By N Ismail and Anand K/Bloomberg
Mundra Port & Special Economic Zone Ltd plans to raise Rs1,800 crore ($407 million) in the first initial public offer by an Indian port operator, sources with direct knowledge of the offering said.
Mundra Port, owner of India’s largest private port, aims to sell Rs1,500- Rs1,800 crore worth of shares as early as the second quarter, the sources said, asking not to be identified before pricing details are announced. The company filed preliminary sale documents with the Securities and Exchange Board of India (Sebi) on 9 March.
Mundra Port is raising funds to expand facilities at the port, located in the Gulf of Kutch. As much as 90% of trade in the country goes through ports. The government wants operators to add capacity to handle more.
“The Indian economy is booming,” said Puru Saxena, Hong Kong-based chief executive officer of Puru Saxena Ltd, a fund management company. “(In the) longer term, infrastructure is a good investment in India.”
The government plans to double the capacity of the country’s 199 ports to 1.5 billion tonnes by 2012 as economic growth strains existing facilities, Shipping Secretary A K Mohapatra said on 13 September. The ports carried 570 million tonnes of cargo in 2005-06. Three-quarters of the traffic went through 12 ports.
The average turnaround time for cargo ships in India is three-and-a-half days, according to the government, which has attributed congestion to insufficient rail and road links from ports to their hinterland. That compares with 10 hours in Hong Kong.
Total cargo volume at Mundra port rose 36% to 11.7 million tonnes in 2005-06, against 8.6 million tonnes a year earlier, according to the offer document filed with Sebi. Mundra Port handles mostly bulk cargo and also crude oil and container ships.
The port plans to sell 40.25 million shares, representing a stake of about 10%.
DSP Merrill Lynch & Co. and JM Morgan Stanley, are helping to manage the share sale, according to the offer document.
While Mona Kwatra, spokeswoman for DSP Merrill Lynch in Mumbai, declined to comment, Nandini Goswami, who represents JM Morgan Stanley, and Sandeep Mehta, CEO, Mundra Port, couldn’t be reached.
Mundra Port is part of the Ahmedabad-based Adani Group, whose businesses in commodities trading, coal mining, power generation, real estate development and agriculture processing.
3i Group Plc, Europe’s biggest publicly traded buyout firm, invested $50 million in Mundra Port in June, said Anil Ahuja, who heads 3i’s Indian business.
Mundra Port has exclusive right to develop and operate the Gujarat port and facilities for 30 years starting February 2001. In April last year, it got approval to build a special economic zone.
The company plans to set aside Rs700 crore to develop the port and build facilities including roads by 2010, according to the sale documents. It will spend Rs300 crore of the IPO proceeds to build a terminal for coal and other cargo. Part of the remaining proceeds will be invested in Adani Group companies.