Hyderabad: Global private equity firm 3i Group Plc. said it will invest $161 million (Rs800 crore) for a minority stake in Krishnapatnam Port Co. Ltd (KPCL), the developer and operator of an all-weather, deep-water port at Krishnapatnam in Andhra Pradesh. The size of the stake wasn’t disclosed.
Mint had first reported on 27 August that 3i filed for approval with the Foreign Investment Promotion Board (FIPB) for buying a stake in KPCL. On 12 October, Mint reported that 3i secured FIPB approval for the proposal, which was being sent to the cabinet committee of economic affairs because the amount involved was above Rs600 crore.
“3i did not deviate from its investment commitment of some Rs800 crore in the port company from day one of initial discussions. However, it has slightly increased the minority holding in the port company for the same amount by the time of final agreement,” 3i’s Asia head, Anil Ahuja, said.
KPCL was formed by CVR Group of Hyderabad to develop and operate a Rs10,000 crore port with a 30-year concession, extendable to 50 years. The port would have the capacity to handle 100 million tonnes (mt) of bulk cargo a year capacity.
CVR Group chairman Chinta Visweswara Rao refused to disclose the size of the stake bought by 3i, citing a non-disclosure agreement. “We are expecting to achieve financial closure for the port project in the next fortnight or so,” he said.
3i Group had in November 2006 invested $44.4 million for a 10% stake in construction firm Navayuga Engineering Co. Ltd, the flagship company of the CVR Group, formerly known as the Navayuga group.
Ahuja said, 3i is investing in KPCL through its $1.2-billion 3i India Infrastructure Fund. It is its third investment in the Indian infrastructure segment, the other two being $227 million in Adani Power Pvt. Ltd in September 2007 and $101 million in engineering and construction firm Soma Enterprises Ltd in December 2007.
“The fund, which has invested some $500 million so far including KPCL, is still left with some $700 million of cash. We expect to complete these investments in three key Indian infrastructure segments that include power, ports and roads by 2010-end,” Ahuja told Mint over phone.
The Indian ports sector is expected to grow strongly in the coming years, driven by international trade and port capacity constraints, Ahuja said.
India’s ports are projected to increase their total cargo handling capacity to 1.85 billion tonnes by 2012 from about 758 million tonnes now, with an investment of about Rs1 trillion, as the country’s foreign trade expands. Private firms are expected to invest at least 65%, or Rs65,532 crore of this, according to the shipping ministry.
The Planning Commission estimates that the port sector requires $20 billion in investment over the next five years.