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Ports is a more attractive sector than several others to foreign investors

Ports is a more attractive sector than several others to foreign investors

Rajiv Aggarwal, CEO, Essar Ports outlines the plans for investment to , after a hugely successful Q1 2013 when the company’s profits grew a whopping 73 per cent.

Please let us know some details of the recently announced India Infrastructure Finance Company Limited (IIFCL) takeout finance of your ports. Which ports, quantum of takeout, from which bank?
We took out about Rs 405 crore through IIFCL refinancing of a loan originally taken from Uco Bank. So this project when it got started it has been operational for two years so we approached them to refinance this. As you know during project stage the financing is normally more expensive.

We started at the rate of 10.5 per cent but with increase of rates within years and with RBI increasing rates it went up to 13 per cent. This now stands reduced to 10.85 per cent (floating) as a result of the IIFCL refinancing.

Coming to your other project which is an expansion, maybe I would like some details on what ports are you planning to expand and what are those expansion plans?
At the moment we are setting up a new port in Salaya in Gujarat. We are putting up a 20 million tonne coal terminal there, with capacity for cape-size vessels. This is a greenfield site and work is going on and there are a few environmental and other issues, for which we are awaiting clearance and before we complete some portion from the Union Ministry of Environment and Forests (MoEF).

Have you received environmental clearance from the Gujarat environmental?
Every year approval comes from MoEF for environment. The state is only a recommending body, so they have sent their recommendations and the process is on.

Do you need any deepening for this port?
Well, constant dredging is not required at Salaya. Once the channel reaches the required level it is maintained. There is not much of dredging which would be required there.

What are your other projects?
Other one is a coal terminal of 16 million tonne capacity in Paradip in public-private partnership (PPP) with Paradip Port Trust. This coal terminal can then receive cape size vessels.

I know that Essar has also been importing coal. Will the new port terminals be employed for coal imports?
In Salaya, 50 per cent will be for Essar and 50 per cent for third party. Our Paradip terminal will not be utilised in that capacity, because there is an existing import of about 12-13 million at Paradip Port. This is non-mechanised so the plan is to mechanise and improve infrastructure. That is why they bid out this project.

Next, we are likely to start shortly the iron ore terminal at Paradip which will be next month. 15 million tonnes-mostly for export-and it is almost completed.

Between the two coal terminals at Paradip and Salaya, what is the commissioning timeline?
Salaya will be September 2013. The coal terminal in Paradip is going to take two years from now.

Between the three what is the kind of investment and what do your books say it will cost you?
Total investment is about Rs 9,500 crore for all projects out of which we have incurred about Rs 7,500 crore. So balance is what we have to do in next two years to complete these projects. Most of the funding is tied up. We are refinancing some of the debt.

So even your external commercial borrowing (ECB) is for the purpose of refinancing?
Yes; some debt which is tied up or in process of tying up, we would like to switch from rupee to dollar.

Do you see finance issues for a group like Essar in recent past as opposed to 2007 and 2009, that you can very palpably feel there is a problem right now in financing for ports?
No, there is nothing like that. The only thing is we do not like the [current] rates of interest!

Do you see any foreign investors holding their horses or not really wanting to invest right now in India?
One is that investing in stock, while the other is to directly invest in a project. Project investment is definitely more risky. When the project will come and what kind of clearances will the project see light of the day, all those issues are there. In case of investment in stock and once the company is running then it is much simpler.

So you are saying in stocks the trend has been steady but within projects…

Ports is an attractive segment to invest in out of the various fields in infrastructure if you see ports are much better. Foreign investment has come in Ports.

Foreign investors have been interested in ports in many ways, but a lot of them in recent delegations have been observed to be interested in sharing expertise and technology.
There are different people who invest-companies with port specific expertise and companies that run ports. Most of the people who came in those delegations were people who were seeking opportunities in India for consulting. They have been mostly consulting organisations and not many large players were there.

Now you have an arrangement with Port of Antwerp. Is there anything that has any kind of activity that has gone up between your port and port of Antwerp?
They have invested in our company and they hold 4 per cent stake. We have been discussing that. Yes, advisory, consulting, technical planning and also some cargo floors could happen in future.

Any specifics you want to throw light on in terms of advisory and technical? What typically would be something that you would like to borrow from them and what would you like to give them in return?
It could be master planning for the port or any technical issue which we might want to discuss.

How are you going to respond to latest reforms and cabinet meeting today might bring up something but how do you think it will affect you or group or company?
So far mostly things have been on retail and some on financial side in terms of insurance etc. So yet to see anything on infrastructure.

Do you foresee trade going up shortly?
Actually we are more in field of bulk commodity which is impacted by power and steel manufacturing, oil etc. I think that is what has been most impacted in slowdown the heavy infrastructure. Investment light business like retail, FMCG were doing quite well. The stakes are not much there.

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