Adani to Buy 70% Stake in Krishnapatnam Port for over ₹5,500 crore

Gautam Adani is looking to expand his ports empire by closing in on buying a 65-70 per cent stake in Krishnapatnam Port Company Ltd, the entity promoted by Hyderabad-based CVR Group to run a private deep-water port at Krishnapatnam in Andhra Pradesh’s Nellore district.

Adani Ports and Special Economic Zone (APSEZ), India’s biggest private port operator, is expected to pay more than ₹5,500 crore to buy the stake which will give it access to the country’s largest waterfront area (for a port) of 12.5 km and a transit storage area of 6,800 acres. It started operations in 2008.

Currently, the port has a draft of 18.5 metres, a depth that can accommodate full-loaded Capesize vessel of 200,000-tonne capacity.

“The transaction consideration will mainly go towards settling the bank dues; the port is burdened with huge debt which has become unsustainable”, a person briefed on the deal said, asking not to be named.

Adani Group and Krishnapatnam Port Company could not be reached immediately for comments as their offices were closed on Sunday.

Krishnapatnam, a port owned by the Andhra Pradesh government, was given to the CVR Group for development and operations on a 30-year contract beginning September 2004. The port contract can be extended up to 50 years (30+20 years).

The port, located 180 km north of Chennai, currently has a capacity to load 40-45 million tonnes of cargo from 10 berths, including a 1.2 million TEU-capacity container terminal, which handled more than 500,000 TEUs in FY19.

Krishnapatnam Port Company is 92 per cent owned by the CVR Group, which has interests in construction, ports, power, steel, information technology and exports. London-based private equity firm 3i Group Plc invested $161 million in the operator in February 2009 through its India Infrastructure Fund for a 26 per cent stake. 3i’s stake has since dropped to 8 per cent due to change in valuations and rupee depreciation.

The deal will give 3i an exit route for its investment over which it has been wrangling with the CVR Group for some time.

Third acquisition

This will be APSEZ’s third acquisition on the eastern coast after the purchase of Dhamra port in 2014 and Kattupalli port in 2016.

The deal will also help APSEZ expedite the vision of handling 400 mt of cargo by 2025 and expand its market share among India’s ports. APSEZ said in a July investor presentation that it “would pursue both organic and inorganic growth opportunities” to achieve the vision.

“The way we are progressing, positioning ourselves, we are targeting 400 mt of volumes by 2025. We are looking at close to ₹2,500 crore of capex every year. This takes care of the 400 mt which I talked about and does not include any acquisitions that we may be planning for. We are continuously on the lookout for stressed assets that are available at discounted rates,” Karan Adani, Chief Executive Officer of APSEZ, said in an earnings’ call on August 7.

In FY19, APSEZ loaded a combined 207.7 mt of cargo, clocking a growth of 15 per cent over FY18. The standalone port business earned ₹8,897 crore in FY19 and a net profit of ₹4,006 crore.

APSEZ’s 10 strategically located ports and terminals — Mundra, Dahej, Kandla and Hazira in Gujarat, Dhamra in Odisha, Mormugao in Goa, Visakhapatnam in Andhra Pradesh, Kattupalli and Ennore in Tamil Nadu — have the capacity to handle a combined 395 mt of cargo, accounting for 24 per cent of the country’s total port capacity.

APSEZ is also developing a transhipment port at Vizhinjam in Kerala and a container terminal at Yangon in Myanmar.