- Investment-grade upgrade reflects confidence in APSEZ’s resilient balance sheet, disciplined leverage and robust earnings trajectory
- Rating agency sees ample financial muscle to fund ₹20,000-crore annual capex while targeting one billion-tonne domestic port capacity by 2030
- Cargo growth from Vizhinjam, Colombo and Australia’s North Queensland Export Terminal expected to accelerate earnings momentum
- Stable outlook signals confidence in prudent capital allocation, though aggressive overseas acquisitions or higher leverage remain key watchpoints
NE BUSINESS BUREAU
NEW DELHI, JUNE 26
In a significant endorsement of its financial resilience and long-term growth strategy, S&P Global Ratings has upgraded Adani Ports and Special Economic Zone (APSEZ) to investment-grade BBB from BBB-, citing the company’s strong cash generation, improving balance sheet and ability to finance an ambitious expansion programme without compromising financial discipline.
The global rating agency assigned a stable outlook, reflecting its expectation that APSEZ will sustain robust operating performance over the next 12 to 24 months while maintaining its net debt-to-EBITDA ratio at around 2.6 times, despite elevated capital expenditure.
According to S&P, the company’s healthy financial position provides substantial headroom to execute its long-term expansion strategy, including increasing its domestic port capacity to one billion tonnes by 2030, up from the current 653 million tonnes.
The agency expects APSEZ’s annual capital expenditure to rise to around ₹18,000 crore in FY27 and FY28, before increasing to nearly ₹20,000 crore in FY29, compared with historical spending of about ₹13,000 crore annually. A significant portion of this investment will be channelled into expanding domestic port infrastructure, particularly container terminal capacity.
S&P also acknowledged APSEZ’s plans to pursue international growth opportunities across Africa and Southeast Asia, while cautioning that acquisitions in jurisdictions with relatively weaker regulatory and macroeconomic environments could affect earnings quality and elevate operational risks.
The rating agency noted that the company’s recently strengthened leverage policy, which targets net debt-to-EBITDA of up to 2.5 times, reinforces confidence that key financial metrics will remain robust even as investment spending gathers pace.
S&P expects earnings growth to be driven by improving capacity utilisation across major assets, including Vizhinjam and Colombo ports, along with a full-year contribution from the North Queensland Export Terminal in Australia. Cargo volumes are projected to grow by around 18 per cent in FY27, followed by annual growth of 7-8 per cent over the subsequent two fiscal years.
The stable outlook also reflects S&P’s expectation that APSEZ will continue to benefit from its diversified asset portfolio, healthy cash flows and disciplined corporate governance by avoiding material related-party transactions outside the ordinary course of business.
S&P said it could consider a further upgrade if the company demonstrates sustained earnings growth without materially increasing exposure to riskier overseas markets while continuing to maintain conservative leverage.
Conversely, the rating could come under pressure if leverage exceeds 3.5 times for a prolonged period or if the company undertakes substantial debt-funded investments beyond current expectations.
