Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil A1+’ rating on the short-term bank facilities of Gujarat Pipavav Port Limited (GPPL).

 

The rating factors in sustained business performance with healthy traffic volume, despite some moderation in container and dry bulk volume during the first nine months of fiscal 2025. While revenue growth is expected to remain flat in fiscal 2025 due to lower container and dry bulk volume; liquid bulk and roll-in and roll-out (RoRo) supported volume during the same period.  Traffic for liquid cargo was 2.2 metric tonne and for RoRo was 164,000 units, which grew ~15% and 71%, respectively, in fiscal 2025. However, container traffic at 694,000 twenty feet equivalent units (TEU) and dry bulk cargo traffic of 1.47 metric tonne degrew 14% and 18.5%, respectively, on-year in fiscal 2025. Liquid cargo traffic is expected to grow 8-10% per annum in the near to medium term, driven by increasing demand for liquified petroleum gas (LPG) by the Government of India for its UJALA scheme. GPPL is also expected to expand its capacity for handling liquid cargo by fiscal 2027 which will further increase traffic at the port.  RoRo traffic is also expected to grow over 10% per annum over the medium term, due to increasing exports of passenger vehicles by domestic auto original equipment manufacturers (OEMs). Container traffic on the Pipavav port route is affected by geopolitical crisis impacting routes of shipping lines. It is expected to grow gradually by 2-5% per annum, over the medium term, as geopolitical issues subside. Dry bulk cargo volume had been lower due to lower tenders for import of fertilizers from the Government of India. The port is not handling coal cargo currently due to operational issues. Overall dry bulk cargo is expected to increase 2-5% over the medium term, driven by increasing government tenders for import of fertilizers. Overall revenue is expected to grow 5-7%, over the medium term, driven by tariff hikes in January 2025 and expected growth in liquid cargo and RoRo traffic and gradual improvement in container traffic and dry bulk cargo. Operating profit remained robust at above 57% in the nine months of fiscal 2025 and is expected to remain healthy at 57-58% over the medium term.

 

The financial risk profile of the company remains strong with nil debt as of December 2024. The company is planning capital expenditure (capex) of Rs 700 crore for expansion of capacity at the liquid berth which will be spread across fiscals 2026 and 2027. The capex will be funded entirely through internal resources. The company had robust liquidity with free cash and equivalent of Rs 1,000 crore as of December 2024.

 

Crisil Ratings notes that the company’s current concession agreement is valid till September 2028 and it has applied for renewal to the Gujarat Maritime Board (GMB). The renewal of the concession agreement with the GMB will be a key rating monitorable.

 

The rating continues to reflect GPPL’s healthy business risk profile driven by healthy traffic volume (especially from containers), strong operating profitability, robust financial risk profile driven by healthy cash accrual, nil debt and above-average networth. The ratings also factor in strong business links with the parent, Netherlands-based APM Terminals BV (APM Terminals; part of the AP Moller-Maersk group). These strengths are partially offset by modest scale of operations and susceptibility to competition from neighbouring ports.

Analytical Approach

Crisil Ratings has considered the financial and business risk profiles of the company on a standalone basis.

Key Rating Drivers & Detailed Description

Strengths:

• Healthy business risk profile: GPPL’s business risk profile is driven by healthy traffic volume handled by its container (capacity of 1.35 million TEU [MTEU]) and dry bulk (4 million tonne per annum) capacities. Traffic volume from these capacities account for around 86% of the annual operating income and were utilised at 51% and 55%, respectively, in fiscal 2025. Revenue growth in fiscal 2025 is estimated to remain flat after growing 8% on-year in fiscal 2024. GPPL is planning to incur capex of ~Rs 700 crore over fiscals 2026 and 2027 for a new liquid berth to increase the capacity of liquid cargo handling. Accretion of benefits from the capex to increase the scale of operations will be a key monitorable over the medium term.

 

The company achieved revenue of Rs 736 crore in the nine months of fiscal 2025, registering flat growth. While traffic was supported by liquid cargo and RoRo, which grew at ~15% and 71%, respectively; it was impacted by on-year decline in container and dry bulk cargo traffic by 14% and 18.5%, respectively, in fiscal 2025. However, the inherent potential of the port to generate healthy trade volume, backed by its location, connectivity to industrial hubs in Gujarat and northern hinterlands and efficient operational metrics, should continue to support revenue growth. Additionally, strong operating margin of 57-58% supports profitability.

 

• Robust financial risk profile: The financial risk profile is driven by strong networth, expected at over Rs 2,300 crore as on March 31, 2025, and no debt. This is aided by strong profitability as reflected in stable operating margin of more than 55%. Operating profit was above Rs 500 crore for fiscal 2024 and is expected to remain above this level over the medium term. Despite strong profitability, net cash accrual is low because of distribution of most of the profit as dividend to shareholders in the absence of large capex since fiscal 2017. Net cash accrual was Rs 114 crore in fiscal 2024. Nevertheless, the unencumbered cash balance was above ~Rs 1,000 crore as of December 2024. Apart from annual maintenance capex, capex for new liquid berth (~Rs 700 crore) is also likely to be met through internal accrual and cash reserves with no debt to be incurred. Dividend payout will continue from most of the profit generated after meeting capex requirement. Substantial dividend outgo over net profit, if any, resulting in depletion of cash balance will remain a key monitorable.

