The equity structure and the ARC debt make the deal finalisation tricky, say consultants
Adani Ports and Special Economic Zone Ltd (APSEZ) is looking to buy Karaikal port in Puducherry at a valuation of ₹1,500-2,000 crore but multiple sources said that the deal is “not easy” to consummate given the ownership structure and the debt.
Marg Ltd, the promoter of the port, holds 45 per cent stake in Karaikal Port Private Ltd (KPPL).
Four private equity funds – Ascent Capital Advisors India Pvt Ltd, Jacob Ballas Capital India Pvt Ltd, Affirma Capital India and GIP India – together hold 44 per cent stake in the Karaikal Port Pvt Ltd and the balance 11 per cent equity is held by Edelweiss Asset Reconstruction Co Ltd.
The port operating company has a debt of about ₹2,000 crore of which 97 per cent is with Edelweiss ARC after it took over the loans from a consortium of state-run banks.
“The discussion is now on how they are going to share the enterprise value of the deal between the equity and debt holders,” said a person familiar with the talks.
“The structure appears to be insurmountable; its not easy for APSEZ to acquire Karaikal port,” said a port consultant.
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APSEZ, he said, has two options to work out a deal.
First, it can directly deal with Edelweiss ARC for the debt portion and pay off the equity holders.
“But, the cost of acquisition will be very high under this option,” the consultant said. Given the “weak financials”, Karaikal’s valuation will be about ₹1,500 crore, which is less than the debt of about ₹2,000 crore.
In case the debt holders agree to settle for ₹1,500 crore, APSEZ will have to spend at least another ₹500 crore to pay off the equity holders. This would translate into an EBITDA multiple that is much higher than the ones finalised by APSEZ for acquiring far better assets such as Krishnapatnam and Gangavaram ports.
As such, dealing with ARC and equity holders will be a difficult process, the consultant said.
The second option is for the debt holders to take the port company to a bankruptcy court which will allow the buyer to write off the equity and pay only the financial creditors.
“But, this is a time-consuming process,” the consultant said.
“We only have debt on behalf of banks. Equity with us is part of restructuring of debt,” R K Bansal, Managing Director, Edelweiss ARC said with a suggestion to pose the query on exit to equity investors.
B Venkataramanan, CFO and Interim CEO, Karaikal Port, did not respond to calls made to his mobile seeking comment.
APSEZ did not respond to a request for comment.
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