Pros and Cons of Investing in Adani Ports and Special Economic Zone

Adani Ports and Special Economic Zone (APSEZ) is India's largest private-sector port developer and operator. It's the flagship of the Adani Group.

It has a vast network of ports and terminals across India, as well as ownership of the strategically important Haifa Port in Israel, Dar es Salaam Port (Tanzania), Abbot Point (Australia), and Colombo West International Terminal (Sri Lanka). It's also evaluating port opportunities in Vietnam.

The company's share price has been on a roller coaster ride over the last few years with periodic steep corrections. But mostly, it has rewarded long term investors.

But what about considering the stock now?

In this editorial, we will examine the pros and cons of Adani Ports and SEZ.

Pros

#1 Good Growth

The company has just reported its FY25 and Q4 results.

It delivered a 23% year-on-year (YoY) jump in revenue and a huge 50% YoY growth in its consolidated net profit for the March quarter.

For the full year FY25, Adani Ports' revenue and net profit rose 16% YoY to Rs 310.79 billion (bn) and 37% YoY to Rs 110.61 bn, respectively. This performance was driven by growth across its ports, logistics and marine business.

Back in FY24, Adani Ports reported a 28% YoY rise in revenue at Rs 267.1 bn from Rs 208.5 bn a year ago. The net profit had grown 70% to Rs 80.7 bn, up from Rs 47.5 bn a year ago.

In FY25, the company has continued its FY20-24 performance. During that period, its revenue and net profit compounded at a compound annual growth rate (CAGR) of 19.6% and 14.9% respectively.

It has been delivering strong return, with the RoE and RoCE averaging at a healthy 14.3% and 12.2%, respectively, during the FY20-24 period.

Adani Port's Financial Snapshot (FY20-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	114,388.00	125,496.00	171,188.00	208,519.00	267,106.00
Revenue Growth (%)	4.7	9.7	36.4	21.8	28.1
Net Profit	37,845.00	50,487.00	49,532.00	53,909.00	81,040.00
Net Profit Margin (%)	33.1	40.2	28.9	25.9	30.3
Return on Equity (%)	14.8	16.5	12.9	11.8	15.3
Return on Capital Employed (%)	12	13.5	10.6	10.8	14.3

Data Source: Equitymaster

In FY25, it handled 450 MMT of cargo. The company is targeting handling 1 bn tons of cargo by 2030, backed by a capex of Rs 500 bn.

The board of directors recommended a dividend of Rs 7 per share for FY25. It has fixed 13 June 2025 as the record date for the same.

For FY26, the company has guided for revenue of Rs 360-380 bn, EBITDA of Rs 210-220 bn, and capex of Rs 110-120 bn.

#2 Shipbuilding Venture

Billionaire Gautam Adani is embarking on a new venture: Building ships at the group's flagship port in Mundra, India's largest port. The group was, initially, not involved in India's shipbuilding ecosystem.

With shipyards in top shipbuilding nations like China, South Korea, and Japan booked until at least 2028, global fleet owners are exploring alternative manufacturing sites, including India.

India ranks 20th in the world commercial shipbuilding market with a marginal share of 0.05%. Indian-owned and flagged ships account for about 5% of the country's total overseas cargo-carrying needs.

Adani's previously unreported shipbuilding venture is part of a Rs 450 bn expansion plan for Mundra Port, which recently received environmental and coastal regulation zone clearance.

It's also first major foray into a heavy engineering business, like shipbuilding, leveraging the already available land and regulatory approvals at Mundra.

#3 Defence Ambitions

APSEZ is actively involved in India's defence manufacturing ambitions through its investment in a state-of-the-art propellant production facility in Shivpuri, Madhya Pradesh.

This facility, part of a Rs 35 bn investment, aligns with the government's Aatmanirbhar Bharat initiative, which seeks to reduce dependency on defence imports and transform India into a leading global exporter of defence equipment.

The propellant plant will enhance India's capability in missile and ammunition production, providing vital components for the country's defence forces.

Additionally, APSEZ has made strides in small arms manufacturing. The company is investing in a small arms plant in Madhya Pradesh, further contributing to India's self-reliance in defence production.

These initiatives are strategically designed to support the Indian Armed Forces and expand India's defence manufacturing base.

Cons

#1 High Debt

As of 31 March 2025, the company's net debt stood at Rs 368.19 bn. It's net debt to EBITDA ratio improved to 1.9 from 2.3 in FY24.

However, a net debt to EBITDA of 1.9 is still high as is the absolute amount of Rs 368.19 bn.

Also, the net debt to EBITDA is set to go up to 2.5 in FY26 as per the management's guidance.

#2 Corporate Governance at the Group Level

The various corporate governance issues of the group have been very well documented.

While the group seems to be slowly making its way out of these issues, no one can confidently say what could happen in this regard in the future.

It's something that investors will have to be constantly concerned about.

For more details about the company, you can have a look at Adani Ports factsheet and quarterly results on our website.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...