The acquisition value of KPCL is about Rs 13,500 crore, including Rs 6,200 crore in debt, APSEZ had said in its announcement of the proposed acquisition on January 3.
The acquisition will be fully funded through APSEZ's internal accruals and existing cash balance. The company's management expects the transaction to be completed within 120 days after regulatory approvals.
Fitch said the acquisition complements APSEZ's existing port portfolio by diversifying its concentration away from the west coast of India.
The company believes that the ratio of cargo volume in western and eastern coasts will shift from the current 80:20 to a more balanced 55:45 following the acquisition. The transaction will also enable the company to tap the coastal cargo market such as shipping of coal from Dhamra to Krishnapatnam.
KPCL is a multi-cargo private port operator in Andhra Pradesh on the east coast of India. It has 13 deep-water berths and 64 million metric tonnes (MMT) of capacity and handled 54 MMT of cargo in the financial year ended March 31, 2019, about 50 per cent of which was long-term cargo.
APSEZ will consolidate KPCL's debt of Rs 6,200 crore into its balance sheet and incur Rs 5,500 crore in cash outflow to fund the acquisition, which will increase FY20 and FY21 EBITDA by about 16 per cent under Fitch's rating case.
"According to our estimates, APSEZ's net debt/EBITDAR for FY20 to FY24 will increase post-acquisition but remain below 5.0x, the level at which we would consider negative rating action," said Fitch.
Following the acquisition, it added, APSEZ's share of pan-India cargo volume will increase to 27 per cent from 22 per cent, consolidating its market leadership.