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Container Corporation of India (Concor) will have to sell its stakes in two key port terminals ahead of a planned privatisation of the state-owned rail hauler by the government to avoid complications associated with the deal.
Privatisation of Concor which is 54.8 per cent-owned by the central government, is expected to draw marquee investors such as Dubai government-owned DP World, Singapore wealth fund-owned PSA International Pte Ltd, APM Terminals Management BV, the container terminal operating unit of Danish shipping conglomerate AP Moller-Maersk Group A/S, and Adani Ports and Special Economic Zone (APSEZ), India’s biggest private port operator, among others.
The deal involves selling 30 per cent of the government’s stake in the company to a strategic partner along with transfer of management control.
The outcome of the bid could throw up some unpalatable scenarios, most importantly, helping the successful bidder emerge as India’s biggest rail hauler of containers with potential anti-trust concerns. It will also help the buyer gain entry into two port terminals, which may not be to the liking of the existing majority owners of these facilities, says industry sources.
Concor holds a 26 per cent stake in Gateway Terminals India Pvt Ltd (GTI), one of the five container terminals operating at Jawaharlal Nehru Port Trust (JNPT), India’s busiest container gateway.
APM Terminals holds the majority 74 per cent stake in GTI.
GTI is India’s single biggest container terminal by volumes loaded, clocking more than two million twenty-foot equivalent units or TEUs a year and accounting for about 45 per cent of JNPT’s total container volumes and approximately 20 per cent of India’s total container traffic.
JNPT handled 5.13 million TEUs in FY19; of this GTI handled 2.05 million TEUs.
Concor owns a 15 per cent stake in India Gateway Terminal Pvt Ltd (IGTPL), the entity that runs India’s first and only international container transhipment terminal at Vallarpadam in Cochin Port. The facility was built to reduce India’s dependence on neighbouring hub ports such as Colombo, Singapore and Jebel Ali to send and receive cargo containers.
DP World Ltd holds the majority 85 per cent stake in India Gateway Terminal, which handled 5,95,000 TEU in FY19.
APM Terminals may not want its rivals DP World, PSA International or even APSEZ to own the 26 per cent which Concor now holds in GTI.
Similarly, DP World would be loathe to having PSA International, APSEZ or even APM Terminals to come in place of Concor in the Vallarpadam facility, as a fallout of the privatisation exercise.
“This is because, globally container terminal specialists would prefer running facilities on their own or through partnerships with local entities such as Concor in India to bring synergies in operations. There is no instance, globally, of top container terminal operators joining hands to run a terminal due to their independent business strategies,” said an industry source.
“It might be difficult for those terminals to function with shareholders who are direct competitors, regardless of the size of the stake,” said an executive with a global terminal operating company. “Those terminals are often marketed in package deals with other terminals in the group portfolio. So, when capacity is short, they have been used as leverage to support deals elsewhere,” he added.
If DP World or PSA International were to buy Concor, it would further complicate issues at JNPT where the Dubai-based operator already runs two terminals while PSA has one facility. This would potentially stoke monopoly fears, said the industry source.
On the other hand, if APSEZ emerge the successful bidder for Concor, it would hold ramification for the DP World-controlled Vallarpadam transhipment terminal in Cochin because APSEZ is building a new international container transhipment terminal a few kms away at Vizhinjam near Thiruvananthapuram.
The existing majority owners of GTI and IGTPL could also face hurdles if they were to buy out the new owner of Concor from these two terminals, the source added.
Concor could not be reached immediately for comments.
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