On Friday, the stock rose 1.86 per cent to hit a high of Rs 716. At this price, the scrip was 26 per cent off its June 9 high of Rs 901. The brokerage has a price target of Rs 890, implying a 24 per cent upside from its current level.
Nomura said the management of
Ports has committed not to provide related party loans to the group entities at the end of FY16. The company has maintained that commitment so far, it said. Receivables from related parties have reduced over FY15-21, providing additional comfort, it said.
The foreign brokerage said related party transactions also appear to be largely cash-positive for Adani Ports, except for FY21, due to the acquisition of a subsidiary. “Even the acquisition and disposal of subsidiaries have been undertaken in line with published related party transaction guidelines. While related party acquisitions of non port-related businesses may not exactly be the most desirable outcome, compliance with established policies provides confidence to minority shareholders that valuations have arrived at an arm’s length basis and the promoter group has not made disproportionate benefits on the transaction,” it said.
Further, Nomura said the management has reduced promoter share pledges significantly from the peak levels of FY20 to below 10 per cent currently. “With negligible loans and advances to group entities and minimal share pledges, we believe Adani Ports is largely insulated from the group’s performance,” it said.
Nomura said Adani Ports’ shareholding and those of other Adani entities are significantly different, thus carrying a limited risk of concentrated fund holdings. It said Adani Ports’ financial performance is largely insulated from the group entities
Besides, Nomura said Adani Group entities, which had been lagging in terms cash flows and weak revenue base prior to FY15, have seen improved operational performance with multi-fold rise in revenues, Ebitda and operating cash flows (OCF). “These entities are still in ‘growth’ phase and have capex requirements, but nevertheless the OCF (operating cash flow) covers interest costs, and we estimate they are financially self-sustainable,” it said.
“Thus, it is highly unlikely in our analysis that these entities will require equity or debt support from ADSEZ in the near future. This provides further evidence that the earlier valuation drag on ADSEZ factoring in the need for supporting either group entities is unlikely to re-emerge in the near future,” Nomura said.
The brokerage has cut FY22 PAT forecast for Adani Ports by 13 per cent to align its volume estimates with that of management guidance, while raising the FY23 PAT forecast by 10 per cent on lower depreciation.
