By Manu Balachandran, ET Bureau | 6 May, 2013
MUMBAI: Adani Ports and Special Economic Zone has started discussions with Tata Steel regarding the terms of handling cargo at Dhamra Port in Orissa, a port which is jointly owned by Tata Steel and Larsen and Toubro , signaling a significant move towards acquiring a strategic control of the port.
Adani Port held discussions with Tata Steel last week regarding cargo handling at the port. Tata's arm TM International Logistics currently manages the port.
In a meeting held on Thursday, senior officials of Tata Steel and Adani Ports met at Bombay house, the head office of Tata Group to undertake due diligence and have also expressed their opinion regarding the cargo handling at the port.
According to the officials, Adani Port is said to have raised certain concerns regarding the cargo handling policy at the port in terms of warranties, damages and liabilities which seems to be in favour of the Tata Group. The companies are now studying the terms and conditions and are expected to meet soon to make a final decision.
"Adani Ports said that the terms and conditions of cargo handling at the port seem to be tweaked in favour of Tata Group. Since Tata Group is the biggest customer at Dhamra Port, these concerns need to be solved before Adani makes any offer regarding the port," said a person who attended the meeting.
L&T had earlier said that the port is a non-performing asset for the company and was looking for potential buyers. "The deal looks like it is inching closer to be completed and a final decision will be taken at the promoter-level soon," the official added.
Adanis and Tata have such business arrangements for other group businesses. The two groups have an arrangement wherein Tata Power uses Adani Port's facility in Mundra to import coal required for its 4,000 MW ultra power project (UMPP) in Gujarat. A spokesperson for Adani Group declined to comment on the matter while Tata Group said that they do not respond to market speculation and rumours.
Dhamra Port's project cost is about Rs 3,600 crore and it reported a total income of Rs 198 crore for the financial year ended 2012 with a net loss of Rs 458 crore. The port has been developed under the build-own-operate-share and transfer model with a concession from Odisha government for 34 years and commenced operations in May 2011.
But the port, which has a significant advantage in terms of its location on the east coast, especially with rising cargo from India to China has been struggling due to infrastructure constraints, including road and rail connectivity.
"Dhamra Port has huge potential on the east coast as it caters to the eastern and north-eastern hinterland in a big way. Kolkata and Haldia Ports are facing depth problems and capacity constraints. In this regard, Dhamra can provide better economies of scale and become an alternate gateway," said Anand Sharma, director at Mantrana Maritime Advisory.
Dhamra Port handled 5.1 million tonnes of cargo during 2012 and Tata Steel had developed the port due to its location, which was ideal for shipment of minerals and raw material for steel plants in the region.
Adani Port is the country's largest private sector port and had recently stated that the company was looking to utilise more than $235 million (Rs 1,300 crore) that the company received from divesting its stake in Abbot Point Coal terminal in Australia to fund its expansion plans in the country's east coast.
Adani Ports had divested some of its stake in Abbot Point Terminal to the Adani family, the promoters of the firm, to focus on its expansion plans in India. Adani Port had acquired Abbot Point Coal Terminal in Australia in 2011 for $2 billion. "We will receive more than $235 million from divesting our stake in the company to the Adani family. The fund will be available for our expansion plans on the east coast of India and can also be used to reduce our debt, B Ravi, CFO of Adani Ports, had told ET earlier.
The company had also recently solved a long-awaited concern with the home ministry after the ministry decided to grant security clearance to the company to participate in port projects in the country.
Adani Ports could not participate in public-private partnership projects in the country as the home ministry had barred the company from participating in the projects due to undisclosed reasons. The denial cost the company the chance to participate in port projects worth Rs 20,000 crore in the past three years.
With the security clearance now in place, Adani is expected to bid for a number of port projects that the ministry of shipping is looking to award this year at an estimated cost of Rs 30,000 crore.
MUMBAI: Adani Ports and Special Economic Zone has started discussions with Tata Steel regarding the terms of handling cargo at Dhamra Port in Orissa, a port which is jointly owned by Tata Steel and Larsen and Toubro , signaling a significant move towards acquiring a strategic control of the port.
Adani Port held discussions with Tata Steel last week regarding cargo handling at the port. Tata's arm TM International Logistics currently manages the port.
In a meeting held on Thursday, senior officials of Tata Steel and Adani Ports met at Bombay house, the head office of Tata Group to undertake due diligence and have also expressed their opinion regarding the cargo handling at the port.
According to the officials, Adani Port is said to have raised certain concerns regarding the cargo handling policy at the port in terms of warranties, damages and liabilities which seems to be in favour of the Tata Group. The companies are now studying the terms and conditions and are expected to meet soon to make a final decision.
"Adani Ports said that the terms and conditions of cargo handling at the port seem to be tweaked in favour of Tata Group. Since Tata Group is the biggest customer at Dhamra Port, these concerns need to be solved before Adani makes any offer regarding the port," said a person who attended the meeting.
L&T had earlier said that the port is a non-performing asset for the company and was looking for potential buyers. "The deal looks like it is inching closer to be completed and a final decision will be taken at the promoter-level soon," the official added.
Adanis and Tata have such business arrangements for other group businesses. The two groups have an arrangement wherein Tata Power uses Adani Port's facility in Mundra to import coal required for its 4,000 MW ultra power project (UMPP) in Gujarat. A spokesperson for Adani Group declined to comment on the matter while Tata Group said that they do not respond to market speculation and rumours.
Dhamra Port's project cost is about Rs 3,600 crore and it reported a total income of Rs 198 crore for the financial year ended 2012 with a net loss of Rs 458 crore. The port has been developed under the build-own-operate-share and transfer model with a concession from Odisha government for 34 years and commenced operations in May 2011.
But the port, which has a significant advantage in terms of its location on the east coast, especially with rising cargo from India to China has been struggling due to infrastructure constraints, including road and rail connectivity.
"Dhamra Port has huge potential on the east coast as it caters to the eastern and north-eastern hinterland in a big way. Kolkata and Haldia Ports are facing depth problems and capacity constraints. In this regard, Dhamra can provide better economies of scale and become an alternate gateway," said Anand Sharma, director at Mantrana Maritime Advisory.
Dhamra Port handled 5.1 million tonnes of cargo during 2012 and Tata Steel had developed the port due to its location, which was ideal for shipment of minerals and raw material for steel plants in the region.
Adani Port is the country's largest private sector port and had recently stated that the company was looking to utilise more than $235 million (Rs 1,300 crore) that the company received from divesting its stake in Abbot Point Coal terminal in Australia to fund its expansion plans in the country's east coast.
Adani Ports had divested some of its stake in Abbot Point Terminal to the Adani family, the promoters of the firm, to focus on its expansion plans in India. Adani Port had acquired Abbot Point Coal Terminal in Australia in 2011 for $2 billion. "We will receive more than $235 million from divesting our stake in the company to the Adani family. The fund will be available for our expansion plans on the east coast of India and can also be used to reduce our debt, B Ravi, CFO of Adani Ports, had told ET earlier.
The company had also recently solved a long-awaited concern with the home ministry after the ministry decided to grant security clearance to the company to participate in port projects in the country.
Adani Ports could not participate in public-private partnership projects in the country as the home ministry had barred the company from participating in the projects due to undisclosed reasons. The denial cost the company the chance to participate in port projects worth Rs 20,000 crore in the past three years.
With the security clearance now in place, Adani is expected to bid for a number of port projects that the ministry of shipping is looking to award this year at an estimated cost of Rs 30,000 crore.
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