Ahmedabad: Adani Ports and Special Economic Zone Ltd’s (APSEZ) acquisition of Katupalli port in Tamil Nadu from L&T Shipbuilding Ltd may take longer to close with the state going to the polls next month.
While the acquisition got the nod from the Tamil Nadu government in March, clearance from the state maritime regulator and approval for the demerger of the port from L&T Shipbuilding may take longer as the model code of conduct has come into effect, said three industry executives familiar with the matter.
The model code of conduct came into effect from 4 March for Tamil Nadu state that goes to the polls on 16 May.
“It will not be until June when the new government is be formed that this deal will move forward," said one of the three executives quoted above.
Tamil Nadu’s port policy, under which the project was awarded to Larsen and Toubro Ltd (L&T), does not permit the sale of the port because it was structured as a shipbuilding cum port facility under a single entity. Currently, L&T operates both the port and a shipyard under L&T Shipbuilding. L&T holds a 97% equity stake in L&T Shipbuilding, with Tamil Nadu Industrial Development Corp., a state government undertaking, holding the rest.
For L&T to divest its investment in the project, it will have to split the company and assets and then divest it, said Ramesh Singhal, chief executive, i-Maritime Consultancy, which tracks the port and shipping sector.
“The demerger, which is very crucial for sealing this deal, is more linked to policy and regulatory issues in this case rather than technical or legal modalities that are usually related to corporate demergers," said Singhal.
An L&T group executive and an APSEZ spokesperson declined to comment.
APSEZ said in a stock exchange filing in November that its unit, Adani Kattupalli Port Pvt. Ltd, had entered into an in-principle agreement for the strategic acquisition.
Gautam Adani, chairman of the Adani Group, said in November that Kattupalli Port is a strategic complement to its Ennore container terminal, which will be commissioned in 2016. Kattupalli Port is located adjacent to Ennore Port, where APSEZ is developing the Ennore container terminal.
APSEZ runs as many as seven ports or terminals located at Mundra, Hazira, Kandla and Dahej in Gujarat; Mormugao in Goa; and Visakhapatnam in Andhra Pradesh, with new facilities under construction at Kamarajar in Tamil Nadu and Vizhinjam in Kerala.
The company handled 144.25 million tonnes (mt) of cargo in the year ended March 2015, which it plans to increase to 200 mt per annum by 2020.