Event update: Adani Ports & SEZ (Outperformer) - Adani Logistics stake acquisition in Snowman – logistical expansion
Event update
Adani Logistics (ALL), a 100% subsidiary of Adani Ports & SEZ (ADSEZ), has entered into a definitive agreement to acquire 40.25% stake in Snowman Logistics (Snowman) from Gateway Distriparks Limited (GDPL).
Details of the acquisition
- ALL is expected to acquire the 40.25% stake at Rs3bn (Snowman is valued at Rs7.5bn) from GDPL. The company expects to make 26% mandatory offer to public shareholders at Rs2bn, in line with SEBI regulations.
- As we understand, the deal is valued at 11.6x FY21E EV/EBITDA Snowman Logistics reported Revenue/EBITDA/PAT of Rs2.3bn/Rs590m/Rs97m, respectively, in FY19. Snowman Logistics is a listed entity.
- Snowman is the market leader in cold chain logistics and provides warehousing and distribution services to customers. The company has 293 refrigerated vehicles, 31 warehouses and 104,343 pallet capacity. Organised cold chain is an Rs52bn industry, estimated to register 17% CAGR over FY19-24E to Rs114bn.
- ALL expects to focus on: a) increasing capacity utilisation, b) on high-yield products c) cut costs through operational efficiencies by reducing electricity costs, optimising fleet costs and setting up new locations for existing facilities. The intended acquisition will broaden ALL’s offerings to customers.
- Besides, the company expects to double capacity and increase realisation from Rs1,450/pallet/month in FY19 to Rs1,900/pallet/month by FY24E
Valuation and view
The Snowman acquisition is in line with ALL’s strategy to expand its logistics company, in a bid to offer end-to-end solutions to various customer segments. We believe this acquisition will help ALL broaden its offerings. Given the unorganised sector (14% is merely organised) and low yield, ALL’s focus should aid the company in driving the yield and profitability of the business over the medium term. We reiterate our Outperformer stance on APSEZ with a target price of Rs466
Adani Ports and Special Economic Zone Limited is an India-based port infrastructure company. The Company is engaged in the business of developing, operating and maintaining the Port and Port-based related infrastructure facilities, including Multi product Special Economic Zone (SEZ). Its segments include Port and SEZ Activities, and Others. Its Others Segment mainly includes Aircraft Operating Income and Services. The Company also provides logistics and infrastructure that moves goods from the port to customers. Its port services include marine, handling intra-port transport, storage, other value-added and evacuation services for a range of customers, primarily terminal operators, shipping lines and agents, exporters, importers and other port users. The categories of cargo handled at the Company's ports are bulk, containers and crude oil. It operates approximately 10 ports/terminals spread across over five states of India, including Gujarat, Goa, Andhra Pradesh, Tamil Nadu and Odisha.
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