Adani Ports has signed agreements to acquire 39% of Gopalpur Port from Orissa Stevedores Ltd. (OSL) and 56% of the port from real estate tycoon Shapoorji Pallonji Group (SP Group). This is an important move by the Adani Group to enhance its hold further over the port sector. The completion of other prerequisites and statutory approvals are prerequisites to the transaction. Earlier in Feb 2023, Adani Group paid $1.2bn for acquiring Haifa port. This was done to increase trade between India and Israel. Ultimately, both these acquisitions helped the Adani Group fight the Adani crisis.
This calculated action (Acquisition of the Gopalpur Port) enhances the Adani Group’s standing in the logistics industry. Adani Ports can increase its cargo handling capacity and serve the expanding eastern Indian market by using Gopalpur Port, which has a capacity of 20 million metric tons per annum (MMTPA). A wide variety of dry bulk cargo, such as limestone, ilmenite, coal, iron ore, and alumina, are handled by Gopalpur Port. The Adani Group’s objective of creating an integrated logistics network will be advanced by the acquisition.
Strengthening APSEZ’s Integrated Logistics Approach
Karan Adani, the Managing Director of Adani Ports, stated that “GPL (Gopalpur Port) will add to the Adani Group’s PAN-India port network, east coast vs. west coast cargo volume parity and strengthen APSEZ’s integrated logistics approach.” The integrated logistics approach of the Adani Group pertains to their method of establishing a cohesive network spanning several logistics sectors. The goal of this network is to provide clients with a one-stop shop by streamlining the flow of supplies and goods.
Approximately twelve ports and terminals on India’s east and west coasts are being developed and run by APSEZ. Contingent consideration of ₹270 crores is expected to be payable after 5.5 years in addition to the enterprise value if certain requirements are met as per the agreement with the sellers.
Acquisition Approach
Early in December 2023, there were hints of an agreement for what would turn out to be Adani Port’s sixth multipurpose facility on the eastern coast. Their current capacity, which is around 247 million tonnes (MT), would be strengthened with this acquisition, increasing their influence in this area and helping tackle the Adani crisis with ease.
Subsequent reports had indicated a discrepancy in estimates since JSW Infrastructure had earlier discussed the asset at an enterprise value of ₹3,000 crores with the Mistry family of the SP. According to an Economic Times story, the enterprise value of Gopalpur Port is $600-650 million (₹5,000 crore), and the equity value of SP Group is expected to be between $240 and 260 million (₹2,000 crore). As of February 2023, the port’s long-term bank facilities were valued at ₹1,432 crores, according to credit rating firm Care Edge.
Strategic Significance of the Gopalpur Port
Located between Paradip Port and Vizag Port on the Bay of Bengal, Gopalpur Port is strategically situated and largely serves the steel industry. Its railway sidings and NH-516 connectivity to the Golden Quadrilateral make it an essential facility for cargo handling. It has been in service since 2015. Because the port is free to charge market rates without being restricted by TAMP (Tariff Authority for Major Ports), more value-added services are possible.
Adani Ports has experienced a notable increase in cargo volumes year over year, with second-quarter totals of 101.2 MT, including a 24% increase in container volumes. The company has not altered its forecast for volume expansion, with goals of 390-400 MT and 500 MT for FY24 and FY25, respectively. The upward trend in the stock price of the company subsequent to optimistic brokerage outlooks suggests that investors have faith in the company’s strategic direction.
Conclusion
Adani Ports has made a big step toward its goal of improving the Indian logistics industry with the acquisition of Gopalpur Port. By properly balancing their footprint across the nation, this move not only strengthens their integrated logistics network and freight handling capability but also gives them a solid foundation on the eastern coast. Given the well-established infrastructure and effective connectivity of Gopalpur Port, Adani Ports is in a strong position to meet the expanding needs of the eastern Indian market, especially the steel sector. This acquisition strengthens Adani Group’s position as a significant player in India’s maritime trade environment. It is in perfect alignment with the company’s ambitious goal of building a complete logistics network and building a positive brand image with no existence of any Adani crisis rumours.
Additionally, optimism about the company’s strategic orientation is reflected in the rising stock price, which indicates growing investor confidence in Adani Ports. Adani Ports’ anticipated growth trajectory will be greatly aided by the successful integration of Gopalpur Port, which will help them reach their challenging cargo volume goals in the upcoming years. It would be interesting to watch how Adani Ports uses this acquisition to open up new opportunities and reshape the logistics landscape in India as they continue to broaden their reach and improve their integrated logistics approach.
