S&P Upgrades Adani Ports to BBB; Cites Strong Cash Flows, Balance Sheet Strength

S&P Global Ratings on Thursday upgraded Adani Ports and Special Economic Zone (APSEZ) to investment-grade BBB from BBB-, citing its robust cash generation, strengthening balance sheet and ability to fund an ambitious expansion plan while maintaining healthy leverage.

The rating agency assigned a stable outlook on APSEZ, reflecting the expectation that the company will sustain strong operating performance over the next 12-24 months and keep its net debt-to-EBITDA ratio at around 2.6 times despite elevated capital spending.

S&P said the company's strong financial position provides significant headroom to support its growth strategy, which includes increasing domestic port capacity to 1 billion tonne by 2030 from 653 million tonne currently.

The agency expects annual capital expenditure to rise to about Rs 18,000 crore in fiscals 2027 and 2028 and Rs 20,000 crore in fiscal 2029, from historical levels of around ₹13,000 crore. Most of the spending is expected to be directed toward expanding domestic port infrastructure, particularly container terminal capacity.

APSEZ is also pursuing international growth opportunities, including in Africa and Southeast Asia, although S&P cautioned that acquisitions in markets with weaker regulatory and macroeconomic environments could affect earnings quality and increase operational risks.

The rating agency said the company's recently tightened leverage policy, which targets net debt-to-EBITDA of up to 2.5 times, supports its view that financial metrics will remain strong even as investment spending accelerates.

S&P expects earnings growth to be driven by higher capacity utilization at ports, including Vizhinjam and Colombo, along with a full-year contribution from the North Queensland Export Terminal in Australia. Cargo volumes are projected to grow about 18 per cent in fiscal 2027 and 7-8 per cent annually over the following two years.

The stable outlook also reflects S&P's expectation that APSEZ will continue to benefit from a diversified asset portfolio and strong cash flows while avoiding material related-party transactions outside the normal course of business.

S&P said it could consider a further upgrade if the company demonstrates sustained growth without materially increasing exposure to riskier overseas markets and continues to maintain conservative leverage levels.

Conversely, the rating could come under pressure if leverage rises above 3.5 times for a prolonged period or if the company undertakes significant debt-funded investments beyond current expectations.