Edelweiss ARC looks to take over Karaikal Port’s daily operations

Edelweiss ARC seeks to take over daily operations of Karaikal Port, Puducherry, from Marg Ltd and give it to its in-house turnaround team led by Sumanth Cidambi


A file photo of the Karaikal Port in Puducherry. Edelweiss ARC bought a large part of Karaikal Port’s debt from various banks in 2015.
A file photo of the Karaikal Port in Puducherry. Edelweiss ARC bought a large part of Karaikal Port’s debt from various banks in 2015.

Mumbai: Edelweiss Asset Reconstruction Co. (ARC) is looking to take over the daily operations of the all-weather Karaikal Port in Puducherry from Marg Ltd, two people directly aware of development said on condition of anonymity.

Edelweiss ARC, which acquired a large part of Karaikal Port’s debt from various banks in 2015, plans to hand over the operations of the port to its in-house operational turnaround team led by Sumanth Cidambi, who was hired from global distressed assets turnaround firm Alvarez and Marsal last year.

“Edelweiss has the backing of almost all of Karaikal Port investors,” said the first person, a senior partner at a private equity fund which has invested in the port. “However, there are some issues that are yet to be resolved with Marg Ltd but we are hopeful of an early resolution.

“While the talks with Shapoorji were in an advanced stage last year and the valuation too was agreed upon by both sides, the deal could not go ahead because Marg was not willing to pass on the daily operations and management control to Shapoorji,” the person said, adding “Finally Shapoorji walked out of the deal and subsequently bought Gopalpur Port in Odisha instead.”

Mint had reported last October that while Shapoorji Pallonji group had been seeking to buy a 51% stake in the port, as per the original concession agreement signed between Chennai-based Marg and the government of Puducherry, the former is required to maintain a minimum 26% stake in the project.

As such a change in ownership can be implemented only if the current promoter agrees to exit the project through a substitution agreement duly ratified by the Puducherry government. The concession agreement between the Puducherry government and Marg was executed on 25 January, 2006. A special purpose vehicle—Karaikal Port Pvt. Ltd (KPPL) — was incorporated for implementing and operating the project. Karaikal Port is among the newer all-weather private ports in India; it became operational in 2009.

“However, there has been significant headway in the recent months, which includes changes in the board structure of Karaikal Port,” the second person said.

“Two board members have since left and have been replaced,” the person added.

In February, The Financial Express citing people close to the development reported that Edelweiss ARC was in the process of approaching the National Company Law Tribunal (NCLT) to seek a recast of Rs1,800-crore debt of Karaikal Port.

The newspaper also reported that Edelweiss ARC had hired consulting firm EY to manage the company’s cash.

Several private equity funds have invested in KPPL in the past few years. In May 2012, Jacob Ballas India invested Rs200 crore for a minority stake.

Subsequently, Standard Chartered PE, IDFC Project Equity and Ascent Capital have invested in the port. KPPL’s term loans to the tune of Rs1,268 crore were restructured in FY13 with a two-year moratorium. Edelweiss ARC declined to comment on the story while an email sent to Marg group and Shapoorji Pallonji group remained unanswered till the time of going to press.

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