Mumbai: Promoters of Krishnapatnam Port Co. Ltd (KPCL)have approached potential investors to raise up to Rs1,500 crore in structured debt to buy out the stake held by private equity fund 3i Group Plc, two people aware of the development said.
The UK-based fund had invested Rs800 crore in KPCL for around 10% stake in 2009, but relations soured when the promoters allegedly refused to honour an agreement to buy back the stake at a pre-set price at a later date. 3i then moved the Company Law Board.
A successful fundraising could end the acrimony, the people cited above said on condition of anonymity.
“The CVR group (promoters of KPCL) has been in talks with several potential investors but discussions with Piramal Enterprises Ltd (PEL) have progressed well," said the first of the two persons. “PEL is an existing investor in Navayuga group of companies, also part of CVR group founded by its chairman C.V. Rao in 1986. PEL is also keen on the transaction since this could help it exit its investments in two Navayuga road assets—Navayuga Devanahali Tollway Pvt. Ltd and Navayuga Dichpally Tollway Pvt. Ltd," he said.
In 2013, Piramal Enterprises had invested around Rs550 crore in Navayuga Road Projects Pvt. Ltd, (NRPPL) the holding company which controls the two assets.
“Significantly, KPCL also owns 49% stake in Navayuga Dichpally Tollway Pvt. Ltd and, given the ongoing dispute, PEL has found it difficult to exit the assets," said the second person, adding that till recently, Navayuga was in talks to sell the two road assets to Essel Group but the transaction did not close because Essel was not comfortable buying the assets given the litigation involving KPCL.
While emails sent to C.V. Rao’s office, Navayuga Engineering Co. Ltd (NECL) and KPCL on Tuesday remained unanswered, a Piramal Enterprises spokesperson said the company declined to comment. A 3i Group PLC spokesperson said, “No agreement has been reached yet".
Krishnapatnam Port is one of India’s largest private sector ports. Inaugurated in 2008, the port was built by NECL, the engineering, procurement and construction (EPC) arm of CVR Group, under the build-operate-share-transfer (BOST) agreement with the Andhra Pradesh government. The port covers an area of 4,553 acres. The BOST agreement, valid for 30 years and further extendable to 50 years, requires the promoters to pay 2.6% of the port’s gross revenue to the state government for the first 30 years.
The agreement also requires KPCL to develop the port in three phases. The second phase of development is underway. The company claims the port will become one of the biggest ports in the world and the largest in India.
A 12,000 acre Special Economic Zone (SEZ) is also being set up in the vicinity of the port which is being developed by Krishnapatnam Infra-Tech Pvt. Ltd, a special purpose vehicle set up by KPCL. In recent years, coal handling has become the main source of revenue for KPCL, although iron ore constituted the bulk of cargo handled when the port began operations in 2008.
At least seven power producers are building coal-fired electricity generating units in and around Krishnapatnam, with a combined capacity of 14,000MW based on imported coal which is expected to generate a demand of 40 million tonnes per annum of imported coal.