JSW to gain control of 3 bulk cargo terminals by buying Chettinad Builders for ₹960 crore

Sajjan Jindal-led JSW Infrastructure Ltd will sign a deal in the next few days to buy Chennai-based Chettinad Builders Pvt Ltd for about ₹960 crore, which will give it control over three bulk cargo handling terminals — two with Kamarajar Port and one with New Mangalore Port Trust. The deal is likely to be funded by IndusInd Bank.

The acquisition was first reported by BusinessLine on August 15.

The cargo terminals being acquired include a 10 million tonne (mt) common user coal handling terminal at Kamarajar Port, a 2 mt multi-cargo terminal also at Kamarajar Port and a 10 mt common user coal terminal at New Mangalore Port Trust.

Approvals in place

The board of Kamarajar Port and the board of trustees of New Mangalore Port Trust have separately approved the proposals filed by Chettinad Builders seeking their no-objection certificates to sell the stakes in the special purpose vehicles operating the terminals to JSW.

The Shipping Ministry has granted the mandatory security clearance for the stake sale, multiple government sources told BusinessLine.

The board of JSW Infrastructure approved the acquisition last month. JSW did not comment.

The deal will take the group a step closer to its target of building port capacity to handle 200 mt of cargo by 2022.

Ports run by JSW Infrastructure at Jaigarh and Dharamtar in Maharashtra; Paradip in Odisha, and in Goa currently have a capacity of over 100 mt and handled a combined 70 mt of cargo in FY20, of which some 90 per cent was the group’s captive cargo.

By 2025, JSW Infra plans to have a 50:50 mix of captive and third-party cargo.

The three facilities being acquired have good cargo handling potential given their location and the presence of power stations and steel mills close by. The two terminals at Kamarajar Port — a corporate entity — are also outside the ambit of the rate regulator for major ports. The New Mangalore terminal operates under a liberal rate structure.

However, port industry executives say the three terminals have “no juice” in them due to the high percentage of annual revenue they are contractually mandated to share with the government-owned ports.

Revenue-share

The Chettinad International Coal Terminal shares 52.524 per cent of its annual revenue with Kamarajar Port, while the Chettinad International Bulk Terminal shares 36 per cent.

The Chettinad Mangalore Coal Terminal won the contract by agreeing to share 31 per cent annually with the New Mangalore Port Trust.

The deal, though, will help JSW Group to cut its dependence on Krishnapatnam Port, which was acquired by Adani Ports in October, for moving cargo. The group started using the Krishnapatnam facility a few years ago after environment concerns forced regulators to trim the cargo volumes handled at its terminal in Mormugao Port Trust.