Adani Ports’ latest deal raises growth concerns—markets aren’t impressed

Adani Ports and Special Economic Zone Ltd’s acquisition of a coal export terminal has some analysts questioning its growth prospects. While the deal is expected to strengthen Adani Ports’ global footprint and bring it closer to its 2030 cargo target, not all investors are convinced. 

The stock is down 1.4% since the announcement, with an intraday drop of up to 4% on Monday—marking the steepest two-day decline in two weeks.

On Thursday, the Gautam Adani-promoted company said it would acquire Abbot Point Port Holdings Pte Ltd, the parent of North Queensland Export Terminal (NQXT), for AUD 3.98 billion (approximately ₹21,783.33 crore). The seller? Carmichael Rail and Port Singapore Holdings Pte Ltd—a Singapore-based entity controlled by the Adani family. 

The deal will be funded by issuing 143.8 million equity shares, effectively transferring ownership of the Australian coal terminal back to Adani Ports from its promoters after more than a decade.

Read this | Norway fund giant Norges cuts off Adani Ports

The deal still awaits key approvals, including from minority shareholders, the Reserve Bank of India, and Australia’s Foreign Investment Review Board. 

Meanwhile, the terminal has had its share of setbacks: it struggled to attract outside funding and required the Adani family to step in and repay $500 million to bondholders in late 2022. In 2020, it also lost a major access fee lawsuit, with the Queensland Supreme Court awarding over $100 million in damages to four companies, according to news reports.

“There have been environmental concerns around NQXT that haven’t entirely gone away,” said Shriram Subramanian, founder and managing director of proxy advisory firm InGovern. “Valuation is another aspect that merits attention, particularly since this is a related-party transaction, a factor that naturally invites closer scrutiny by investors.”

That said, he acknowledges the company’s earlier decision to divest from the Myanmar port project as a sign of its sensitivity to global investor expectations. While there are some valid questions around the deal, it is clear the company has made efforts in the past to align with broader stakeholder concerns, Subramanian added.

Read this | Mint Explainer: What are related party transactions and why do they run into controversies

Valuation without growth?

From a valuation perspective, the numbers are puzzling. 

NQXT was valued at 17x EV/Ebitda in FY13, when Adani Ports sold it to its promoter group. The FY25 estimate? Still 17x, according to the company’s presentation.

Read this | BlackRock buys nearly third of Adani group promoters’ $1 bn private bonds

In an 18 April note, Nuvama Institutional Equities, which has retained its buy rating on the Adani Ports stock, said the AUD 3.98 billion valuation (enterprise value, including AUD 819 million in net debt) is in line with that earlier deal, and comes at a discount to recent regional transactions, which have ranged between 18 and 25x EV/Ebitda.

“So, at 17 times for an asset that’s seen virtually no growth, where is the future growth supposed to come from?” asked an analyst at a brokerage, requesting anonymity.

Some brokerages argue that growth will stem not from volumes but from pricing power. 

NQXT has 40 million tonnes of contracted volume, and revenue is expected to reach AUD 349 million with an Ebitda margin of 65% in FY25, pointed out a report by Elara Capital dated 20 April. 

“In the next four years, Ebitda is targeted to double to AUD 400 million, led by a rise in contracted capacity to 50 million tonnes via customer addition, contract renewals at higher price and group synergy,” said analyst Ankita Shah in the report.

Owning the terminal outright improves the economics, too. 

According to Elara's Shah, the shift from a 10% O&M margin to a 90% operating margin could drive substantial profit gains. With no major capex expected until 2030, the deal could also boost return on capital employed—though high depreciation costs may keep net profit gains modest in the near term.

Still, the funding structure remains a key question. The issuance of 143.8 million new shares implies a meaningful equity dilution. Nuvama estimates a 2% earnings per share dilution in FY26, but expects profits to recover from the second year onward as synergies kick in.

Strategically, the asset is important. NQXT sits close to the Bowen and Galilee coal basins and offers Adani Ports a stronger foothold in Asia-facing trade corridors. 

Also read | Two port stocks stand out on the charts. Is Adani Ports one of them?

Motilal Oswal Financial Services, which has a buy rating on the stock, said in an 18 April note that the deal strengthens the company’s global footprint. The brokerage will update its growth forecasts once the acquisition closes.

But as the market reaction shows, scale isn’t everything.