Sical Logistics to sell its stake in Chennai terminal to PSA

Sical Logistics to sell its stake in Chennai terminal to PSA

Bangalore: Sical Logistics Ltd is selling its 27% stake in a new container handling facility at Chennai port to PSA International Pte Ltd, its dominant joint venture partner, two people familiar with the matter said.

“Sical has applied to us for permission to sell its 27% stake in Chennai International Terminals Pvt. Ltd to PSA," said an official at Chennai port. “We have referred the proposal to the legal department."

Proceeds from the stake sale will be used by the parent AC Muthiah group to restructure its debt-ridden fertilizer firm Southern Petrochemical Industries Corp. Ltd (Spic), the second person said. The two people did not want to be named.

L.R. Sridhar, managing director of the Chennai-based Sical Logistics, said the “deal has not been done yet".

A venture between PSA and Sical had invested around Rs600 crore to build the new facility, which it will operate for 30 years.

PSA, the world’s second biggest container port operator, is fully owned by Temasek Holdings Pte Ltd, the investment arm of the Singapore government. Chennai is India’s second biggest container port after Jawaharlal Nehru port near Mumbai.

But Sical wants to exit the venture as it does not forsee a meaningful role in its operation, management and maintenace because of the minority shareholding, the second person said.

The PSA-Sical facility, the second container handling terminal at Chennai port, is designed to handle 1.5 million standard containers a year.

Chennai International Terminals, the special purpose vehicle for implementing the project, was originally structured with PSA holding a 60% stake and Sical taking the balance. However, in 2008, because of the financial trouble facing the AC Muthiah group, Sical decided to settle for a 27% stake in the joint venture.

“Sical did not support PSA in raising debt for the project, which was totally done by the Singapore operator by leveraging its balance sheet," the second person said. “PSA is of the view that Sical was not giving any value addition to the project."

Sical was also facing problems in getting its port concessions assigned in favour of a subsidiary created in 2007 to house its ownership in concession-based, asset-intensive terminals in the inland and port infrastructure space.

These include Sical’s 74% stake in a new iron ore-handling terminal at Ennore port and its 37.5% stake in a container-handling facility at Tuticorin port, both in Tamil Nadu. Sical is also setting up iron-ore handling facilities at the Union government-owned New Mangalore port.

Other projects in this portfolio are Sical Distriparks Ltd, the firm’s container logistics business, and Sical Multimodal and Rail Transport Ltd, its container train operating unit.

Sical Logistics also owns a 74% stake in subsidiary Sical Infra Assets Ltd, with Old Lane Mauritius IV Ltd, a vehicle of Old Lane Opportunities Funds, holding the balance equity.