DP World’s decision to invest in Indian port facilities comes at a time when private equity (PE) funds that invested $1.2 billion in India’s ports since 2007 are staying away from the sector in 2015 as existing investors are struggling to cash out.
DP World’s decision to invest in Indian port facilities comes at a time when private equity (PE) funds that invested $1.2 billion in India’s ports since 2007 are staying away from the sector in 2015 as existing investors are struggling to cash out.

DP World eyes opportunities in Indian ports, to invest $1 bn

Dubai based firm identifying opportunities to invest in container terminals, among other projects, across India, say company officials

Mumbai: DP World Pvt. Ltd, the world’s fourth biggest container port operator majority owned by the Dubai government, has plans to invest over $1 billion in India for augmenting its port-related operations.

DP World group chairman and chief executive officer Sultan Ahmed Bin Sulayem on Friday said the port firm will invest over $1 billion in brownfield container terminals, greenfield container terminals, logistics parks, inland container depots, container rail facilities and basic infrastructure facilities required for business expansion.

“India is very important market for us. We are very bullish about the prospects of India," Sulayem said.

Sulayem did not give any time frame for the investments.

Anil Singh, senior vice-president and managing director (subcontinent) at DP World, said the firm is identifying opportunities to invest in container terminals, among other projects, across India. DP World currently operates six container terminals in India, including Chennai, Mumbai, Kochi and Mundra.

DP World’s decision to invest in Indian port facilities comes at a time when private equity (PE) funds that invested $1.2 billion in India’s ports since 2007 are staying away from the sector in 2015 as existing investors are struggling to cash out.

The port sector, which has seen lower traffic due to falling exports, saw only one investment of $25 million in 2014 and just two exits worth $1.6 million in 2015.

A fall in exports due to a sluggish global economy and a high level of debt on the balance sheets of some firms in the port sector are seen as reasons behind the decline in fresh investments in the sector.

However, Sulayem is hopeful about Indian port prospects.

He said the firm has inaugurated a new port terminal in Mumbai with 330 metre length with a capacity of 1 million TEU (twenty -foot equivalent units).

A TEU is the standard size of a container and a common measure of capacity in the container business.

This will be a terminal in addition to the existing Nhava Sheva International Container Terminal (NSICT) at Jawaharlal Nehru Port Trust (JNPT), near Navi Mumbai, which is India’s busiest container gateway loading more than half of the container cargo shipped through its ports.

Meanwhile, state-run JNPT is weighing a plan to shift the terminal run by Dubai’s DP World since 1997 to a revenue-share model from a royalty format as a sharply rising royalty and stagnant rates hurt the viability of the project.

Sulayem said DP World is in talks with the Union government to shift the revenue share model.

NSICT is the first private container terminal at a Union government-owned port after India opened the sector to private funds in 1997.

The voyage ahead for Dubai’s DP World in India is not smooth, said Shashank Kulkarni, an independent port consultant.

“In India, it is all about surviving and competing. DP World also needs to get a clarity on regulations about the Vallarpadam trans-shipment terminal, which is not doing well as expected," said Kulkarni, who was former secretary general at Indian Private Ports and Terminals Association as well as Indian National Shipowners’ Association,

Sulayem admits that there is intense competition from Indian and international port companies.

To be sure, India’s first international container trans-shipment terminal, or ICTT is yet to take off in full swing. It has handled 17,000 twenty-foot equivalent units, or TEUs, aggregated from various ports in India out of the 365,000 TEUs loaded in the year ended March 2015 and it was not great performance by any standard.

“Cargos that are trans-shipped through Colombo will come back to India," Sulayem said.

He said the tariff rates are at least 30% lower in Colombo and it will take some more time to compete with this scenario.

“Shipping lines are asking to match the Colombo rates," Sulayem said referring to competition.

Asked about competition from Adani Group, Sulayem said: “Why do you want to single out Adani Group. Competition is from everywhere."

India’s merchandise exports contracted for the 13th month in a row in December due to tepid global demand and a volatile global currency market. India’s exports are projected to decline 13% from the previous year’s level to $270 billion in 2015-16, according to the commerce ministry.

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