Gautam Adani-led Adani Ports and Special Economic Zone Ltd (APSEZ) will buy a 75 per cent stake in Krishnapatnam Port Company Ltd, the entity that runs a private deep-water port at Krishnapatnam in Andhra Pradesh’s Nellore district, for ₹13,500 crore.
Business Line was the first to report on the deal in its edition dated August 19, 2019.
The deal is APSEZ’s biggest acquisition yet in India’s port sector in terms of value and size and helps it build scale in an industry that is dominated by the 12 state-owned ports.
The acquisition, finalised today, fits well with the Group’s strategy to take-over stressed assets, said a person briefed on the deal.
The acquisition will give APSEZ, India’s biggest private port operator, access to the country’s largest waterfront area (for a port) of 12.5 kms and a transit storage area of 6,800 acres. The port started operations in 2008.
Krishnapatnam, a port owned by the Andhra Pradesh government, was given to the Hyderabad-based CVR Group for development and operations on a 30-year contract beginning September 2004. The port contract can be extended up to 50 years (30+20 years).
Chinta Sasidhar, the managing director of Krishnapatnam Port Co Ltd and the youngest son of C Visweswara Rao, its chairman, will continue to hold the balance 25 per cent stake in the port operating company.
Currently, the port has a draft of 18.5 metres, a depth that can accommodate full-loaded Capesize vessels of 200,000-tonne capacity.
The port, located 180 kilo metres north of Chennai, currently has a capacity to handle 92 million tonnes (mt) of cargo from 10 berths, including 67 mt of bulk cargo and 2 million twenty-foot equivalent units (TEUs) of containers which is equivalent to 25 mt.
The port handled 54.37 mt in FY 19 including 506,168 TEUs.
The port has applied for environment and coastal regulation zone (CRZ) clearances to expand capacity further.
Krishnapatnam Port Company is 90.6 per cent owned by the CVR Group, which has interests in construction, ports, power, steel, information technology and exports.
London-based private equity firm 3i Group Plc invested $161 million in the port operating company in February 2009 through its India Infrastructure Fund for a 26% stake. 3i’s stake has since dropped to 9.4 per cent due to change in valuations and rupee depreciation.
The deal will give 3i an exit route for its investment over which it has been wrangling with the CVR Group for some time.
This will be APSEZ’s third acquisition on the eastern coast after the purchase of Dhamra port in 2014 and Kattupalli port in 2016.
The deal will also help APSEZ expedite the vision of handling 400 million tonnes (mt) of cargo by 2025 and expand its market share among India’s ports.
The proceeds will be used by the CVR Group to settle lenders’ dues, a person briefed on the deal said.
In FY19, APSEZ loaded a combined 207.7 mt of cargo, clocking a growth of 15 per cent over FY18. The standalone port business earned ₹8,897 crore in FY19 and a net profit of ₹4,006 crore.
APSEZ’s 10 strategically located ports and terminals — Mundra, Dahej, Kandla and Hazira in Gujarat, Dhamra in Odisha, Mormugao in Goa, Visakhapatnam in Andhra Pradesh, Kattupalli and Ennore in Tamil Nadu — have the capacity to handle a combined 395 mt of cargo, accounting for 24 per cent of the country's total port capacity.
APSEZ is also developing a container transhipment port at Vizhinjam in Kerala and a container terminal at Yangon in Myanmar.
Krishnapatnam is Adani’s second acquisition in the port logistics space in less than a week after the purchase of Snowman Logistics Ltd for ₹296 crore on December 27.