Brickwork Ratings assigns 'BWR A+'Rating for Ennore Port's bonds issue

Brickwork Ratings has assigned aRating of BWR A+ [Pronounced BWR A Plus] with Stable Outlook for Ennore Port Limited's(EPL or "the Company") proposedTax Free, Unsecured, Redeemable and Non-convertible Bonds issue ofRs.1000 Crore (Rs.One thousand Crore) having a tenor of 10 years. Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.

The rating has, inter alia, drawn comfort fromthe port's favorable location, well-developed infrastructure with modern navigational facilities, Cargo handling capability, stable revenue stream expected through the "Landlord port model" and ownership of Govt. of India. The rating is however constrained increasing competition from nearby ports and delays in development of container terminal. The rating is sensitive to timely execution of the Company's future plans of development of LNG Terminal, Container Terminal and Coal Berth-III Terminal exclusively for Tamil Nadu Generation and Distribution Corporation Ltd. (TENGEDCO) to meet their increasing business volume.

BWR has essentially relied upon the audited FY12 results, projected financials, business plan, publicly available information and information and clarifications provided by the Company.

EPL, incorporated in October, 1999 under Indian Companies Act, is situated on the Coromandal coast about 24 Km north of Chennai Port. It is the 12th major port in India and the first Corporatized major port in India. Its phase I was completed in 2001 and full-fledged operations were started in Dec 2002. EnnorePort was originally conceived primarily to handle thermal coal to meet the requirement of Tamil Nadu Electricity Board (TNEB) formally known as TENGEDCO. Ennore port has six berths as of now capable of serving the varied needs of the Maritime Industry. Only the first two berths of EPL are owned by EPL and these are dedicated to and operated by TENGEDCO for their captive coal cargo used for generation of power in the power plant located adjacent to the port of EPL. The Govt. of India holds about 66.67% shareholding in EPL and rest 33.33% is with Chennai Port Trust.

As a corporate port, the Ennore Port has chosen to function on "Landlord" concept whereby the Port will provide the basic infrastructure like dredged basin / channel, road and rail infrastructure, aids to navigation, firefighting facilities, utilities, water and power supply etc. and manage the resources. Development and operation of cargo handling terminals will be through private sector participation on BOT basis. Private Operators are licensed to operate specific terminals (like coal, marine liquid, car, container, etc.,) on PPP/ BOT model.

During FY12, the standalone income from operations increased by 48.6% from Rs. 167.31 Crore in FY11 to Rs. 248.64 Crore in FY12 mainly due to increase in Composite Tariff on Coal, shared revenue and vessel related income. EBIDTA has increased by 51.8% from Rs. 134.67 Crores in FY11 to Rs. 204.42 Crore in FY12. However, PAT showed an improvement of 74% from Rs. 55.58 Crore in FY11 to Rs. 96.72 Crore in FY12 mainly due to little improvement in port operating expenses and depreciation from Rs. 17.93 Crore and Rs. 12.93 Crore in FY11 to Rs. 26.88 Crore and Rs. 13.25 Crore in FY12 respectively.

The Rating reflects the Port's potential for growth in revenue, ability to handle larger vessels,and private sector participation on BOT basis. However, it is, inter alia, also constrained by the delay in implementation of road connectivity project, requirement of huge capital investment, risk of concentration of business with TANGEDCO, uncertainty about the prospects of iron ore terminal and significant increase in competition from nearby ports.

Source : Equity Bulls

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