Adani Ports shares in focus after Adani group firm opts out of US funding for Sri Lanka project

Adani stock: Shares of Adani Ports & Special Economic Zone Ltd are in focus on Wednesday morning after the Adani group firm said it would not seek US funding and instead use its own resources to fund a Sri Lankan port project.

In a filing on BSE and NSE, Adani Ports said that Colombo West International Terminal (CWIT) project in Sri Lanka was progressing well and was on track for commissioning by early next year. The Adani group company said the project will be financed through the company’s internal accruals and capital management plan. "We have withdrawn our request for financing from the DFC," Adani Ports said.

DFC stands for US International Development Finance Corporation.

To recall, the DFC had in November 2023 offered a $553 million loan to support the development, construction, and operation of a deep-water container terminal at the port of Colombo, Sri Lanka.

The CWIT is being developed by a consortium consisting of Adani Ports, the Sri Lankan conglomerate John Keells Holdings Plc, and the Sri Lanka Ports Authority (SLPA). Adani Ports shares are down 7 per cent in the past one month, but are up 19.48 per cent in 2024 so far.

The DFC financing was part of the US government's wider strategy to counter China's increasing influence in the region and was viewed as a confirmation of Adani's capability to develop top-tier infrastructure, PTI reported.

The loan process, however, came to a halt after the DFC requested amendments to the agreement between Adani and the SLPA to meet their conditions, which were then reviewed by Sri Lanka's Attorney General.

As the project neared completion, Adani Ports, which holds a 51 per cent stake in the venture, decided to proceed without the DFC's funding, PTI reported quoting officials familiar with the matter. The US agency recently stated that it was "actively assessing the ramifications" of bribery allegations involving Adani group executives. To date, it has not disbursed any funds to the ports-to-energy conglomerate.

The CWIT project was initiated in September 2021, when Adani Ports signed an agreement with the Sri Lanka Ports Authority and Sri Lankan conglomerate John Keells Holdings, pledging over $700 million to expand the capabilities of Colombo Port.

The CWIT will be Sri Lanka's largest and deepest container terminal, with a quay length of 1,400 metres and an alongside depth of 20 metres. When complete, the terminal will be able to handle Ultra Large Container Vessels (ULCVs) with capacities of 24,000 TEUs and is expected to have an annual handling capacity of over 3.2 million TEUs, PTI reported.

As of September 30, 2024, Adani Ports had approximately $1.1 billion or Rs 8,893 crore in cash reserves. It generated an operating profit of $2.3 billion or Rs 18,846 crore in the past 12 months, PTI reported.