APM to start operations on east coast3 min read . Updated: 15 Nov 2009, 09:03 PM IST
APM to start operations on east coast
APM to start operations on east coast
Mumbai: Global port operator APM Terminals Management B.V. plans to start operations on the east coast of India and is considering an initial public offering of shares in its Gujarat unit over the next year, chief executive officer (Africa, Middle East and Indian subcontinent) Charles Menkhorst said.
APM Terminals is a division of Denmark-based AP Moller-Maersk A/S that operates Maersk Line, the world’s largest container shipping company.
“We cannot afford (to) not be present on the east coast," Menkhorst said in an interview. Having “strategically" covered the west coast of India with two ports and considering the “tremendous" growth opportunity in India, “we are now looking at developing a port on the east coast".
APM Terminals, which runs a global network of 48 terminals, is attempting to expand operations in India, the world’s second fastest growing major economy, where it has developed a multi-purpose port in Pipavav, run by Gujarat Pipavav Port Ltd, and Navi Mumbai-based Gateway Terminals India Pvt. Ltd in partnership with Container Corp. of India Ltd, or Concor.
The company is yet to make a decision on the project it wants to develop the east coast. According to Menkhorst, the project will more likely be “brownfield"—a facility at an existing site— than “greenfield," which would involve construction from scratch at a new site.
“We are carefully examining all opportunities coming up," he said.
Menkhorst said the firm is considering raising additional funds for the expansion of Gujarat Pipavav either by shareholders infusing additional money or seeking a bank loan. The third option is taking the company public.
The Adani Group-operated Mundra Port and Special Economic Zone Ltd, which runs India’s biggest private port, had a successful initial public offering (IPO) in November 2007, the only Indian port operator to have done so.
Menkhorst, who joined the company from global logistics firm DHL International GmbH, said India is an important location for his company’s port network, but financial viability would the chief criterion for deciding on any project.
The firm globally invested $723 million (Rs3,362 crore) in new ports and port projects in calendar year 2008 after having spent $850 million in 2007.
DP World Ltd, the world’s fourth biggest container port operator that is owned by the Dubai government, has already developed a string of ports on India’s west coast in Mundra (Gujarat), Navi Mumbai (Maharashtra), Kochi (Kerala) and on the east coast in Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh) and Kulpi (West Bengal).
Port users will likely welcome APM Terminals’ move to expand operations, given that some of them are dissatisfied with state-run port operators.
C.R. Nambiar, vice-president at Seahorse Ship Agencies Pvt. Ltd, which uses Indian ports, says firms like his prefer “efficiency at a reasonable cost", irrespective of nationality.
“… given the administrative inefficiency of the state undertakings, in terms of delays in taking decisions and even more delay in implementing them, it would be better to have more of such private operators, whether foreign or Indian," he said.
Also, as the economy picks up momentum and domestic demand for goods returns, albeit slowly, the outlook for the shipping and logistics industry would improve.
Port traffic at the 12 major ports grew 2.9% year-on-year in the three months ended September, domestic brokerage Centrum Broking Pvt. Ltd’s analysts Siddhartha Khemka and Mahantesh Sabarad wrote in a 12 October report. They noted that the growth rate exceeded the previous quarter’s 1.9% growth, adding that it fuelled hopes of a recovery in the second half of the fiscal.
“We expect container volumes to revive in FY11, once the overall economy recovers," the analysts wrote. “We estimate 4% volume growth (in standard container unit terms) during FY10E and 8.4% growth in FY11."
FY10E refers to estimates for the fiscal year ending March 2010.
Foreign firms such as APM Terminals are also looking to India for another, more basic reason: their Indian port units have performed better than other international units despite a global downturn that has plunged more mature economies such as the US and parts of Europe into a painful recession.
“We still have more appetite for more cost-effective port projects on the Indian coast. All of our Indian ports have performed well," Anil Singh, DP World’s senior vice-president and managing director (subcontinent), said without divulging details.
A 27 August statement on DP World’s website on interim results for the six months to 30 June said the Asia-Pacific and Indian subcontinent region showed the least impact of the global downturn, with only a 10% decline in volumes, a 7% decline in revenue and a 6% decline in Ebitda (earnings before interest, tax, depreciation and amortization) compared with other regions.