Adani to buy Dhamra Port for Rs 5.5k cr from Tata, L&T

Acquisition a milestone in the group's plan to set up ports all over India

The Ahmedabad-based Adani Group has finalised the terms and conditions to buy out construction major Larsen & Toubro (L&T) and Tata Steel’s stakes in Dhamra Port Company Limited (DPCL) in Odisha for an enterprise valuation of close to $1 billion (about Rs 5,500 crore). The deal was agreed in a recent meeting between Adani Group Chairman Gautam Adani, L&T Chairman A M Naik and Tata Group’s new Chairman Cyrus Mistry.

An announcement is expected in the next few days, said a source directly involved with the talks. Adani, which operates India’s biggest private port at Mundra in Gujarat, will fund the deal from its own funds, the source added. This will be the second attempt by the Adani group to buy a port in eastern India after its bid for the Chennai port terminal was rejected on security grounds.

L&T and Tata Steel own 50 per cent stake each in the Dhamra project. With this acquisition, Adani will get a toehold in the eastern coast.
 

PORT PORTFOLIO Adani Ports in expansion mode
Place	Cargo	Capacity (mmtpa)
Mundra	Multi-cargo	78
Dahej	Dry bulk	20
Hazira	Multi-cargo	75
Mormugao (Goa)	Coal berth	10
Vizag	Coal berth	7
Kandla	Dry bulk terminal	20
Australia
Dudgeon Point	Coal terminal,	90
Abbot Point	—	50

When contacted, an L&T spokesperson said: “As a matter of policy, L&T neither confirms nor denies market speculation.” Email questionnaires to Adani and Tata Steel did not elicit any response till the time of going to press.

L&T currently owns 50 per cent in DPCL through its subsidiary, Infrastructure Development Projects Ltd (IDPL), and had identified this property as a non-core asset. According to analysts, the transactions, as and when they materialise, could unlock L&T’s value and improve its consolidated earnings. In FY12, DPCL had pulled down L&T’s consolidated earnings per share by five per cent. Dhamra Port’s project cost is about Rs 3,600 crore and it reported a total income of Rs 198 crore for FY12, with a net loss of Rs 458 crore. As this was the first year of operations, it had high amortisation and interest costs, along with initial ramp-up traffic, the company said in its annual report.

The port has been developed under the build-own-operate-share and transfer model with a concession from Odisha government for 34 years. The port, which commenced operations in May 2011 handled 5.1 million tonnes of cargo during that year. The port’s location makes it ideal for shipment of minerals and raw material for steel plants in the region.

According to analysts, it is important for L&T to sell its stake in Dhamra Port because, in the absence of recovery in the investment cycle, it will be difficult for L&T to achieve last year’s growth in 2013. Soon after its second quarter results, the company had told analysts that it will exit from Dhamra Port by the end of March 2013.

For Tata Steel, which is reeling under Rs 53,432 crore of consolidated debt as on September 2012, any disinvestment in assets will help it raise funds and retire its high-cost debt. This is also the first transaction in which the new chairman of the Tata group, Cyrus Mistry, is closely involved with his predecessor, Ratan Tata.

For the Adani group, the acquisition of Dhamra Port will be an important milestone in the group’s plan to set up ports all over India. The group currently operates Adani Ports in Gujarat, the second-largest commercial port infrastructure company and the largest private port operator in India.

The group is also constructing ports in Hazira, coal berths in Mormugao, Vizag and a dry bulk terminal in Kandla.