As Adani Ports cuts capex by half for FY21, CONCOR privatisation looks unlikely this year

Adani Ports and Special Economic Zone Ltd (APSEZ) has cut its capex for FY21 by half to Rs 2,000 crore in an indication that the planned privatisation of Container Corporation of India Ltd (CONCOR) will likely be pushed back to the next fiscal.

APSEZ, India’s biggest private port operator, is the strongest contender for the state-run rail hauler of containers.

“It’s too early to say whether CONCOR (privatisation) will happen or not,” Karan Adani, Chief Executive Officer of APSEZ said during an analyst call on Wednesday. “But, we will keep our interests on as of now,” he said.

The government has decided to privatise CONCOR by selling 30.8 per cent of its 54.8 per cent stake in the company to a private company along with transfer of management control.

Apart from APSEZ, Hindustan Infralog Private Limited (HIPL), a joint venture between Dubai-based port giant DP World Ltd and India’s National Investment and Infrastructure Fund (NIIF) and PSA International Pte Ltd, the world’s biggest container port operator by volumes, and fully-owned by Temasek Holdings Pte Ltd, the sovereign wealth fund of Singapore, are expected to bid for the government’s stake in CONCOR.

APSEZ, according to Karan, will keep evaluating the opportunity. “We would look at it more from a returns perspective. We have always said in our capital allocation policy that if we are able to generate an internal rate of return of 16 per cent plus, those are the investments we would look at,” he said.

“Considering the uncertain times in FY21, our focus will be to maintain adequate liquidity and conserve cash. We are organising our operational contracts to optimise costs and boost our margin. We are re-aligning the assets to be deployed optimally to avoid further expenditure. Discretionary capex will be curtailed from an original capex outlay of Rs4,000 crore to Rs2,000 crore. This includes maintenance and necessary capacity expansion at Myanmar and Vizhinjam ports. This outlay can be further reduced looking at the situation going forward,” Karan stated.

In FY20, APSEZ spent Rs 3,615 crore on capex which included Container Terminal 2 at Mundra, cranes, cross-country pipelines for the LPG business, liquid tank farms at Hazira and Kattupalli ports, Berth 3 and 3 A at Dhamra port, purchases of railway rakes and the container terminal at Myanmar.

“Considering the uncertain times where the full impact of COVID-19 is still to be completely understood, we have redrawn our entire capex programme to conserve capital and implement even tighter cost control measures,” Deepak Maheshwari, Chief Financial Officer, APSEZ, added.

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