Mundra Port & Special Economic Zone Ltd plans to raise as much as Rs1,800 crore ($407 million) in the first initial stock sale by an Indian port operator, people with direct knowledge of the offering said.
Mundra Port, owner of India’s largest private port, aims to make the IPO within the next two months, the two people said, asking not to be identified before pricing details are announced. The company filed preliminary sale documents with stock market regulator Securities and Exchange Board of India (Sebi) on 9 March.
The company plans to use the funds to expand facilities at the port, located in the Gulf of Kutch, an inlet of the Arabian Sea on India’s west coast. As much as 90% of trade in the world’s second-fastest growing major economy 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) long term, infrastructure is a good investment in India.”
The Centre 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 last year. The ports carried about 570 million tonnes of cargo in the 12 months ended 31 March 2006. 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 MT in the year ended 31 March 2006, compared with 8.6 MT a year earlier, according to the sale documents filed to Sebi. Mundra port handles mostly bulk cargo and also crude oil and container ships, according to these documents. It plans to sell 40.25 million shares, representing about 10% stake, the documents show.
The local units of Merrill Lynch & Co. and Morgan Stanley are helping to manage the share sale, according to the sale documents. Mona Kwatra, a spokeswoman for DSP Merrill Lynch in Mumbai, declined to comment. Nandini Goswami, a Mumbai-based spokeswoman for JM Morgan Stanley, and Sandeep Mehta, chief executive officer of Mundra Port, could not be reached for comment.
Mundra Port is part of the Ahmedabad-based Adani Group, which has 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 the exclusive right to develop and operate the Gujarat, western India-based port and facilities for 30 years starting February 2001. In April last year, it got approval to build a special economic zone, where companies are given tax and other incentives to attract investments.
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 funds from the sale to build a terminal for coal and other cargo.
Part of the remaining proceeds will be invested in Adani Group companies. Net profit in the year ended March 2006 rose 6.9% to Rs74.75 crore, from Rs69.92 crore, according to Mundra Port’s sale documents.
India’s $854 billion economy, the fourth-biggest in Asia, may expand at a record 9.2% in the year ending 31 March following a 9% gain last year, according to the government’s statistics office, making it the world’s second-fastest growing major economy after China. China’s $2.2 trillion economy expanded 10.4% in 2006.
India’s exports rose 5.5% to $9.6 billion in January and imports increased 23.2% to $15.4 billion, the commerce and industry ministry said this month.
Total traffic at the Jawaharlal Nehru port, India’s largest, grew to 37.75 MT in 2005-06 from 6.87 MT a decade earlier, according to the operator’s website. The port is located south of Mumbai.
The government is seeking to invest $320 billion upgrading and building airports, power plants, ports and other infrastructure by 2012.
(Santanu Choudhury in New Delhi contributed to this story)