Warburg Pincus buys 30% stake in new port in Andhra Pradesh

Warburg Pincus buys 30% stake in new port in Andhra Pradesh
Comment E-mail Print Share
First Published: Fri, Sep 05 2008. 12 22 AM IST

Dropping anchor: Ships at Jawaharlal Nehru Port, the country’s busiest. However, Gangavaram is the deepest port with 20m depth which will help it handle bulk carriers of capacity up to 200,000 tonnes.
Dropping anchor: Ships at Jawaharlal Nehru Port, the country’s busiest. However, Gangavaram is the deepest port with 20m depth which will help it handle bulk carriers of capacity up to 200,000 tonnes.
Updated: Fri, Sep 05 2008. 12 22 AM IST
Bangalore: Private equity firm Warburg Pincus Llc. has invested around Rs150 crore for a 30% stake in India’s deepest port located at Gangavaram in Andhra Pradesh on the country’s eastern coast.
The Rs1,700 crore first phase of the new private port, located just 15km away from the Union government-owned Visakhapatnam port, started so-called trial operations in August. It will be formally inaugurated in the first week of October and have the capacity to handle 35 million tonnes (mt) of coal, iron ore, other bulk and general cargo a year.
Dropping anchor: Ships at Jawaharlal Nehru Port, the country’s busiest. However, Gangavaram is the deepest port with 20m depth which will help it handle bulk carriers of capacity up to 200,000 tonnes. Ashesh Shah / Mint
The port has a water depth of up to 20m, deeper than any other port in the country, that will help it handle large bulk carriers with a cargo carrying capacity of up to 200,000 tonnes. Besides, the cargo handling facilities at Gangavaram are fully mechanized unlike many ports where loading and unloading is done manually.
Gangavaram Port Ltd, a company promoted by D.V.S. Raju, the co-founder of India’s fourth largest IT services firm Satyam Computer Services Ltd, won the deal from the Andhra Pradesh government to develop and operate the new port for 30 years beginning 2006.
A consortium of 13 banks led by State Bank of India has lent Rs1,200 crore to Gangavaram port for funding the phase one development of the project. The equity of around Rs500 crore has been contributed by Raju, the government of Andhra Pradesh and Warburg Pincus.
Raju, who was also founder-chairman of Hyderabad-based IT services firm VisualSoft Technologies Ltd, holds a 59% stake in the port company, while Andhra Pradesh government has a shareholding of 11%. Warburg Pincus holds 30% of the equity stake in Gangavaram Port Ltd, said a company executive who did not want to be named.
Warburg Pincus said it has invested in Gangavaram port, but declined to give details citing company policies and confidentiality clauses in the deal.
Gangavaram port has already poached a top customer from the rival Vizag port by signing on state-owned Rashtriya Ispat Nigam Ltd that runs the Visakhapatnam Steel Plant.
Vizag Steel currently imports about 4mt a year of coking coal, limestone, thermal coal and other such raw materials for its steel plant through Vizag port. The imports will rise to at least 6mt a year after the steel maker doubles capacity to 6.3mt from 3 mt by October 2009.
Vizag Steel also exports about 100,000 tonnes a year of finished steel products to Sri Lanka, Thailand, Taiwan, the UAE and the US through Vizag port.
“Gangavaram port has a long term understanding with Vizag Steel. The steel-maker will shift its entire imports and exports to Gangavaram port, saving upwards of Rs150 crores a year on logistic costs,” said the same executive mentioned earlier.
A Vizag Steel spokesman confirmed that it was shifting to the new port but declined to give details.
“At a depth of 20m, customers can export or import cargoes on bigger bulk carriers and save substantially on ocean freight due to economies of scale as larger quantities of cargo can be transported at a time,” said T.V. Shanbhag, a shipping expert who was till recently adviser (shipping) with Mumbai-based shipping company Mercator Lines Ltd.
Vizag Steel currently ships raw materials on handymax carriers (that can load up to 50,000 tonnes) because the depth at Vizag port cannot accommodate bigger vessels. The inner harbour of Vizag port, where most of its cargo handling berths are located, has a depth of 11m.
Vizag port plans to deepen the inner harbour to 14m to accommodate ships that can carry 73,000-75,000 tonnes of dry bulk commodities.
Still, it would be nowhere near the new port in terms of depth. Vizag port handled 64.60mt of cargo in the 12 months to March this year.
Being a port owned by the state government, the private operator of Gangavaram port is free to fix its own tariffs without consulting a regulator, whereas the rates for the 11 union government-owned ports including Vizag port are set by the Tariff Authority for Major Ports.
Gangavaram port would thus be able to fix competitive rates to attract customers.
Visakhapatnam is the industrial nerve centre of Andhra Pradesh and is regarded as the gateway for trade with China and the Asean region.
“Soon the port will initiate expansion plans by doubling the capacity of the coal terminal, developing a dedicated liquid bulk terminal and a container terminal,” said the executive.
This is part of the company’s plan to boost the port’s capacity to handle over 100mt of cargo a year by 2015 with an investment of around Rs7,000 crore.
Comment E-mail Print Share
First Published: Fri, Sep 05 2008. 12 22 AM IST