Mumbai: Investors in Adani PortsNSE -2.28 % balked at the company’s acquisition of Adani Agri Logistics from a group company as analysts termed the buyout as expensive and questioned its corporate governance practices.
Adani Ports and SEZ shares tumbled 8.26% on Monday to close at ₹324.85 on worries the acquisition would increase the net debt of the company from ₹17,662 crore to ₹18,400 crore. Analysts said the company will not benefit from this acquisition at least till 2024-25.
“The street isn’t happy as the acquisition is expensive and there is uncertainty on the capital allocation along with the lack of transparency in the company which has caused the share price to tank,” said Umesh Mehta, head of research at Samco Securities.
Adani Ports announced the acquisition of Adani Agri Logistics, a 100% unlisted subsidiary of Adani Enterprises, for ₹950 crore, at an enterprise value (EV) of ₹1,680 crore. The deal is valued at 16.8 times FY20 estimated EV/ EBITDA (operating profit) – a valuation matrix that measures the total value of a company, including debt, against the earnings from operations.
“This acquisition value appears excessive, especially in light of negative RoE in FY2018,” said Atul Tiwari, analyst, CitAnalysts said Adani Agri is a loss making company, which is expected to turn profitable in FY22. It is estimated to pay ₹81crore interest, which is 82% of EBITDA. The acquisition will reduce the company’s interest costs.
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