Adani Ports and SEZ on Monday said the acquisition of Adani Agri Logistics from Adani Enterprises a positive due to government's focus on agriculture.

On Saturday, Adani Logistics, a subsidiary of Adani Ports, said it will acquire Adani Agri Logistics in an all-cash deal, which is expected to be completed by March.

In an interview to CNBC-TV18, Karan Adani, chief executive officer, said, "With the government’s focus on developing warehousing at agriculture level, there would be another 6-6.5 million tonne of tenders are expected in next 3-5 years. So, there is a lot of potential in the business."

Talking about the valuations, he said independent valuations were done at arm’s length basis and the acquired company has a lot of growth potential.

According to Adani, Adani Agri Logistics has earnings before interest, tax, depreciation and amortization (EBITDA) of Rs 100 crore, which would likely go to Rs 170 crore by FY22 and expect it to double in the next 3-5 years.

He said Adani Ports will fund the acquisition through internal accruals as the company has a free-cash-flow of Rs 1,750-2,000 crore this year and would not look at increasing debt.

Going forward, Adani expects net debt to EBITDA to go down as most of the company’s debt borrowing is on a long-term basis of 5-10 years.

First Published:Feb 25, 2019 4:19 PM IST