Adani  Ports  and Special Economic Zone Ltd.-

Converging Strength with sustainability

Girl in a jacket

Date Published: November 20, 2020

Company Overview:

Adani Ports and Special Economic Zone Limited (APSEZ) is India’s largest commercial port operator and integrated logistics player. India’s largest private port and special economic zone, was incorporated as Gujarat Adani Port (GAPL) in 1998 to develop a private port at Mundra, on the west coast of India. The company commenced commercial operations in October 2001. Mundra Special Economic Zone (MSEZ) was incorporated in November 2003, to set up an SEZ at Mundra. MSEZ was merged with GAPL in April 2006. The company was renamed as Mundra Port and Special Economic, to reflect the nature of business. The company is promoted by Adani Group. The group is a business behemoth based in India having a global footprint with interests in Infrastructure, Power, Global Trading, Logistics, Energy, Port & SEZ, Mining, Oil & Gas, Agri Business, FMCG products, Real Estate Development, Bunkering, etc. Mundra Port, India’s largest private port, provides cargo handling and other value-added port services. The port offers a number of locational and logistical advantages. The company operates in Singapore, India and Australia. APSEZ is headquartered in Ahmedabad, Gujarat, India.

Industry Overview:

According to the Ministry of Shipping, around 95 per cent of India’s trading by volume and 70 per cent by value is done through maritime transport. India has 12 major and 205 notified minor and intermediate ports. Under the National Perspective Plan for Sagarmala, six new mega ports will be developed in the country. The Indian ports and shipping industry plays a vital role in sustaining growth in the country’s trade and commerce. India is the sixteenth largest maritime country in the world, with a coastline of about 7,517 km. The Indian Government plays an important role in supporting the ports sector. It has allowed Foreign Direct Investment (FDI) of up to 100 per cent under the automatic route for port and harbour construction and maintenance projects. It has also facilitated a 10-year tax holiday to enterprises that develop, maintain and operate ports, inland waterways and inland ports.

Company Operations:

Dry Cargo Handling & Storage: The Mundra Port has state-of-the-art facilities for the handling and warehousing of dry cargo which include  4 Gottwald and 4 Liebherr mobile harbour cranes with a handling capacity of 750 tons per hour (TPH) per crane,  22 bagging lines capable of 1008 TPH in total,  One 1,000 TPH ship loader,  3.6 km long import and export conveyor system capable of handling 1,500 TPH of import and 1,000 TPH of export cargo,  2 mobile hoppers for direct discharge into the import conveyors,  6 mobile hoppers for direct discharge into dumpers,  Wheat cleaning and rice sorting systems, State of the art fully mechanised fertiliser cargo complex,  03 Nos 20 MTS goliath cranes with vacuum handling pipe attachments capable of handling 8′ to 56′ diameter of pipes, 60 Nos 40 ft trailers for internal transportation,  4 Nos 32 MTS kalmar forklifts,  Wheat cleaning facility with a capacity of 1,200 MT / day,  Rice sorting and grading facilities with a capacity of 500 MT / day,  8 weighbridges for dry cargo and  2 in-motion rail weighbridges.

Storage: 21 closed godowns ad measuring 1,37,000 Sq.Mts. for wheat, rice, sugar, de-oiled cakes (DOC), fertilizer, fertilizer raw materials (FRM), etc, 8,80,000 Sq. Mts Of well demarcated open storage space for steel sheets, plate, coils, scrap, clinker, salt, coal, coke, bentonite, etc, 26,000 Sq. Mtr of open storage alongside rail siding.

Liquid Cargo Handling & Storage: Mundra Port is one of the most facilitated ports for the offloading and warehousing of liquid cargo with the following facilities which include 9 Nos. Dock Pipelines with diameters ranging from 8 inch to 24 inch (including 8′ dia Stainless Steel line), connecting Liquid berths to the shore tanks, Dedicated pump with individual tank for road tanker loading (88 pumps), 88 loading bays for uninterrupted delivery from every tank i.e. 3 road tanker simultaneous loading from individual tank and 12 unloading bays, Bulk Bitumen storage tank facility inside port. 2 tanks each of 3000 Kiloliter and one service tank of 430 KL, Fire fighting, nitrogen, hot water circulation, effluents treatment plant (ETP) and oil-water separator systems, 9 pump houses and 7 Weighbridges in the liquid terminal. Tank terminal with 97 tanks with total storage volume of 4,25,624 kiloliter for storage of various liquids like  edible oils, petroleum products, bitumen in bulk and chemicals, All Pipelines with cup pigging system for pushing pipe line product and effective cleaning of pipe line. Export pumps installed 300×4 Nos. and 500x 3 Nos. cu.m/HR for export from tank to vessel, Encl-9 tanks (16 nos.) with Radar Gauges and Mass flow meters at delivery end, Rail connectivity for vegetable oil loading/unloading

Project Cargo: Mundra Port has many advantages for project cargo handling like Capability to handle oversized and overweight cargo, availability of exclusive sea front/berthing as well as common user berths, Opportunity for on-site manufacturing and assembly in the port backup area, backed with SEZ facilities to set up units in SEZ, provision for barge operations and multiple berth options with possibility of priority berthing of chartered vessels possible.

