Adani Ports and Special Economic Zone (APSEZ) announced on Friday that it had signed a definitive agreement with L&T Infrastructure Development Projects (L&T IDPL) and Tata Steel to acquire 100% stake in Dhamra Port Company (DPCL), in Odisha, for R5,500 crore.
The all-cash transaction is expected to bring Adani Ports closer to its 200-million-metric-tonne target for the ports business by 2020, Sudip Bhattacharya, managing director, APSEZ, told newspersons in a conference call. As per the agreement, the transaction is subject to the customary
‘condition precedent’, including lender/third-party approvals.
Bhattacharya said there will be no equity infusion, but Adani will raise funds for the project. "We will be raising some funds later, but we would not like to talk about the quantum just yet. Adani Port's net debt is very low and our debt-to-equity ratio is below 1:1," he said.
According to industry sources, Adani Enterprises is looking to raise $1.5 billion in bonds, and some part of that could go towards funding this acquisition.
Dhamra Port, which has an installed capacity of 24 million tonne, currently handles close to 14.3 million tonne of cargo, which, Bhattacharya said, is expected to grow by 15-20% in the next few years.
"Following the acquisition, the second phase of development will be initiated within 90 days and completion is targeted in 30 months. This continued expansion will allow the Dhamra port exceed 100 million tonne of cargo capacity by the year 2020," he said.
“The Dhamra port acquisition now gives us an opportunity to replicate the development and phenomenal growth of the Mundra port on the eastern coast of India and thereby continue to execute on our pan-India strategy,” Adani Group chairman, Gautam Adani said.
Highlighting the rationale for the acquisition, Bhattacharya said Dhamra has the advantage of being a naturally protected all-weather port. It has a deep draft with the ability to berth capesize vessels, gives access to hinterland, and is close to the mineral-rich areas of the country.
Commenting on the stake sale, K Venkatesh, CEO, L&T IDPL, said, "The funds will be used for the equity requirements of IDPL's existing and ongoing projects. The sale was part of our regular exercise to churn our portfolio".
The stake sale was in the works for a long time, with various issues surrounding the project. Issues ranged from green clearances (the port is allegedly destroying breeding grounds of the endangered Olive Ridley turtle) to fall in traffic due to the slowdown.
Dhamra, a multi-cargo handling port, commenced operations in May 2011 and handled total cargo of 14.3 million tonne in FY14. The port has two fully mechanised existing berths and 63 kilometers of a private rail line connecting the Bhadrak station to the main trunk line. It has already received environmental clearance for the development of 12 additional berths.
In a separate statement, L&T IDPL and Tata Steel said, "As part of Tata Steel’s review of its investments portfolio, the board of the company has approved the divestment of its equity holding in the JV at an attractive valuation".
DPCL is a 50:50 joint venture between L&T IDPL and Tata Steel.
To secure its long-term requirement and access to a deep-water port for operations in Jamshedpur and Odisha, Tata Steel has also entered into a long-term cargo handling arrangement with DPCL.
Elaborating on the contract, Bhattacharya said, "The contract with Tata Steel is for handling a minimum of 5 million tonne cargo for a duration of 15 years, with the option to reduce it".
Source: Financial Express
