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Shapoorji Pallonji has been seeking to buy a 51% stake in Karaikal port.
Shapoorji Pallonji has been seeking to buy a 51% stake in Karaikal port.

Shapoorji Pallonji’s port buy plan hits a hurdle

Karaikal Port promoters refuse to give up management control to Shapoorji Pallonji

Mumbai: The planned acquisition of a stake in Karaikal Port in Puducherry by Shapoorji Pallonji group has hit a roadblock, with promoters of the all-weather port, Chennai-based MARG Group, refusing to give up management control, two people aware of the development said.

Shapoorji Pallonji had been seeking to buy a 51% stake in the port.

“As per the original concession agreement signed between MARG Limited and Government of Puducherry, MARG is required to maintain a minimum 26% stake in the project," one of the two said on condition of anonymity.

“A change in ownership can be implemented only if the current promoter agrees to exit the project through a substitution agreement duly ratified by the Puducherry government but it has become a stumbling block," the person said.

Talks are still underway between lenders, promoters and the Puducherry government to end the deadlock, the person added.

The concession agreement between the Puducherry government and MARG was executed on 25 January 2006. A special purpose vehicle—Karaikal Port Pvt. Ltd (KPPL)— was incorporated for implementing and operating the project. KPPL is among the newer all-weather private ports in India; it became operational in 2009.

In October last year, a consortium of 12 lenders of KPPL led by Indian Bank sold a large part of KPPL’s loans to Edelweiss Asset Reconstruction Co. (EARC).

The lenders also reached an agreement with Shapoorji Pallonji group to sell a 51% stake in KPPL by invoking pledged shares.

Mint first reported on Shapoorji’s plans to acquire a stake in the project on 9 February.

E-mails sent to Shapoorji Pallonji group, EARC and MARG remained unanswered as of press time.

“As per the terms of agreement, Shapoorji had agreed to pay Rs900 crore for a majority stake in the port and also take over the outstanding debt," said the second person.

In May 2012, NYLIM Jacob Ballas India (FVCI) III LLC invested Rs200 crore for a minority stake in the firm. Subsequently, Standard Chartered PE (Mauritius) II Ltd invested Rs130 crore for a minority stake in the port.

The funds were invested in the firm to increase capacity from 21 million tonnes per annum (mtpa) to 28 mtpa. Other investors in KPPL include PE funds IDFC Project Equity Co. Ltd and Ascent Capital Advisors India Pvt. Ltd.

KPPL’s term loans to the tune of Rs1,268 crore were restructured in FY13 with a two-year moratorium which ended in 31 December 2014 along with an additional funding of Rs80 crore.

In FY14, KPPL reported a loss of Rs69 crore on revenue of Rs263 crore, as per its latest corporate filings. Edelweiss ARC declined to comment on the development.

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