DP World: All set for a new voyage in India

N. K. Kurup | Updated on November 20, 2017 Published on January 27, 2013

Container being loaded at the DP World Chennai containerterminal. The company proposes to transfer all its local assetsto a new company in India named Hindustan Ports.— Bijoy Ghosh

It may not be the best of times for private terminal operators at the Government-owned major ports in India. Prolonged uncertainty over tariff regulations, continuing apathy of decision makers and the not-so-encouraging economic outlook have long dampened the spirits of these operators, mostly global players.

Yet, some of them see the long-term business potential in the country’s vast port sector and they quietly work out strategies to fortify themselves to grab growth opportunities. Among them is DP World in India.

The company, majority owned by the Dubai Government, is the biggest container port operator in India, handling close to 40 per cent of the country’s container volume through its five terminals. DP World is all set for an organisational restructuring in India. The company proposes to transfer all its local assets to a newly incorporated company in India, named Hindustan Ports.

Local flavour

This holding company will be the vehicle for the global port operator’s future investments in India. In fact, the new company has recently obtained the Foreign Investment Promotion Board’s approval to bring in Rs 440 crore as equity investment in a new project at the Jawaharlal Nehru Port, estimated cost for which is Rs 900 crore.

The restructuring is said to be aimed at consolidating and ‘Indianising’ the local assets, which would make their overall management easier and help route investments directly. DP world’s investments in India so far have been reportedly routed through Mauritius. The restructuring could help direct investment through the holding company. Besides, it is said that the holding company would be a strong entity, which could diversify the risks in earnings at a weak terminal.

However, analysts see the move as part of a strategy to enhance the company’s valuation with an eye to tap the local capital market for funds in the future. Probably, the name Hindustan Ports, would have a better appeal locally, it’s a clever strategy, said an analyst.

A company official, however, said there was no immediate plan to go for a listing in India. DP World is listed on the London Stock Exchange.

DP World, the third-largest terminal operator in the world by volume, has five operating terminals in India — at JNPT, Mundra (Gujarat) Chennai, Kochi and Vizag. Of these, the first three are fully owned by DP World. It holds 80 per cent stake in Vallarpadam container terminal in Kochi, and 26 per cent in the Vizag terminal. Each terminal is now owned by a separate special purpose vehicle (SPV). After the restructuring, Hindustan Ports will be the promoting company for all terminals. According to reports, the Dubai firm has so far invested more than $1 billion in the country.

Besides container terminals, DP World also has a logistic service company in India — Container Rail Road Services Pvt Ltd, started five years ago. It has a category-I licence from the Railways to operate container trains. The company moves containers by rail and road, providing connectivity between port and hinterlands.

Major entry

The Dubai port operator came to India more than a decade ago. It took a 26 per cent stake at a container terminal at Vizag in 2002. Three years later, it signed a significant agreement with Kochi Port to set up an international transhipment container terminal.

But DP World’s Indian assets got expanded after it acquired the UK Port group P&O in 2006 for $6.8 billion, piping PSA of Singapore in a closely contested race. Overnight, it got control of three container terminals in India along with several others owned by the P&O group across the globe.

Today, DP World has emerged as a major force to reckon with in the Indian port sector. In 2012 its five terminals together handled 3.92 million TEUs, out of the total 9.8 million TEUs handled by all ports in India. It’s set for further capacity expansion. The recently awarded 330-meter berth at JNPT will have an initial capacity of eight lakh TEUs. Once this project is completed, expected in 2015, the company’s installed annual container handling capacity in India will exceed five million TEUs.

Last year DP Wold got a boost in India with the Government granting its long-standing demand of Cabotage exemption for the Vallarpadam International Transhipment Terminal. The policy relaxation, allowing foreign lines to operate feeder services from and to the terminal, was given against strong opposition from Indian shipping lines. It is expected to help the port to attract main-line vessels and improve its transhipment volume. No wonder, Vallarpadam has set an ambitious target of eight lakh TEUS (more than double of last year’s throughput of 3.25 lakh TEUs) for the current year.

Grey areas

But all is not rosy for DP World in India. Last year, the Tariff Authority for Major Ports (TAMP) cut rates at its Jawaharlal Nehru Port terminal by 27.85 per cent. It moved the court and the case is still pending. The terminal is governed by the 2005 TAMP guidelines and the Government is yet to decide on the plea to scarp them. At Vallarpardam, it needs to increase the transhipment volume, which is not an easy task.

Despite the setback on the tariff front and other operational difficulties, Anil Singh, who heads DP World in India, appears to be bullish on the company’s new project. At the celebration of the 15{+t}{+h} anniversary of the terminal his company operates at Jawaharlal Nehru Port, Singh said he will complete the 330-metre berth within 15 months, much ahead of the 24-month deadline. It could have been said in a celebratory mood, yet it reflects his optimism to complete the project on time — something that rarely happens in India. Hope this optimism could stand him in good stead to complete the new exercise to restructure the company’s local assets.

Will the revamping of assets be the beginning of a new voyage for DP World in the country? Will it help it to discover more wealth at the Indian shore? Only time can tell.

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Published on January 27, 2013
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