Adani Buys Stake in IOTL and IOT Utkal for 1,050 Cr.
Adani Ports and Special Economic Zone Ltd. (APSEZ) said in a press release dated 9th November 2022 that it has acquired of 49.38% stake in Indian Oiltanking Ltd. (IOTL). In addition to this, APSEZ has acquired 10% stake in IOTL’s subsidiary, IOT Utkal. Adani Group’s port and logistics subsidiary has acquired these stakes for a total of Rs. 1,050 crore.
Adani Ports Acquires Oiltanking GmbH’s Stakes Through These Deals
IOTL had been established as a 50-50 joint venture between Government-owned Indian Oil Corporation of India Ltd. (IOCL) and Germany’s Oiltanking GmbH in 1996. The purchase made by Adani is out of the shares owned by the latter.
In IOT Utkal, IOTL’s 71.57% subsidiary, Oiltanking GmbH owned 10% stake. This stake has also been acquired by APSEZ.
APSEZ Now India’s Largest Third-party Liquid Storage Company
Speaking about this acquisition, Mr Karan Adani, CEO and Whole Time Director of APSEZ stated, “With this acquisition, APSEZ’s oil storage capacity jumps 200% to 3.6 Million Kilo-Litre (Mn KL), making it India’s largest third-party liquid storage company”.
IOTL has substantial crude oil and petroleum storage assets, comprising six liquid storage terminals with an aggregate capacity of 2.4 Mn KL. It’s subsidiary, IOT Utkal was incorporated in 2009, and in 2010, IOT Utkal entered into a 15-year contract to develop a terminal on Build-Own-Operate-Transfer (BOOT) basis for Indian Oil’s Paradip Refinery.
IOTL’s ‘Take-or-Pay’ Contracts to Improve Cashflow
Adani Ports and SEZ said in its release that IOTL is growing on account of increased demand for petroleum products in India.
IOTL has contracted its storage capacities to major oil companies, and about 80% of these contracts are on a ‘take-or-pay’ basis. This means that either these companies should honour their contracts with IOTL, or pay a fine. Therefore, APSEZ anticipates IOTL’s cash flow to be secure in the near future.
Major contracts secured by IOTL include a 25-year contract to develop a crude oil storage facility at Paradip port for Numaligarh Refinery Ltd. on BOOT basis.
Adani’s Ports Business to Focus on Higher Margins
Mr. Karan Adani said, “This stake purchase is also well aligned with our strategy of diversifying the cargo mix with focus on products and services having higher realisation and margins.”
APSEZ has 13 domestic ports and terminals, and an annual capacity to handle 20 million tonnes of cargo. While the company handles all kinds of cargo including steel, fertilisers and minerals, its investment in the crude and petroleum storage sector is important for its position in the Indian Ports and Logistics industry. Mr. Adani also said that this deal will fortify its association with Indian Oil, which owns 50% stake in IOTL.
About Adani Ports and Special Economic Zone Ltd.: APSEZ is Adani Group’s Port and Logistics arm, and has its presence across seven states, namely Gujarat, Maharashtra, Goa, Odisha, Andhra Pradesh, Kerala and Tamil Nadu. The company handles nearly 24% of the cargo movement in India and is the country’s largest private commercial ports operator. During FY-22, the company’s consolidated revenue stood at Rs. 19,115 crore.