Rail Transport: The port has 7 railway sidings and two dedicated diesel locomotives and  It can handle double stack container trains.  A 64 km private railway line has been developed which connects the port with the national network at Adipur. Adipur falls on the broad gauge from Mumbai to Bhuj. Adani also has equity stakes in the Kutch Rail Company Ltd. (KRCL), a project by the Indian railways to shorten the distance between the northern hinterland (including Delhi and commercially important cities like Ludhiana) and Mundra Port by providing a broad gauge connection between Palanpur and Adipur.

Road Transport:The Port road is connected to NH 8A. The existing 10 km long external Four lane road connecting Mundra Port is having navigational guidance through various signboards and landmarks at appropriate points.

Marine Services: The company also provides the marine services to vessels like Fresh water services, Bunker services (fuel ‘ HSD / gas oil and lubes) at a competitive price, Reception facilities for sludge and slop,  Garbage collection facilities,  Fire fighting services on demand,  Gangway security,   Fresh provisions and stores,   Bonded store items,   Sign-on and sign-off facility with direct flights to Mumbai,   Medical facilities and the port’s own fleet of tugs.

Bunkering: The Adani Group, promoters of the Mundra Port, run Adani Bunkering Services which offers all grades of fuel oil and gas oil as per ISO specification at globally competitive price. The advantages of bunkering at Mundra Port  includes Compliance with MARPOL Annex VI requirements, Services offered are at par with International Standards, by virtue of two owned-barges and oil terminal inside Mundra Port,  ISO 9001-2008 accredited Bunker Supply Chain Management ensures the quality of bunker fuels ,Internationally acclaimed 24×7 environment-friendly services ensures meeting bunker fuel requirements in time, Two dock lines of 24′ and 12′ for discharge of Cargo, loading of barges and Bunker supply,  Besides Mundra Port, Chemoil Adani’s bunkering facilities can be provided at Kandla, Sikka, Jamnagar and Vadinar,  Road Tank Wagon supplies are available for alongside jetties and  Chemoil Adani Bunkering has procured orders for other Indian Ports such as Mumbai, JNPT, Goa, Cochin, Haldia, Chennai, Vizag and New Mangalore.

Recent Developments:

Adani port signed an agreement with Myanmar Economic Cooperation (MEC) to develop and operate a container terminal at Yangon Port in Myanmar. MEC is one of the major conglomerates and holding companies owned by Burma government. The port will be developed adjacent to Ahlone International Port Terminal (AIPT). Container Terminal Capacity of Myanmar including City Cluster and Thilawa cluster is 1.7 Mn TEUs per annum. Traffic at Myanmar Ports is projected to from presently 1 Mn TEU to almost 3 Mn TEU by 2028. AIPT(2) would be developed across 50 acres of land owned by Myanmar Economic Corporation, the operator of AIPT.

Our View:

Adani Ports and Special Economic Zone Limited (APSEZ) is part of the Adani Group, one of the largest conglomerates in India. The company started its operations in 1998 and has become the largest private sector port developer and operator in India. It operates Gujarat’s Mundra Port, the largest commercial port in India and overall had more than 15 per cent share in India’s cargo in FY18. Other than ports, the company also has interests in integrated logistics and Special Economic Zones (SEZs). Currently, the company operates 10 domestic ports in six Indian states. Increasing investments and cargo traffic point towards a healthy outlook for the Indian ports sector. Providers of services such as operation and maintenance (O&M), pilotage and harbouring and marine assets such as barges and dredgers are benefiting from these investments. The capacity addition at ports is expected to grow at a CAGR of 5-6 per cent till 2022, thereby adding 275-325 MT of capacity. Under the Sagarmala  Programme, the government has envisioned a total of 189 projects for modernisation of ports involving an investment of Rs 1.42 trillion (US$ 22 billion) by the year 2035. Ministry of Shipping has set a target capacity of over 3,130 MMT by 2020, which would be driven by participation from the private sector. Non-major ports are expected to generate over 50 per cent of this capacity. India’s cargo traffic handled by ports is expected to reach 1,695 million metric tonnes by 2021-22, according to a report of the National Transport Development Policy Committee. Within the ports sector, projects worth an investment of US$ 10 billion have been identified and will be awarded over the coming five years. Company’s ports handle diverse cargo, including containers, coal, crude, minerals, chemicals and agri-commodities. The cargo volume continue to surpass the industry growth rate, primarily on account of geographically diversified presence, segmented cargo profile, highly integrated operations and long-term customer contracts. As per the mean estimates of earnings projections made by brokers at Bloomberg, the estimated EPS (consolidate) for FY2020 and FY2021 stands at Rs.22.31 and Rs.25.94 respectively as compared to EPS of Rs.19.27 for FY 2019. The stock is trading at a PE of 15.67. Therefore, taking into consideration the aforementioned facts Adani Ports and Special Economic Zone Ltd appears to be a good buy with short term perspective.

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