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Why Dredging Corporation deal makes sense for Adani Ports

Deal might be a strategic fit, as Adani now has the largest capital dredging capacity in the country

Sohini Das  |  Ahmedabad 

Why Dredging Corporation of India deal makes sense for Adani Ports

India's largest port operator and Special Economic Zone (APSEZ) is in the fray for acquiring the government's in Dredging Corporation of India (DCI), a mini-ratna PSU. The government is looking at selling 51 per cent in the dredging major, which posted an 82 per cent drop in net profit in FY17. It currently holds 73.47 per cent.

APSEZ, which now has a fleet of 19 dredgers, is in fray among other domestic dredging firms for a controlling in DCI, sources close to the development indicated.

An spokesperson said, "We believe in both organic and inorganic growth strategies and are always focused on identifying opportunities to grow. We will surely look at potential opportunities whenever they arise."

shares had touched a 52-week high in the first week of March this year as the of government divesting its had come in. A senior official in the firm said on grounds of anonymity that they are yet to officially hear from the Centre on the sell plan.

He, however, admitted that the going is getting tough for the PSU with heightened competition from private players. "Now we have to participate in bidding for getting dredging contracts, and there is stiff competition from private players. The Indian arms of international players often undercut prices as they are facing a slowdown in the international markets," he said.

Around a decade back was dominating the Indian dredging scenario. Now space has competition from players such as Essar Group, Mercator Ltd, and Marg Ltd.

Analysts felt that the decision might be a strategic fit for APSEZ, who now has the largest capital dredging capacity in the country. primarily employs its dredgers for captive purposes, but since the last couple of years, it has also started taking up outside work. It has already executed dredging contracts for Tata Power, Gangavaram Port and other "If this deal works through, is likely to emerge as a major dredging player in the country. It would not only reduce its dredging costs but is also likely to add to the topline through contractual dredging activities it would undertake," said an analyst.

as such has a market capitalisation of around Rs 1,749.02 crore and is in the process of acquiring a dredger (at the cost of around Rs 900 crore or so) which would be delivered over the next two years.

already has a fleet of 12 cutter suction dredgers (CSD) mainly used for capital dredging, one trailing suction hopper dredger (TSHD), one grab dredger among others. In comparison, has 12 trailing suction hopper dredgers (used for maintaining channel depth), three among others. The fleet thus compliments APSEZ's current fleet.

Hitesh Avachat, an analyst with Care Ratings said that many Indian ports now have captive dredging activities. "This makes it difficult for independent dredging players who have a fleet of maintenance dredgers. Capital dredging activities are not year long," he said.

Sources also indicated that dredging being a capital intensive activity reducing idle time for the fleet is a crucial factor for improving bottom lines. posted a net profit of Rs 7.4 crore in FY17 with net profit margins of 1.2 per cent.

First Published: Fri, July 14 2017. 17:25 IST