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Adani Ports submits initial bid to buy debt laden Karaikal Port

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PUDUCHERRY : Adani Ports and Special Economic Zone Ltd (APSEZ) has placed an initial bid to buy stressed port company Karaikal Port Pvt Ltd which is undergoing resolution under India’s bankruptcy law, multiple sources said.

Karaikal Port Pvt Ltd runs the all-weather Karaikal port developed on a Build, Operate and Transfer (BOT) format under the Public Private Partnership (PPP) mode on a 30-year concession awarded by the Puducherry government. The port started operations in June 2009.

A potential deal for Karaikal will add to APSEZ’s presence on India’s eastern seaboard where it acquired Krishnapatnam and Gangavaram ports in the last two years. APSEZ also runs ports/terminals at Dhamra, Kattupalli, and Ennore.

On the Western coast, APSEZ runs ports/terminals at Mundra, Tuna, Dahej, Hazira, Dighi and Mormugao.

The 12 ports/terminals run by APSEZ on the east and west coasts have a capacity to handle a combined 538 million tonnes (mt) of cargo a year.

APSEZ handled 312 mt of cargo in FY22 at a capacity utilisation of 58 percent compared.

“In three years, we expect to grow our cargo volumes by 60 percent to 500 mt as we target to emerge as the world’s largest port operator and India’s largest transport utility by 2030,” Karan Adani, Chief Executive Officer, APSEZ, said in the firm’s annual report for FY22.

The Chennai-bench of the National Company Law Tribunal (NCLT) started corporate insolvency resolution process against the private port located in Puducherry promoted by Marg Ltd on 29 April this year on a petition brought by Omkara Assets Reconstruction Pvt Ltd (Omkara ARC) seeking to recover unpaid dues of Rs2,804.56 crores.

In November last year, Edelweiss Asset Reconstruction Co Ltd (EARC) sold the debt of Rs2,059.24 crore along with the 11 per cent equity it held in Karaikal Port Pvt Ltd to Omkara ARC for Rs1,500 crore. Omkara ARC now is in charge of Karaikal port.

The Swiss Challenge auction by Edelweiss ARC of Karaikal Port’s debt was prompted by an offer from mkara ARC, which is believed to have the backing of APSEZ.

Earlier this year, Omkara ARC inducted long-time Adani Group loyalists Ameet Desai and Surender Kumar Tuteja as its representatives on the board of Karaikal Port, reinforcing industry and market speculations that APSEZ has struck a deal for the all-weather port in Puducherry promoted by banker-turned entrepreneur G R K Reddy.

The speculation gained further credence after Omkara ARC hired Vettath Raghunandan and Nilanjan Bhattacharya – who previously had long association with the Adani Group in senior roles – to run Karaikal Port as chief executive officer and chief financial officer, respectively.

Unlike a formal acquisition deal, APSEZ, according to industry sources and experts, could be using the NCLT route to buy Karaikal Port as the IBC process allows India’s biggest port operator to buy the port on a “clean slate” without having to face any unforeseen liabilities that could spring up post acquisition.

Besides, the port can be acquired at a much lower price under IBC.

“Karaikal Port is a done deal for APSEZ,” said a port industry executive with knowledge of the matter.

“Adani has mobilised executives on the ground to run the port and its board prior to the sale through NCLT”, he added.

It could not independently ascertain whether the expression of interest floated by the resolution professional for Karaikal Port, had attracted any other bidders.

Port industry sources, though, said that speculation over APSEZ’s “links” with Karaikal Port could have dissuaded other potential bidders from participating in the resolution process.
Besides, by holding 96 percent of the voting share in the Committee of Creditors (CoC), Omkara ARC has the right to decide the outcome of the resolution plan for Karaikal Port, the port industry executive mentioned earlier said.

Chennai-based infrastructure developer Marg Ltd, promoted by Reddy, held a 45 per cent stake in Karaikal Port while four private equity funds – Ascent Capital Advisors India Pvt Ltd, Jacob Ballas Capital India Pvt Ltd, Affirma Capital India and GIP India – together owned 44 per cent stake.

If successful in the bid, Karaikal Port could be APSEZ’s second port acquisition under India’s bankruptcy law after Dighi port in Maharashtra.

The resolution professional for Karaikal Port and APSEZ could not be reached immediately for comments.

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