Graphic: Ahmed Raza Khan / Mint

Graphic: Ahmed Raza Khan / Mint

Adani looks at eastern foothold through Gangavaram port buy

Adani looks at eastern foothold through Gangavaram port buy

Bangalore: Gautam Adani-controlled Mundra Port and Special Economic Zone Ltd (MPSEZ), which runs India’s biggest private port at Mundra in Gujarat, has opened talks to buy Gangavaram port in Andhra Pradesh, at least two people familiar with the discussions said, asking not to be identified.

If successful, the acquisition will help Adani gain a foothold on India’s eastern coast.

Graphic: Ahmed Raza Khan / Mint

Adani is placing a huge bet on India’s ports, which account for at least 90% of the country’s trade in goods. Mundra port, 81% owned by Adani, is currently ranked eighth among Indian ports in terms of cargo handled.

MPSEZ holds the rights to develop non-liquefied natural gas cargo ports at Hazira and Dahej, both in Gujarat, and to develop and operate a new port in the state, at Dholera. It is also developing a coal handling terminal at Centrally owned Mormugao port in Goa.

Adani has picked or is choosing ports not controlled by the Union government for expanding its business because these are free from tariff regulations. These ports are owned by the states but have been given to private firms that develop and operate them.

Like Mundra, Hazira, Dahej and Dholera, Gangavaram too is a port outside Central control. Hence, the private operator of Gangavaram is free to set rates. In comparison, the rates for 11 of the 12 Central ports are set by the tariffs regulator.

Gangavaram Port, the entity that runs the port, is a special purpose company promoted by D. Venkata Satyanarayana Raju, co-founder of India’s fourth largest IT services firm Satyam Computer Services Ltd, since acquired by Tech Mahindra Ltd, which won the rights from Andhra Pradesh to develop and operate the new port for 30 years beginning 2006.

Raju, who was also founder-chairman of Hyderabad-based IT services firm VisualSoft Technologies Ltd, holds a 59% stake in the port company, while the AP government has a shareholding of 11%. Private equity firm Warburg Pincus Llc has invested close to Rs150 crore for a 30% stake in Gangavaram port, billed as India’s deepest port with a water depth of 20m.

This depth can accommodate capesize ships, the largest of the dry bulk carriers with a cargo carrying capacity of up to 200,000 tonnes.

The Rs1,700 crore phase I of the new private port, located just 15km from the Centrally owned Vizag port, started commercial operations in 2008, with a capacity to handle 35 million tonnes of coal, iron ore, other bulk and general cargo a year. Vizag is the industrial nerve centre of Andhra Pradesh and is regarded as the gateway for trade with China and the South-East Asian region.

MPSEZ had earlier said it was pursuing opportunities in ports on the eastern coast, mainly Andhra Pradesh and Orissa, and in South-East Asia and Africa.

“While I do not know the specifics of this deal and the discussions, I would see this as a sign of the ports sector maturing," said Neeta Ramnath, vice-president, transport advisory, at consultancy firm Feedback Ventures Pvt. Ltd.

“In any infrastructure sector, the early stages are marked by concessions being owned by opportunistic players who are able to take the initial project risks related to bidding, financing and in some cases, construction, too. But only experienced players can undertake the operations risk," she added, picking the Adani Group as one such.

The only other deal of a similar nature was in 2005 when APM Terminals Management BV, the world’s third biggest container port operator, acquired control of Pipavav port from the original promoter SKIL Infrastructure Ltd.