 

• Strong business linkages with the parent: The company leverages the expertise, resources and network of its parent in developing business with shipping lines. Maersk Line remains one of the largest customers (accounting for 20% of revenue in fiscal 2024). Benefits are also derived from access to modern technology, operational know-how and best industry practices because of an association with APM Terminals and the ultimate parent, AP Moller-Maersk A/S (part of the A P Moller-Maersk group; ‘BBB+/Stable’ by S&P Global Ratings). Any material change in the credit risk profile of APM Terminals will continue to be a key rating sensitivity factor.

 

Weakness:

• Modest scale of operations and susceptibility to competition from neighbouring ports: Scale of operations is expected to remain on similar levels as previous fiscal due to decline in traffic in the container and dry bulk cargo. Container traffic was disrupted due to disruption in shipping line routes caused by the geopolitical crisis. Dry bulk cargo traffic is driven by import of fertilizers by the Government of India. Fertilizer imports by the government had been lower in fiscal 2025, although some improvement in the government’s tender for fertilizer imports was seen in the third quarter of the fiscal. Container traffic has also improved from the third quarter of fiscal 2025 and is expected to grow 2-3% on-year, over the medium term, at the port. With expected normal monsoon, dry bulk cargo is expected to grow 3-4% over the medium term on a lower base. Coupled with increase in tariffs, overall revenue is expected to grow 4-5% per annum over the medium term. However, if geopolitcal crisis persists, recovery in container traffic may take longer than expected. Fluctuations in traffic volume and realisation of other cargoes will curtail any growth in revenue. Significant growth in revenue is not expected before the completion of expansion of capacity for the liquid berth. GPPL faces competition from neighbouring ports, including Jawaharlal Nehru Port Trust (7.7 MTEU) and Adani Port & SEZ Ltd (domestic capacity of over 498 million tonne), which have larger scale of operations and attract healthy traffic volume from surrounding industrial hubs and export-import activities. The company’s ability to offer competitive tariff and ensure healthy operating efficiency will remain critical to support growth over the medium term. The company has also applied for renewal of the concession agreement for the port to GMB as the current concession agreement is valid till September 2028. The renewal of the concession agreement with the GMB will be a key monitorable.

Liquidity: Strong

Cash accrual is expected to be over Rs 150 crore per annum against no debt repayment over the medium term. Free cash balance was ample at ~Rs 1,000 crore as of December 2024. The non-fund-based bank limit of Rs 60 crore was utilised at 77% (Rs 46 crore) on average over the 12 months through February 2025. The company incurs maintenance capex of Rs 75-100 crore per annum which is funded entirely through internal accrual. The planned capex of ~Rs 700 crore, spread over fiscals 2026 and 2027, can also be funded through internal accrual and existing free cash in hand of the company.

Rating sensitivity factors

Downward factors:

• Fall in revenue by more than 15% because of lower traffic
• Large debt-funded capex or substantial dividend payout over and above the profit generated, depleting cash position and weakening of the financial risk profile

 

Environment, social and governance (ESG) profile

Crisil Ratings believes GPPL’s ESG profile supports its already strong credit risk profile. The sector can have a moderate environmental and social impact, primarily driven by its plastic waste generation, intensive water usage and the direct impact of its product on the health and wellbeing of its customers.

 

Key ESG highlights:

• The port has installed 1,000 kWp (kilowatt peak) DC capacity solar power plant, which has been commissioned. Also, the company has entered an agreement with a renewable energy supplier for purchasing green energy. Subsequently, about 45% of the company’s power requirement is being sourced through renewable energy. The company is also working at various levels to increase the contribution of renewable energy.
• The company is committed to ensuring the safety and security of its employees. It aims for zero fatality and lost time injury (LTI) free days. The lost time injury frequency rate (LTIFR) for fiscal 2023 is 0.29.
• The company is committed to local communities around the port and actively driving social initiatives in education, sanitation and health, women empowerment, skill development and infrastructure development.
• The governance structure is characterized by effectiveness in board functioning and enhancing of shareholder wealth, presence of investor grievance redressal mechanism and extensive disclosures.

 

ESG is gaining importance among investors and lenders. GPPL’s commitment to ESG will play a key role in enhancing stakeholder confidence, given shareholding by foreign portfolio investors.

About the Company

Incorporated in 1992, GPPL has been operating the Pipavav port in Saurashtra, Gujarat, since 1998. It has exclusive rights to develop and operate facilities of APM Terminals in Pipavav until September 2028, according to a concession agreement with GMB and the government of Gujarat. The company handles four cargo types: container, dry bulk, liquid bulk and RoRo.

 

The promoter, APM Terminals, is among the world’s largest port and terminal operators. It operates and manages over 75 port facilities in 40 countries and has inland services operations at over 100 locations in more than 50 countries. It provides ports, terminals, inland services management and operational services for more than 60 container shipping lines.

Any other information: Not Applicable