Background:

Adani Ports and Special Economic Zone Limited (APSEZ) is Indias largest private multi-
port operator. APSEZ is a part of the Adani Group, an integrated infrastructure
corporation. The company (earlier known as Mundra Port & Special Economic Zone Ltd)
changed its name to "Adani Ports and Special Economic Zone Limited" on January 6,
2012. While earlier the company had one operational port at Mundra, it today operates
across eight ports in India.

Questions:
1. What criterias are used for investment decision at your company?

NPV method is used for the new procurement of the equipment. Ongoing capital
investment to sustain port expansion, weather to hire lease or installment purchase.
Investments are covered into the project costs, are defined in the beginning and involved
into the business plan.
All the port entities CAPEX project are expansion and development activities, which are
already part of the capital expenditure.

2. Company recently paid interim dividend. On what basis company decided to

pay interim dividend?

This year most of the companies paid the interim dividend. When a company pays
dividend, company has to pay dividend distribution tax and there was no tax on the
dividend earned by the shareholders. But in recent union budget, government said from
the 1st April, 2016, dividend which comes in the hands of the shareholders, if this
dividend income is more than 10 lacs rs, then they also have to pay tax. Therefore to give
benefit to their shareholders this year company paid interim dividend.
Interim dividend paid: 40% of the base price

3. Size of Investment Small / Medium / Large

a) Who is the final authority to take investment decisions? Is it centralized or

decentralized.
For CAPEX decisions Chairman is the final authority. But CEO has the power to approve
up to a limit of 5 crores.
 b) Who all are involved in decision making process (Single Person /
committee)?

For the mergers and acquisitions, where subsidiaries are not in place, Board needs to be
concerned. All the subsidiaries are not wholly owned.

4. What is your long term debt: equity ratio?

Source: Annual Report 2015-16

Financial risk is simply the risk that a company defaults on the repayment of its liabilities. When
debt-to-equity ratio is high, it increases the likelihood that the company defaults and is liquidated
as a result. Obviously, this is not good for investors and lenders because it increases the risk
associated with their investment or lending which causes them to require a higher rate of return
to compensate for the additional risk. Increase in the required return of investors and lenders
means an increase in the cost of capital to the company.

A higher debt-equity ratio however is not always a bad thing. This is because debt is a cheaper
source of finance compared to equity because of tax savings (dividends are not tax deductible)
and predictable return for lenders. Therefore, when the financial risk is at an acceptable
level, increasing the debt-to-equity level could benefit the company through a reduction in the
cost of capital.

5. What is rate of interest for your various debt funds?

We get external commercial borrowings from foreign companies, having good ICRA rating of
AA+ for bank limits and non- convertible debentures. So we enjoy low debt rates.

6. What order of finance do you follow?

We prioritize our financing method firstly on internal financing, and then debt, lastly raising
equity as a "last resort" because once we are done with the internal funds its always better to go
for Debt which is less expensive for two main reasons. First, interest on debt is tax deductible
(i.e. the tax shield). Second, debt is senior to equity in a firm's capital structure. That is, in a
liquidation or bankruptcy, the debt holders get paid first before the equity holders receive
anything.

7. If company has foreign debt, how does it manage foreign currency risk? Do they
hedge 100% risk?
We manage the foreign currency risk by hedging. It is important that corporates dont get
complacent with rupee moving in a narrow band because if the rupee weakens sharply then
corporates can see their margins hit, borrowing cost rise and even credit matrices moving down.
So it is very important to hedge.

We generally do not do 100 % , but we do it close to 80 %.