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Mundra IPO success may push ports, shipyards to tap market

Mundra IPO success may push ports, shipyards to tap market

In the wake of the successful initial public offering (IPO) of Mundra Port & Special Economic Zone Ltd, several Indian developers of private ports could be encouraged to sell their shares, say analysts.

Shares of the Adani Group- operated Mundra Port debuted at Rs770 a share on the Bombay Stock Exchange on Tuesday, a 75% premium to the issue price of Rs440 a share. They rose to Rs1,150 before closing at Rs961.70 on a day when the exchange’s benchmark index, the Sensex, closed 0.62% down at 19,127.73.

The IPO, which raised around Rs1,770 crore attracted $52 billion of bids, 116 times the value of shares on offer. “Mundra has set the trend for other ports to follow," said an executive at Enam Securities Pvt. Ltd who did not wish to be identified. Enam was one of the investment bankers that managed Mundra’s IPO.

Gujarat Pipavav Port Ltd, promoted by global container terminal owner and operator APM Terminals also plans an initial sale of shares, possibly in 2008, according to an executive at the company who did not wish to be identified.

The executive added that the board of the company had cleared this at its last meeting. APM Terminals is the container terminal operating unit of Danish shipping and oilconglomerate A P Moller-Maersk Group. “Ports are going to grow like anything," said M.K. Padia, chief executive officer ofKrishnapatnam Port Company Ltd, which is developing and will operate the Krishnapatnam port in Andhra Pradesh. The Rs8,000 crore port is promoted by Hyderabad-based Navayuga Engineering Co. Ltd.

“Ports, as an industry, is booming because of India’s growing foreign trade. Ultimately, ports are in demand and will continue to be in demand," Padia said.

Indian ports handled 649 million tonnes (mt) of cargo in the 12 months to March 2007. Out of this, the 12 Central government-run ports handled 464mt of cargo, while ports owned by the state governments and developed and operated by private firms such as those at Mundra and Pipavav handled 185mt of cargo. India’s ports handle 95% of the country’s trade by volume and 70% by value. India’s share of global trade is currently less than 1%.

A number of ports on the east and west coasts of the country are being developed by private firms and will start operations in the next two years. These include ports at Gangavaram, Machilipatnam, Karwar, Vizhinjam, Bedi, Modhwa, Vansi Borsi, Simar, Mithivirdi, Khambat, Mahua, Sutrapada, Dahej, Rewas, Dighe, Cuddalore, Kattupalli and Vijaydurg.

Apart from ports, local shipyards are also looking at selling shares to the public. Pipavav Shipyard Ltd, promoted by SKIL Infrastructure Ltd, and the state-run Cochin Shipyard Ltd have plans to raise money from the public. The management of Cochin Shipyard has been pushing for an IPO, but the proposal is yet to get clearance from the shipping ministry.

Pipavav Shipyard, which will start operations early next year, is expected to file a draft prospectus for a public offer in the next few months, according to an executive at SKIL Infrastructure who did not want to be identified.

The shipping ministry says India’s cargo handling capacity at ports needs to be raised to 1,500mt a year by 2012 from the current level of 736mt a year to meet the rising demand for importing raw materials and exporting finished goods in the world’s second fastest growing major economy.

The ministry estimates that around Rs90,000 crore will be needed to meet this demand. Much of this money is expected to come from the private sector.


Bloomberg’s Pooja Thakur contributed to this story.

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