OPEN APP
Home >Companies >Adani Ports considering acquisitions in India, abroad

Mumbai: Adani Ports and Special Economic Zone Ltd, India’s biggest private port operator, is looking to complete its “string of pearls" ports strategy by plugging gaps that remain in a few coastal states. In addition, the company is also eyeing overseas acquisitions.

The company, part of billionaire Gautam Adani-led infrastructure conglomerate Adani Group, is actively looking at acquisitions, two company executives said, adding that chief executive officer Karan Adani is leading the drive. Karan is Gautam Adani’s son and took charge of Adani Ports on 1 January.

In India, the company is looking to expand its presence in Maharashtra and West Bengal. In overseas markets, the company is scouting for port opportunities in Sri Lanka, Bangladesh, the US and Europe, apart from the ports planned in Australia.

“The overall objective is to make the group a trans-shipment port company," one of the executives cited above said on condition of anonymity.

Adani Ports has plans to turn India’s biggest commercial port at Mundra in Gujarat into a regional trans-shipment hub by partnering with Terminal Investment Ltd SA, a container terminal operating company majority-owned by Geneva-based Mediterranean Shipping Co. SA, the world’s second biggest container shipping line.

It is also developing a trans-shipment port in Kerala.

“The idea is to model Adani Ports on the lines of international port operating firms AP Moller of Denmark and DP World of Dubai," a second executive said, also on condition of anonymity.

“The entire port play will be supported by logistics, infrastructure and cargo support from group companies," he said.

“Adani Ports is very aggressive in acquisitions and consolidations in the Indian maritime market as it is looking at better bargaining power with its shipping lines and other vendors," said Mathew Antony, managing partner at Aditya Consulting, a boutique legal and business advisory firm specialising in shipping and ports.

Some of the company’s key acquisitions so far include Vizhinjam port in Kerala and Dhamra port in Odisha. In addition, the company has won the bid for a container terminal at Ennore port in Tamil Nadu. It also has a joint venture with shipper CMA CGM group of France for developing a terminal at Mundra.

To be sure, in achieving its large-scale ambitions, Adani Ports will encounter financial hurdles.

“The firm’s debt is very high and it is essential to generate more revenue to service the same," Antony said.

As of September 2015, the consolidated debt of Adani Ports stood at 17,186.43 crore

The company’s net sales is seen rising to 8,093.2 crore by 2016-17, up 32% from 6,152.0 crore in 2014-15, according to a report from Emkay Research in December.

The bigger hurdle that Adani Ports faces in achieving its plans is the competition from domestic and international firms, all of whom have plans of their own.

DP World, which specializes in containers, currently has a capacity of 5.5 million TEUs (twenty-foot equivalent units, the standard size of a container), that translates roughly into 80.3 million tonnes (mt), across four terminals in Cochin, Visakhapatnam, Chennai and in Adani’s own port at Mundra.

Two more at Nhava Sheva and Kulpi are under development and DP World has plans to grow into other segments such as bulk materials that will complement existing operations.

“Yes, we want to grow but we have to be cognizant of the fact that the requirement is in specific areas," said Ajay Singh, chief executive officer at DP World Nhava Sheva, naming eastern India, particularly the Hooghly river basin, as one such location.

“We will always grow in this economy… we will be going in for new terminals and building more capacities," he said.

The trump card for the company lies in the fact that the container trade is growing around the world and even bulk commodities such as iron ore, coal and fertilizers are increasingly being transported in containers, which is its forte.

Likewise, the Netherlands-based port operator APM Terminals, a unit of AP Moller-Maersk Group, plans to invest in augmenting capacity in India and expects to “remain among the top three industry leaders of the future", said Rizwan Soomar, head of South Asia portfolio for APM Terminals.

The company currently operates the Gujarat Pipavav Port Ltd—a port in which it bought a 43% stake in 2005. It also has inland container depots and freight stations at five other locations across the country.

APM Terminals is currently in the midst of an expansion to increase its container handling capacity from 850,000 TEUs to 1.35 million TEUs a year, which would roughly mean a capacity of 19mt.

“We are keen to invest more in economically viable projects which fit into our long-term strategy," said Soomar.

“APM Terminals continues to view India as one of the world’s most important growth engines, and we are committed to participate in India’s growth by investing more in terminals and inland service facilities," he added.

Other international port operators such as Hutchison Port Holdings Ltd of Hong Kong, Halifax Port Authority of Canada and Port of Amsterdam are also eyeing India, according to Atul Kulkarni, an independent maritime expert on ports and infrastructure.

Adani Ports’ current capacity of 330.3mt gives it about 23% share of India’s total port capacity of 1,438mt, according to data from equity brokerage and research firm Emkay Global Financial Services.

By 2020, it is expected to have a capacity of 365.4mt, according to Emkay, giving it a reduced market share of 18% of the estimated Indian port capacity of 2,000mt by that time.

Commissioning of the international container trans-shipment port at Vizhinjam in Kerala (10 million tonnes capacity) around 2020, and mergers and acquisitions if any, may push its capacity higher, but the market is expected to stay fragmented and Adani may find itself vying for small capacities as well, experts said.

However, the company is seen differentiating itself by driving higher capacity utilization at its ports, which could give it good revenues.

“At the end of the day it is all about revenue and Adani Ports is expected to use smart marketing techniques to have higher capacity utilization," said a port analyst who did not want to be named due to company policy.

“So if others are having a 70% utilization, Adani could be doing 90% and that is how it will stay ahead in the race."

ruchira.s@livemint.com

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperMint is now on Telegram. Join Mint channel in your Telegram and stay updated with the latest business news.

Close
×
Edit Profile
My ReadsRedeem a Gift CardLogout