Adani to buy L&T's port for Rs 2,000 cr

The port is being demerged from L&T Shipbuilding

Adani Kattupalli Port, a subsidiary of Adani Ports, has entered into an in-principle agreement for acquisition of Kattupalli Port in Tamil Nadu from L&T Shipbuilding (L&TSB), a subsidiary of Larsen and Toubro.

While neither disclosed the acquisition cost, industry sources and people familiar with the deal have said the deal value was estimated at Rs 2,000 crore.

Currently, L&TSB operates both the port and shipyard. The strategic sale is subject to approval from the Tamil Nadu government and the Centre and the port being demerged from L&TSB. Sources said the  process would take at least six months to get completed. Till that time Adani would have management control of the port.

Kattupalli is a deep-water and all-weather port, with an international container terminal near Chennai. It commenced commercial operations in January 2013.

Gautam Adani, chairman, Adani Group, said Kattupalli  was a strategic complement to company's Ennore Container terminal (10 km before Kattupalli), which would be commissioned next year.  The Kattupalli port is located adjacent to and north of Ennore Port, where APSEZ is developing a container terminal.  

This move of APSEZ is  another step to build a network of ports across the coastline and expand its footprint across the SouthEast coast. Kattupalli has two berths with a  total quay length of about 710 m and equipped to handle containers with an installed capacity of 1.2 mn TEUs per annum.

Ennore Terminal's capacity would be 1.2 million TEUs, of which 0.8 million TEUs will be ready in the first phase.

Adani Kattupalli Port Pvt, a 100 per cent subsidiary of Adani Port & Special Economic Zone Ltd, will operate and manage the Kattupalli Port in Chennai with effect from November 1, 2015, according to a note issued to customers of L&T, which was accessed by Business Standard.

Gudena J Rao, director of Adani Port & SEZ will be the key person for the Kattupalli project.

Sources in the industry said Adani might consider handling all the containers at Ennore, while bulk cargoes, including coal, would be handled at Kattupalli. Another official questioned since there is a shipyard how they are going to handle bulk cargo at Kattuapalli is a big question.

For the trade in the region, two  positives and one negative aspect might  emerge out of the advancement of Adani in the port sector in the south and Chennai, said an industry veteran.

The positives for the industry are better efficiency, faster turnaround  and option of facilities off the Chennai port, which handles 1.2 million TEUs (twenty-foot equivalent units).

On the negative side, despite the argument that cost factors will be decided by competition and market forces will balance /blunt escalated costs, possibility of a private monopoly cannot be ruled out when Adanis  conquer many of the strategic ports/terminals in the east coast, especially when there are beyond the  purview of any regulator on tariffs.

Apart from developing the Ennore terminal, the company has also received the letter of award from the Kerala government for the development of the strategically located Vizhinjam port.