Maintain 'Overweight' on Adani Ports: Barclays

Posted online: Thursday, Jan 16, 2014 at 0000 hrs
On January 13 2014, the Gujarat HC via its final order stopped the construction and functioning of 12 units operating in the Mundra SEZ, citing lack of an SEZ environment clearance. We note the order is in line with an earlier Gujarat HC order stopping construction of Alstom Bharat Forge units (in the Mundra SEZ) in May 2012, and 11 other units through an interim order in February 2013. We highlight that these orders do not impact Mundra portís operations. The court has also asked MoEF to decide on environment clearance for the Mundra SEZ within 30 days of the order. We maintain our OW rating as this order mainly impacts the third-party units operating within Mundra SEZ ó the issue is well known and the order is in line with previous High Court orders. The environment clearance for the SEZ proposal is still pending decision by the MoEF, and it does not impact core port operations.

The HCís core argument is that construction cannot happen until the SEZ has received the clearance to provide related infrastructure services.

We feel the court order will have little impact on the stock as the bulk of our valuation comes from the Mundra port (Rs 135/share), where operations remain normal, while the Mundra SEZ only accounts for a R7 share in our SOTP valuation. As the issue is well-known and the court had taken a similar view, we do not see any incremental impact. We believe the denial of clearance by MoEF (decision expected in 30 days) would be negative, but a positive EAC report reduces the possibility. We maintain overweight.