Tax-free bonds issued by ports get poor response2 min read . Updated: 20 Mar 2013, 12:30 AM IST
Three state-run ports raise only a combined `200 crore against an issue size of `3,500 crore
Plans to sell tax-free bonds by three state-owned port entities—Jawaharlal Nehru Port Trust, Ennore Port Ltd and Dredging Corp. of India Ltd—ended with the firms raising only a combined ₹ 200 crore against an issue size of ₹ 3,500 crore when the issue closed on Tuesday.
The issue size of JN Port was ₹ 2,000 crore, of Ennore Port ₹ 1,000 crore and of Dredging Corp. ₹ 500 crore.
The fund mop-up through the bond issues would have been worse if the shipping ministry, which controls these entities, had not stepped in to direct five state-owned ports located at Kandla, Vizag, Paradip, New Mangalore and Mumbai to subscribe to the bonds.
Kandla Port Trust bought tax-free bonds worth ₹ 20 crore issued by Ennore Port Ltd, the entity that runs Ennore Port in Tamil Nadu.
A spokesman for Kandla Port Trust said his firm subscribed to the bond issue of Ennore Port on a direction from the shipping ministry. “We have invested only in the tax-free bond of Ennore Port Ltd because the coupon rate of 7.01% offered by Ennore to non-retail investors is the highest among the three offerings," said the spokesman for Kandla Port, based in Gujarat.
Ennore Port raised ₹ 95 crore through the bond issue, which included subscriptions of ₹ 20 crore each from Kandla Port Trust and Paradip Port Trust and ₹ 10 crore each from Mumbai Port Trust and New Mangalore Port Trust, general manager (finance) M. Gunasekaran said.
Vizag-based Dredging Corp. received applications from Vizag Port Trust and Paradip Port Trust for tax-free bonds worth ₹ 10 crore each, chairman and managing director D.K. Mohanty said.
Jawaharlal Nehru Port Trust, India’s busiest container gateway, was the worst affected by the lukewarm response to the bond issue, collecting less than ₹ 50 crore. “There were so many factors for the poor response to our bond issue," said an official with JN Port.
“Our rate was very low; the market is very tight and being the month of March, nobody has surplus funds to invest," he said, also on condition of anonymity.
N.N. Kumar, deputy chairman of JN Port Trust, said the government directed other ports to invest in the tax-free bond issues of Ennore Port and Dredging Corp. as JN Port has surplus cash of about ₹ 3,500 crore. “Our issue opened very late. Besides, there were too many issues crowding the market. By 11 March, money was totally exhausted," he said, explaining the reasons for the poor response.
The Kandla, Vizag, Paradip, New Mangalore and Mumbai ports dug into their cash surplus to invest in the tax-free bond issues, an official at Kandla Port Trust said, requesting anonymity.
A spokesman for the shipping ministry defended its move to ask other state-run ports to buy the tax-free bonds with their surplus funds. “The Major Port Trusts Act empowers the shipping ministry to direct these ports to deploy their surplus funds in a manner it deems fit," he said.
Ennore Port is the only one among the dozen controlled by the Union government that is run as a company under the Companies Act of 1956. The remaining 11 ports function as trusts under a law called the Major Port Trusts Act of 1963.
Both Ennore Port and Dredging Corp. are mini-ratna state-owned firms, a tag that allows them the freedom to invest without taking government approval up to a certain limit.
JN Port will qualify as a navratna company if the government succeeds in converting the ports that are run as trusts into companies. A navratna company enjoys greater financial freedom than mini-ratna companies.