companies. Even good assets are getting bought out in this transaction, it would still weigh on the stock performance in the near term,” Edelweiss Securities said in an interview with The Economic Times.