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The Andhra Pradesh government has allowed Aurobindo Realty and Infrastructure Pvt Ltd to acquire majority stakes in Kakinada Gateway Port Ltd (KGPL) and the nearby Kakinada Seaports Ltd by waiving a restriction in the concession agreement for KGPL that barred its developer and operator from holding over 25 per cent stake in another port located within 75 km. Since Kakinada Gateway Port and Kakinada Seaports Ltd are within the 75 km of each other, Aurobindo Realty could not have acquired controlling stake in the two ports without the waiver.
In September 2020, Aurobindo Realty and Infrastructure signed a deal to buy the 51 per cent stake held by GMR SEZ and Port Holding Ltd (a wholly-owned unit of GMR Infrastructure Ltd) in Kakinada SEZ Ltd for ₹2,610 crore including sub-debt.
As part of the deal, 100 per cent equity in the planned Kakinada Gateway Port Ltd held by Kakinada SEZ (KSEZ) was also to be transferred to Aurobindo Realty, according to an announcement by GMR Infrastructure on September 25 last year. KSEZ is developing a port-based multi-product special economic zone at Kakinada in East Godavari district.
Kakinada Gateway Port Ltd was awarded a contract by the Andhra Pradesh government to set up a greenfield commercial port in Kona village of East Godavari district.
While the sale of the SEZ unit was approved by the Board of Approvals in the Commerce Ministry, the clearance from the Andhra Pradesh government for the related port deal ran into complication after Aurobindo acquired a majority 41.12 per cent stake in the nearby Kakinada Seaports Ltd, violating the 75-km clause in the concession pact for Kakinada Gateway Port.
To facilitate clearance for the port deal from the Andhra Pradesh government, KSEZ and Aurobindo proposed to limit the equity of KSEZ in Kakinada Gateway Port to 74 per cent with the balance 26 per cent stake to be held by GMR SEZ and Port Holding Ltd.
‘No absolute restriction’
The State government sought legal opinion from Justice VN Khare, a former Chief Justice of India, who said that the concession agreement did not place “an absolute restriction and is subject to waiver by the Authority”.
The AP government decided to give an exemption to Auribindo “with a condition that the target towards investment and employment proposed by Aurobindo should be achieved, failing which the Authority is at liberty to take necessary action, by entering into a supplementary agreement to that effect,” R Karikal Valaven, Special Chief Secretary wrote in a March 10 order.
The government has also permitted GMR SEZ and Port Holding to acquire 26 per cent equity in Kakinada Gateway Port from KSEZ, he added.
Aurobindo plans to invest ₹3,500 crore to build the port for handling about 16 million tonnes (mt) of cargo a year in the first phase.
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