Creditors panel approve JNPT's bid to buy debt-laden Dighi Port

P Manoj Mumbai | Updated on February 04, 2019 Published on February 02, 2019

This is the first instance of a Centre-owned port (JNPT) buying a private port under the Insolvency and Bankruptcy Code. Shashi Ashiwal

Dighi Port Ltd is promoted by Balaji Infra Projects Ltd and IL&FS Ltd

The Committee of Creditors (CoC) has backed the resolution plan placed by state-owned Jawaharlal Nehru Port Trust (JNPT) to buy the debt-laden Dighi Port Ltd under India’s bankruptcy and insolvency law.

The approval of the lenders panel will be submitted to the National Company Law Tribunal (NCLT) for ratification, at least two people briefed on the decision told BusinessLine.

Adani Ports and Special Economic Zone Ltd and a consortium of Veritas (India) Ltd, Veritas Infra & Logistic Pvt Ltd and Veritas Polychem Pvt Ltd had also filed their resolution plans for the private port located on the banks of Rajpuri creek in Maharashtra’s Raigad District.

JNPT, India’s biggest container gateway, had quoted an upfront amount of more than ₹ 600 crores besides capital infusion to continue running the port as a going concern, a shipping ministry official, one of the two persons mentioned earlier, said.

The bid placed by JNPT is a huge hair cut on some ₹ 2,628.84 crores that Dighi Port Ltd owes a clutch of 16 banks led by Bank of India (BOI).

Given the low price quotations, the resolution professional for Dighi Port, Shailen Shah, had attempted a Swiss Challenge round to improve the bids to which none of the three bidders responded.

Subsequently, the resolution professional had asked all the three bidding groups to improve their financial quotations, again without success.

“The resolution plan approved by the CoC is the one submitted by JNPT in November,” the ministry official said.

Dighi Port Ltd is promoted by Balaji Infra Projects Ltd and IL&FS Ltd.

For JNPT, the deal makes commercial sense given the constraints to expand further. Dighi is located in the same district as JNPT just a few kilo metres away.

It is also the first instance of a port (JNPT) owned by the Centre buying a private port under the Insolvency and Bankruptcy Code (IBC).

That aside, Dighi fits into its strategy of developing a new hub and spoke model with JNPT at the centre, the ministry official said.

“In India, it’s not easy to set up a port. It takes its own time. Dighi is a ready-made port, plus it’s a stressed asset. So, we are trying to get it a reasonable price, that’s the game,” the ministry official said.

JNPT’s revenues are steady. In some seven years, it will make net profit of over ₹3,000 crore. So, if the port is making ₹3,000 crore net profit every year, it must create more asset base by taking advantage of depreciation. If it earns ₹100 and invest ₹300 and claim 30 per cent depreciation on ₹300, there will be zero tax. If it keeps on building assets and pay less taxes, it will be able to earn more,” the official pointed out.

The future of JNPT, he said, is in having a hub and spoke model on the waterside; keep JNPT in the centre, create 3-4 smaller ports nearby and start bringing cargo from those places through waterways.

“Dighi will be a satellite port but dealing with specialised cargo like the cargo which Mumbai Port Trust is not handling now, it will be shift to Dighi. It’s ready business available. South Korean steel-maker Posco is already having business there, coal market is already there. There is ready cargo rest you build up,” the official said.

Published on February 02, 2019

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.