The Indian ports and shipping industry plays a vital role in sustaining growth in the country’s trade and commerce, with 95% of India’s trading by volume and 70% by value being done through maritime transport. India has a vast coastline of over 7,500 km and has thus 12 major ports and 205 minor intermediate ports. The government has identified a speedy development of this top priority sector and taken several measures like improving cargo traffic by increasing the major ports capacity by over 50% to over 3,000 MT in the next two years. It has also allowed Foreign Direct Investment of up to 100% under the automatic route for port and harbour construction and maintenance. Plus it has also given a 10 year tax holiday to companies that develop, maintain and operate ports. A company which has build a formidable presence in the Indian port infrastructure and logistic services sector is Adani Ports and Special Economic Zone Limited. It is a port infrastructure company engaged in the business of developing, operating and maintaining port and its related infrastructure facilities, including the Special Economic Zone. The company provides port services such as logistics and infrastructure by moving goods from the ports to a range of customers such as terminal operators, shipping lines and agents, exporters, importers and other port users. Adani Ports is the largest port developer and operator in the country representing 24% of the total port capacity. The categories of cargo handled by the company are bulk, containers and crude oil. The company has 10 strategically located ports and terminals spread across five states of India, including Gujarat, Goa, Andhra Pradesh, Tamil Nadu and Odisha. Presently, it is building a new port in Kerala. In March 2019, Adani Ports acquired 100% in a rail based logistic firm Innovative B2B Logistic Solutions for an enterprise value of Rs. 331 crores. With this acquisition, Adani Ports will strengthen its presence in the North and East to become the largest private rail and logistic park operator in the country. The company posted strong Q4FY19 numbers with net profit rising 38% at Rs. 1,285 crores and margins up by 66% in the same period. The overall Q4 volume was up 18% led by rebound in coal and container transportation. The management expects Adani Ports to see revenue and EBITDA growth at around 12% and 15% respectively in the next one year. The company has taken several positive measures for analysts to merit the Adani Ports stock as a strong buy. Measures such as bringing down cost, enhancing non port revenue, diversifying geographically and integrating the operations wisely should take the company to new heights in the future. Plus, the Indian government’s renewed focus on development of ports and improving marine transport traffic should be positive for the company. Analysts expect the Adani Ports stock quoting at Rs. 416 to be a good buy for one year time frame with a 20% price appreciation target.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

 

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