Home / Companies / Krishnapatnam Port eyes stake sale to fuel bigger ambitions

Hyderabad: Krishnapatnam Port Co. Ltd (KPCL), promoted by Hyderabad-based infrastructure conglomerate CVR Group, plans to induct a strategic investor as it looks to become the largest port-cum-coal transhipment hub on the east coast of India.

KPCL said it is in talks with investors for the proposed stake sale.

The talks come as UK-based private equity firm 3i Group Plc, which had taken a stake in KPCL six years ago, looks to exit the company.

“We are looking at a strategic investor," Chinta Sasidhar, managing director of KPCL, said in a recent interview. “Japanese (companies) have shown lot of interest."

KPCL said it is looking to partner with Japanese companies such as Mitsubishi Corp. and Sumitomo Corp., which are into coal trading.

Some Mitsubishi officials recently visited Krishnapatnam port, but the stopover did not involve any specific interest in acquiring a strategic stake, according to a company spokesman.

“The visit is only for general purpose to survey sea port terminals in India," Koichi Funabashi, a spokesman for Mitsubishi’s logistics infrastructure business, said in an email.

Sumitomo did not answer an email seeking comment.

UK-based private equity investor 3i Group had picked up a 9.2% stake in KPCL for 800 crore in February 2009, valuing the company at around 9,000 crore. 3i has been looking to exit as part of its global strategy to exit India investments.

KPCL plans to use the proceeds of stake sale to double the capacity from existing 70 million tonne (mt) to 140 mt, a plan that requires an investment of 8,000 crore.

KPCL expects to finish year 2014-15 achieving 35 mt cargo handling and revenues of around 1,800 crore. It handled 26 mt cargo and posted revenues of 1,200 crore in the year ended March.

Sasidhar said the company plans to increase cargo handling by 50% in the financial year 2015-16 to around 55 mt.

“If we touch figures of 50-55 mt, it will be time for us to start phase-III," Sasidhar said.

Phase-III involves increasing the draft or depth of the port from 18.5 metres to 21-22 metres to allow large bulk carriers called Chinamax vessels that can carry upto 380,000-400,000 deadweight tonnage (dwt). KPCL handles capsize vessels of 200,000 dwt capacity.

“Our plan is to make KPCL into a transhipment hub for coal and iron ore handling on east coast," Sasidhar said.

Transhipment involves offloading cargo from a mother ship at a single port and redistributing and supplying it through feeder vessels connecting different ports.

Coal handling has emerged as the breadwinner for Krishnapatnam port. Out of total 35 million tonne per annum capacity (mtpa) that KPCL expects to handle in 2014-15 around three-fourths is coal. At least eight power producers are building coal-fired electricity generating units in and around Krishnapatnam, with combined capacity of 14,000MW based on imported coal, at least 2000 MW has become operational and the rest set to be operational in next two-three years.

Power plants in Krishnapatnam would require about 55 mt imported coal when they become fully operational, Sasidhar said.

“It’s very economical for them to bring imported coal in capsize vessels, which require very deep draft," said Manish Sharma, partner, capital projects and infrastructure at PwC India.

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