...Acquisition a milestone in the group's plan to set up ports all over India
AHMEDABAD : The Ahmedabad-based Adani Group has finalised the terms and conditions to buy out construction major Larsen & Toubro (L&T) and Tata Steel’s stakes in Dhamra Port Company Limited (DPCL) in Odisha for an enterprise valuation of close to $1 billion
(about Rs 5,500 crore). The deal was agreed in a recent meeting between Adani Group Chairman Gautam Adani, L&T Chairman A M Naik and Tata Group’s new Chairman Cyrus Mistry.
An announcement is expected in the next few days, said a source directly involved with the talks.
Adani, which operates India’s biggest private port at Mundra in Gujarat, will fund the deal from its own funds, the source added.
Addressing the get-together, Manas Vaid, Chairman, SPNM, said “SPNM received a remarkable response from the trade and this is the first event for the year 2013. Encouraged by the fact that there was participation from every segment of the maritime industry with leading stakeholders present who obviously did not want to miss out on the latest happening, the founding members decided to go ahead and set the ball rolling and bring in the change where every entity in the fold can work unitedly, simultaneously ensuring that all share the cake according to their capacity and capability”.
He explained more about SPNM through power point presentation. SPNM is a sister organization of The Shipping Professional Network in London (SPNL), which has its roots in the shipping communities in London and is strongly supported by various premier organizations and institutes.
L&T and Tata Steel own 50 per cent stake each in the Dhamra project. With this acquisition, Adani will get a toehold in the eastern coast. L&T currently owns 50 per cent in DPCL through its subsidiary, Infrastructure Development Projects Ltd ( IDPL), and had identified this property as a non-core asset.
According to analysts, the transactions, as and when they materialise, could unlock L&T’s value and improve its consolidated earnings. In FY12, DPCL had pulled down L&T’s consolidated earnings per share by five per cent. Dhamra Port’s project cost is about Rs 3,600 crore and it reported a total income of Rs 198 crore for FY12, with a net loss of Rs 458 crore. As this was the first year of operations, it had high amortisation and interest costs, along with initial ramp-up traffic, the company said in its annual report.
The port has been developed under the build-own-operate-share and transfer model with a concession from Odisha government for 34 years. The port, which commenced operations in May 2011 handled 5.1 million tonnes of cargo during that year. The port’s location makes it ideal for shipment of minerals and raw material for steel plants in the region.
According to analysts, it is important for L&T to sell its stake in Dhamra Port because, in the absence of recovery in the investment cycle, it will be difficult for L&T to achieve last year’s growth in 2013. Soon after its second quarter results, the company had told analysts that it will exit from Dhamra Port by the end of March 2013.
For Tata Steel, which is reeling under Rs 53,432 crore of consolidated debt as on September 2012, any disinvestment in assets will help it raise funds and retire its high-cost debt. This is also the first transaction in which the new chairman of the Tata group, Cyrus Mistry, is closely involved with his predecessor, Ratan Tata.
For the Adani group, the acquisition of Dhamra Port will be an important milestone in the group’s plan to set up ports all over India.
The Group currently operates Adani Ports in Gujarat, the second-largest commercial port infrastructure company and the largest private port operator in India. The Group is also constructing ports in Hazira, coal berths in Mormugao, Vizag and a dry bulk terminal in Kandla.
