Adani Ports & Special Economic Zones Ltd Share Analysis: Business Model, Future Growth & Strategic Aquisition

“Is Adani Ports the Future of India’s Logistics and Global Trade?”

Many people don’t know that the maritime transport constitutes for 80% of the global trade volume. This simply means that an efficient port industry of a country is instrumental in well-optimized supply-chain, which is responsible for driving economic growth by serving as key hubs for the transportation of goods, people and resources. Moreover, it not just helps to reduce transportation costs & increasing trade efficiency but also provide access to various businesses for global markets resulting in industrial growths. As far as India’s port industry is concerned, along with 12 major and 200 minor ports 95% of India’s total trade volume with 705 of the trade value is handles of its port industry. And with such a significant importance of economic values it contains, India don’t own even a single trans-shipment port with its huge coastline and strategic position in the Indian ocean. Because of this, the shipping industry of India is facing several challenges such as heavy reliance of foreign ports, inadequate port capacity, outdated & inefficient cargo handling equipment.

Admits all such problems of the industry, there is one company in India which is capitalizing on this opportunity and if successful, then could be considered as the game-changer of the Indian port industry. And the company which we are talking about is none other than the Adani Ports & Special Economic Zones Ltd (APSEZ), which is one of the key players in this sector.

About The Company

Adani Ports & SEZs Ltd is the India’s largest private commercial port operator responsible for addressing a massive 25% of the country’s total cargo movement. The company’s portfolio of ports composed of 13 national & 2 international ports having strong presence in both east (with 38% of capacity) coastline & west coastline (with 62% of capacity). The company’s domestic ports such as Mundra, Hazira, Dahej, Kattupalli, Innore, Dharma, Krishnapatnam, Ganvaram, and more. The company also strengthen its position as a global port operator by acquiring the one of the largest ports of Israel i.e. Haifa port & is also developing west container terminal (WCT) in the Colombo port of Sri Lanka. The most important of all to note is that the Haifa port in Israel of the company would act as an intermediary to connect Europe with India under the IMEC corridor which is considered as a game-changer in India’s economic diplomacy and global logistics. The bold move of acquiring Haifa port would bring a strong revenue growth as it already handles half of Israel’s container traffic & long-term trade volume growth as it would be a key hub for IMEC corridor.

Business Model and Revenue Streams

The core business of port operations is the major contributor to the company’s revenue. The port operation is further broken down as cargo handling, vessel-related charges and storage & warehousing fees. In cargo handling segment the company charges its fees for loading & unloading the cargo based on per metric tons or per twenty-feet-equivalent (TEU). Another one is vessel-related charges which the company levied for using its port infrastructure, mooring & unmooring services, safe navigational assistance, etc. These charges are paid by either shipping company, cargo owner or by vessel operator. And the last but not the least, is its warehousing & storage segment. By offering various services like inventory handling, bulk-storage solutions, security & monitoring, special handling for flammable liquids, temperature requirements, etc. The company can generate a good amount of revenue and income along with provide all necessary services related to ports and logistics to satisfy customer needs and convenient.

Another revenue stream for the company being its logistics & rail-freight business. Through its multi-model logistics parks for storage hubs, the company provides last-mile connectivity solutions for easy move of container and vessel goods. For the purpose, the company possesses an impressive 690 km of private railway line along with various types of 127 dedicated trains such as double-stack & single container trains as per the requirements.

The company operates special economic zones (SEZs) at Mundra port, Gujrat, with a commercially subsidized space of more than 15,000 hectares. The company get regular lease rentals for 30-50 years of leasing contracts and often gets one-time upfront payment of leasing rents by many companies for securing high-demand industrial areas. The duty exemptions, tax benefit and other incentives are the key reasons for attracting many companies to set-up leasing contracts with Adani Ports & Special Economic Zones Ltd.

Along with the above-mentioned revenue streams, many other segments such as international port operations, dredging services, marine services, third-party pot operations and more also contributes a significant amount to the company’s total revenue specially the international ports.

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Financial Performance

For the first three quarters of FY 2024-25, APSEZ exhibits a strong growth in both revenue and net profitability. The company has delivered an incredible 32% up move in its net profits of ₹8,039 crore on comparing with previous year's first three quarter net profit of ₹6,089. The revenue growth also shows a significant up-move 13% year-on-year to ₹14,627 for the H1 2024-25.

In addition to that, the company maintains a healthy operating profit margins & net profit margin of 52.63% and 25.53% respectively. At last, the company rebounds from a negative net cash flow of ₹75.5 billion to a positive net cash flow of ₹4.5 billion.

Note: - All the above date in the given table for FY 2024-25 may vary as the financial year haven’t yet finished.

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The Secret Weapon of The Company: Vizhinjam International seaport

Vizhinjam international seaport is going to be the first trans-shipment & largest port in the Indian port industry of the country, jointly developed by APSEZ Ltd & Government of Kerala under the public private partnership (ppp) model. The construction of this port is a need of an hour because currently 62% of the country’s cargo is handle by foreign countries like Sri Lank, UAE, and Singapore. The VIzhinjam international seaport is located near Thiruvananthapuram, Kerala, which is just 10 nautical miles away from the international shipping route leveraging it to become a trans-shipment hub in the Indian ocean. The construction of this port is stated from 2015 and is expected to be finished till 2019, but due to covid outbreak and Russia-Ukraine war, the construction is expected to be complete till 2025. The total cost of developing this port is nearly about ₹7,600 crore. The total handling capacity of this port is about 20,000 to 24,000 TEUs on full expansion. It would not just reduce the maritime trade dependency of India but also increase the company’s market share for the international market as well.

Final Thought

From the above discussion, it’s clear that the company enjoys a strong monopoly on the entire port industry of India. The strong financial growth, aggressive expansion in the international as well as in domestic markets clearly indicates a strong growth potential ahead. The company's have a strong capability of playing a critical role in the upcoming advanced trade route known as the IMEC corridor. The company’s Vizhinjam port is set for India to become a trans-shipment hub in the Indian ocean. The company end-to-end logistics services through railway lines, warehousing and special economic zones (SEZs) are its competitive advantage which force every other customer to choose Adani Ports & Special Economic Zones Ltd, as their cargo handling partner for their businesses.

Frequently Asked Questions

Why Adani Ports & Special Economic Zones Ltd has potential to generate huge return?

The Adani Ports & Special Economic Zones Ltd has potential to generate outstanding returns mainly because of its Haifa Port in Israel and Vizhinjam Port in India. Haifa port of Israel is responsible of handling half of the country’s cargo, while Vizhinjam port in India would be the first trans-shipment port of India and would be a trans-shipment hub in the Indian ocean as well.

What are the associates with Adani Ports & Special Economic Zones Ltd?

As the company operates in the port industry, it would face several challenges as the other companies in the same industry which are regulatory and policy risks, geopolitical and trade risk. The company’s huge debt might become as a key threat in the future.

Does Adani Ports & Special Economic Zones Ltd operate any port in Australia as well?

The Adani Ports & Special Economic Zones Ltd operates the Abbot Point Terminal in Australia. The company took it for 99-years of lease in the year 2011 for approximately $1.83 billion for primarily exporting coal from the coal mine of Adani Group located in Galilee Basin.

DISCLAIMER: we are not SEBI –registered, all the above information is for education purpose only, consult with your financial advisor or do your own research before investment.