Shares of Adani Ports and Special Economic Zone tanked as much as 9.1 per cent to Rs 322 on Monday in its biggest intraday per cent drop since January 28 after Adani Logistics, a unit of Adani Ports and SEZ on Saturday announced that it would be acquiring Adani Agri Logistics from Adani Enterprises in an all-cash deal.

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"The transaction is proposed at an enterprise value of Rs 1,662 crore,” a statement said. Post the acquisition, the combined business EBITDA (earnings before interest, tax, depreciation and amortisation) will immediately double to Rs 200 crore, it added. The deal is expected to close by March 2019.

Adani Agri Logistics will add 28 locations and 7 trains to Adani Logistics network. “AALL targets to double infrastructure capacity in the next three years and tap the new 12.5 MMT infrastructure market as well as opportunities such as conventional storage conversion, among others,” the statement said.

Adani Ports shares were currently trading at Rs 325, down 8 percent from its previous close on the NSE. Adani Enterprises was down 2 percent at Rs 125.60. In comparison, the front-line Nifty50 was trading 0.2 percent higher at 10,809.

Moreover, Citi has downgraded Adani Ports to ‘neutral’ from ‘buy’, saying that the acquisition appears expensive and raised questions on capital allocation of the company. The brokerage believed that the acquisition might lead to a resurgence of investor concern around related-party transactions. Citi cut the target price to Rs 385 from Rs 500 per share.

Talking to CNBC TV18, Karan Adani, CEO of Adani Ports said, "With the government’s focus on agriculture sector increasing, the acquisition will be a positive step. It was intended to create presence in the logistic sector.

The company expects doubling of EBITDA in next 3-4 years. Current EBITDA is at Rs 100 crore. Going ahead, they also expect the net debt to EBITDA to come down. The net debt to EBITDA is currently at 2.75x.

"Most of the debt borrowing is on long term basis of 5-10 years. Independent valuation of the deal was done by E&Y," Adani added.

First Published:Feb 25, 2019 11:36 AM IST