US-based private equity firm Warburg Pincus has started talks with UAE ports operator DP World to sell its 31.5% stake in Gangavaram Port in Andhra Pradesh, two people aware of the development said.
Warburg has hired investment bank UBS to find a potential buyer, said one of the two people, both of whom spoke on condition of anonymity, adding the port is valued at $1-1.4 billion and Warburg plans to sell its 31.5% stake for $300-400 million.
Other interested parties include Adani Ports and Special Economic Zone Ltd (APSEZ) and JSW Infrastructure, a unit of Sajjan Jindal led JSW Group, according to the second of the people cited above.
Warburg plans to sell its stake while the other shareholders have no such immediate plans, according to the second person who spoke on condition of anonymity. In 2007, Warburg had invested around Rs150 crore ($40 million) in the port at Gangavaram in Andhra Pradesh.
The port, operated by a D.V.S. Raju-led consortium, is the deepest all-weather port in India. Raju and his family owns 58.11% stake and Warburg Pincus 31.5%, while the Andhra Pradesh government holds the rest.
With a depth up to 21 metres, Gangavaram can handle fully laden Super Cape size vessels of up to 200,000 DWT (dead weight tonnage). Commissioned in 2008, its handles cargo groups including coal, iron ore, fertilizer, limestone, bauxite, raw sugar, project cargo, alumina, and steel products, according to a company website.
“We are always looking out for the right opportunities. We don’t comment specifically on any unless there is something to announce. We plan to increase our market share by increasing capacity at key locations and developing our beyond-the-gate strategy,” said a DP World spokesperson. Mails sent to spokespersons at APSEZ and JSW Infra were not answered while spokespersons from Warburg Pincus and Gangavaram port declined to comment.
The Dubai government-owned DP World has a portfolio of 77 terminals in 40 countries with a capacity of 85 million TEU (twenty-foot equivalent units).
Last year, DP World had announced its plan to invest $1 billion in India over the next few years. The group has already invested $1.2 billion in India and runs six terminals—Nhava Sheva (India) Gateway Terminal (NSIGT) and Nhava Sheva International Container Terminal (NSICT) at Jawaharlal Nehru Port Trust (JNPT); Mundra International Container Terminal (MICT); Chennai Container Terminal; India Gateway Terminal at Cochin Port; and Visakha Container Terminal at Visakhapatnam Port. DP World holds about 30% market share of India’s container trade.
“The maritime sector contributes significantly to our trade and we are witnessing several positive developments in the sector. Private sector participation, aided by favourable policy framework, extends from creating port infrastructure to logistics to wider participation in coastal economic zones,” said Jaideep Ghosh, partner and head, transport and logistics, KPMG.
Private sector ports have immense potential, and are an important private sector investment vehicle in the maritime sector. However, these are longer term investments and financial attractiveness such as valuations need to be considered accordingly, Ghosh added.
In 2015, Times of India had reported that APSEZ was in exclusive talks to acquire Gangavaram Port for $2.1 billion.
APSEZ, India’s largest private port operator and the logistics arm of Adani Group, operates ports in Mundra, Dahej, Hazira, Dhamra and Kattupalli and terminals in Murmugao, Vishakhapatnam, Tuna-Tekra. Ennore Container Terminal and Vizinjham Port are under construction.
Ports and terminals under JSW Infrastructure in Maharashtra and Goa currently have an operational capacity of 33 MPTA. Within the next four years, this is going to increase more than six-fold to reach 200 MTPA through Greenfield and Brownfield expansions, according to a company website. The port facilities of JSW are located at Mormugao Port Trust in Goa, Jaigarh and Dharamtar in Maharashtra.
Indian ports have seen tepid response from private equity investors in the last few years. The port sector saw its biggest PE investments in 2007 when about $500 million was invested, out of total $1.2 billion invested in the sector till 2016.
India’s merchandise exports rose 25.7% to $28.6 billion in September, and the trade gap narrowed to $8.9 billion. Merchandise exports grew at the fastest pace in six months in September, helping cut the trade deficit to a seven-month low, belying concerns that implementation of the goods and services tax (GST) from 1 July may blunt export competitiveness, said 13 October report in Mint.