PROJECT FINANCE

Adani Logistics
Submitted to: Dr. Anupam Rastogi

Kanishk Dua J037

Khushboo Aggarwal J022

Nimish Chaudhary A056

Prasham Goel F012 Submitted by

Crew IV 
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INDUSTRY OVERVIEW

Indian Market Growth Drivers

Government • ₹100 crore for the • With the new regime,
• India’s rank in the World Bank’s Logistics Performance Index (LPI), has gone up from 54 Policies ‘Gati Shakti’ master Trade the trade policies have
in 2014 to 44 in 2018 basis the overall logistics performance plan Policies enhanced & improved,
• Market is largely fragmented with a high number of unorganized players in the market , • National Logistics that has promoted
Policy introduced by trade with different
however, there has been a recent trend of rise in the number of organized players the government, is nations, thereby
• The market is currently estimated USD 215 Billion and set to grow with CAGR of 10.5% , further designed to allowed to amplify the
promote seamless international business
with its employment being at 22 million people directly. movement of goods. as well.
• The industry has also been able to get investments from around the country

Industry Trends Infrastructure • India’s infrastructure • A lot of attention is

in the last decade Logistics & being paid to the
has improved Private Indian logistics market,
massively which has and that can be seen
improved the Investment from the logistics
capacity of the s center, warehouses,
logistics and logistics parks
infrastructure.

Outlook
• There has been decline in demand of the logistics sector seen during the lockdown phase,
however, the demand for logistics service has increased. This can be seen from how the logistics
market is expected to grow in the recent future. Currently pegged at 215 Billion, and is growing
with the rate of 10.5 CAGR.
Major Ports: Average Output per ship berth- • It is expected that the industry set to expand into Tier-2, Tier 3 and Tier 4 cities as well.
day Moreover, with WFH becoming more prevalent, there has been a shift in the resource to smaller
towns, which has lead increase in local consumption of daily requirements.
Source: Statista
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COMPANY OVERVIEW

Business Description Peer Analysis

 Adani Logistics is an end-to-end logistics service provider in India that has presence across all
D/E
major markets. It specializes in handling customers across segments such as Auto and Grain 1.49 ROCE(%)
1.33
Handling, Industrial, Containerized, Retail, Bulk, and Break-Bulk.
9.33%
0.72 7.42%
5.49% 4.89%
 However, it is a wholly owned subsidiary of Adani Ports and Special Economic Zone Limited 0.36 2.14%
(APSEZ), which is the flagship company of the Logistics and Ports vertical of Adani Group. 0.03 0
s Z in n s s
s tic SE ha tio st
ic
st
ic
gi P C r a g i g i
o A
pl
y po Lo Lo
Business Model Ownership Structure n iL p or L ra
da Su rC VR in
d
A re i ne a h
As Adani Logistics operates as tu ta M
Fu on
a subsidiary of APSEZ and C -28.34%
enjoys the benefits which its
sister concerns have to offer, 15%
which allows it to maximize
the synergy benefits. 4% Structure
Cargo Composition
and footprint
(Q1inFY21)
India
Moreover, APSEZ has made an
end-to-end supply chain
solution with building 18%
infrastructure in all aspects of Adani Group
Logistics services. This 64% (63.74%)
infrastructure can be seen
from how the logistics services
cover more than 50% of the APSEZ
industrial areas of the country
and the strategic locations of
(100%)
the park, cold storages etc. Promoter & Promoter Group
Foreign Institutional Investors Adani Adani SEZ &
Adani Ports
Insurance Companies Logistics Land
Indian Public and Others
Source: Company Filings
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Deal Structure

Adani’s expansion or acquisitions have mostly been done through a financing option in
the following ways:
1. Companies using borrowed funds to buy equity in other group firms
2. Group Companies lending to each other
3. Lending from subsidiaries to holding companies
4. Adani Group raises funds from Overseas through debt and equity
5. Deal will be financed using 90% debt and 10% of the total bid with the cash reserves
of APSEZ.
6. Of the Total Debt to be issued, APSEZ, will raise funds through various sources:
1. Borrowing Money from the different group companies of Adani Enterprises
approx. amount will be 10% of the total bid amount. As this will be lending
from one company to other, the rate of interest which shall be charged be
very less as compared to that of the market
2. The remaining money will be financed through, the issuance of the bonds in
the capital market with different maturity period, starting from FY2031.

• 4 bonds shall be issued, each of value Rs 4000 CR, with the maturity
period Of 2031, 2036, 2041, and 2046

Source: Articles and Company Filings

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DEAL OVERVIEW

Why there is a heavy competition for CONCOR Bid?

CONCOR
Current Market Valuation • Government is giving up the management control
• CONCOR has a  market share of over 70 percent in the container
(41,123Cr) train segment, and a network of 63 terminals – including four
strategic tie-ups— in India
GOI Share ( 54.8%) • CONCOR have 60 inland container depots, 250 rakes, as well as it
has 12 Multi-Modal Logistics Parks.

