French company negotiates for majority stake in Adani Logistics3 min read . Updated: 22 Feb 2008, 11:00 PM IST
French company negotiates for majority stake in Adani Logistics
Mumbai: The world’s third biggest container shipping firm, CMA CGM, is negotiating the acquisition of a majority stake in Adani Logistics Ltd which runs container trains across India in an effort to enter a business that is set to grow rapidly as demand for moving goods to and from ports on container trains increases in the world’s second fastest growing major economy.
The two companies had started discussing the sale of a 26% stake earlier, but the Marseilles-based firm now wants a controlling 51% stake in Adani, said an Adani executive who did not wish to be identified. This has delayed the deal, this executive added.
The sale of a “51% stake would mean we would have to give up management control of Adani Logistics Ltd. This is something we are discussing internally," the executive said.
Omar Sait, general manager of CMA CGM’s Indian unit, would not confirm the development but said the company is discussing several options with the Adani Group.
Container cargo represents about 30% by value of India’s external trade of $127 billion (Rs5.08 trillion) in the 12 months to March 2007. In comparison, the global average is 70-75%.
CMA CGM’s inter-modal rail subsidiary, Rail Link, runs container trains connecting the port of Marseilles in France with a number of destinations in northern Europe.
Adani Logistics, an unlisted subsidiary of Ahmedabad-based Adani Group, has a licence to run container trains in the country (as do 14 others) and entered the business after India privatized container rail freight services in 2006. Adani Group is the promoter of Mundra Port and Special Economic Zone Ltd.
The company started operating container train services with two rakes in November, linking its own inland cargo terminal at Patli, 30km from Gurgaon, with Mundra port three times a week.
One rake can load 90 twenty-foot equivalent units or TEUs or 45 forty-foot equivalent units or FEUs. A FEU is double the size of a TEU, which is the standard size of a container and is a common measure of capacity in the container business.
Yogendra Sharma, president, Adani Logistics, said the firm has ordered nine more rakes, of which four would be delivered by May and the balance by the end of the year.
“Once new rakes come in, we would increase the weekly frequency to Mundra Port and connect Jawaharlal Nehru Port (JN Port)," he said. The JN Port is India’s biggest container port handling some 60% of the total container cargo handled in the country. Container ships of CMA CGM call at both Mundra and JN Port.
“Teaming up with a large shipping company will make sense for Adani Logistics since it will assure large volumes for running container trains. Moreover, across the world, large shipping companies are entering into shipping-related services including port management, container train operations and allied services," said Krishnakant Thakur, an analyst with domestic brokerage Edelweiss Securities Ltd.
A study by Edelweiss said the country’s growing external trade, particularly in textiles, automotives, auto ancillaries, engineering, and capital goods has boosted the volume of cargo shipped in steel containers. “Transportation of cargo containers by road has become expensive with the hike in diesel prices and the recent ban on overloading. Rail transportation is cheaper by 15-20%," the report added.
Apart from CMA CGM, the world’s other top container shipping firms such as Maersk Line, Mediterranean Shipping Co. SA and APL Ltd already have a presence in running container trains in India.
Maersk Line has a presence through Pipavav Railway Corp. Ltd (PRCL), a 50:50 joint venture of the Indian Railways and the Gujarat Pipavav Port Ltd (GPPL), while Mediterranean Shipping has a joint venture with Hind Terminals Pvt. Ltd to run container trains.
APL holds a majority 76% stake in India Infrastructure and Logistics Pvt. Ltd, which has a licence to run container trains. These firms hold a significant share of the container cargo shipped into and out of India.