Up for Bid ( 30.8%)

7,393 Crore
( Current value of the CONCOR’s
share open for bidding)
Synergies
• CONCOR owns inland ports- called dry ports
• Dry ports provides rail transport for containers
• CONCOR also handles cold-chain and air cargo
• Having CONCOR in its pocket can help Adani increase its capacity
which otherwise might take 10 years
Source: Company Filings
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VALUATION
Adani Logistics Limited
Highlights Key Financial Indicators
• ROCE of 2.14%
 It operates as a wholly owned subsidiary of APSEZ.
• Has an EBITDA margin of 37.07%
 It operates 60 rakes, of which 43 are container, 9 are GPWIS, 1 is AFTO, and 7 are Agri Rakes.
• Revenue as per FY 21 is 110 cr
 The company also has 400,000 sq ft of space for warehousing, more than 5,000 containers, 0.9 million metric
• Boast the lowest DE ratio of 0.3 among all competitors.
tonnes of grain silos, and lastly 6 inland waterways vessels.
• Company moving towards being debt free.

Company Assumptions
Critical Assumptions
Debt (in ₹Cr) 9.6

Equity (in Cr) 665

Enterprise Value • Company’s revenue has been forecasted using industry’s
Proportion of Debt 1.45%
expected rate of growth of 10% over 10 years.
Proportion of Equity 98.55%
23,197 crores
• Data was not available due company not being listed due to
Cost of Debt (Kd) 6.0% which capital WIP is kept constant
Tax Rate 22% • Terminal growth of 7.5% is assumed going forward as per

Beta 0.9 the market expectation.

Capital Market Assumptions
Post-tax Cost of Debt 4.68%
• Pre covid percent of non contemporary income is assumed
Risk Free Rate (Rf) 2.5%
going forward.
Cost of Equity (Ke) 8.71%
Long-term Market Risk 6.9%
WACC 8.65% Premium
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BID FOR CONCOR INDIA LIMITED

Key Drivers
DCF Valuation Bid Amount
Cost of Equity (Ke) 8.31% 20,000 crore • Provides an opportunity of capturing a bigger market share for ALL.

Risk free rate 2.5% • Very high synergy between CONCOR and ALL as they both serve in same
industry and have similar business model.
Expected Market Return (Rm) 6.9%
• Government is key stakeholder in the company thus reducing negative political
Effective Tax Rate 22% Enterprise Value impact.
Proportion of Equity 98.55% • Boast the highest inventory turnover ratio of 266.71.
41,123 crores • Asset Turnover Ratio 52.35% is highest among key competitors signifying
Pre-Tax Cost of Debt (Kd) 6.0%
efficient asset and inventory management.
Post Tax Cost of Debt (1-t)*Kd 4.68%
• Brings a vast network of railway sidings, and vehicles.
• Has multiple suitors for bidding and therefore expected bid will be over twice
Beta 0.85
Stake up for Bid
enterprise value.
WACC 13.69% 7,393 Crore
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RISKS AND MITIGATION STRATEGY

Risks to lender and mitigation strategy General Risks
Mitigation

The company operates on the basis on
permissions and allowances given by various
1) Regulatory risk countries and hence a change in regulation
could impact its operations and cash flow.
This is an additional risk which the covid
pandemic has generated where there is
uncertainty regarding delivery of quality
2) Service quality risk customer service which was committed to
them in the situation of supply chain
disruptions.
The company has a proactive in-house • Macro-economic risk High
team to identify such possible changes in
regulation in advance to prepare actions to
be taken to restore operations.
• Competition risk High
The company provided additional benefits
beyond the contractual obligations and also
closely monitored its actions to identify • Geographic risk Low
diversions.

• Demand and safety risk High/Low

This refers to the inability to implement the
3) Project management project as per schedule which might create
additional costs and delay project completion
risk
affecting the long-term viability of the project.
The company has in place processes to
check supply chain and resource
management, technical difficulties and
other issues creating hindrance in project
completion. • Environment risk Low

This is a risk of the company failing to service The company tries to maintain its
its long-term debt which affects its future investment grade rating and works with a
4) Debt repayment risk capability to raise debt, credit rating and safe buffer of 3 times the amount to be
interest rate at which it can raise debt. paid to the lenders.

Loans taken in foreign currency create an
exchange rate risk increasing the amount of
5) Currency risk money to be repaid during unfavorable
currency fluctuations and negative impacts of
currency depreciation on income.
The company tries to maintain a sufficient
portion of its debt in Indian currency and
hedges its foreign debt with export income.
Marketable securities, receivables, advances and loans can expose
the company to numerous kinds of credit risk.
Monitoring the credit quality of the counterparty
Requiring credit support from financial institutions

Source: Company Filings

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