Chennai’s Marg group looks to sell Karaikal Port

Marg Ltd, an infrastructure company based out of Chennai, is looking to sell the Karaikal Port in Puducherry, two people aware of the matter told Mint. The company has appointed Ambit Pvt Ltd to run the sale process and is seeking a valuation of ₹3,000 crore.

“The port recorded EBITDA (earnings before interest, tax, depreciation, amortisation) of about ₹250 crore in FY20 and was expected to do about ₹300 crore this year had it not been for covid-19,” one of the people cited above said. “We hope to close the sale process by March 2021. With EBITDA of ₹300 crore and increasing, an enterprise valuation of ₹3,000 crore won’t be hard to achieve but capital is tight in these times.”

The port was awarded under a build-operate-transfer contract by the Puducherry government to Marg group in 2006. It is an all-weather, deep water, multi-commodity port situated between the Chennai and Tuticorin ports, connected to four national highways and with six private railway sidings.

It has five berths and a container terminal. It can annually handle about 21 million tonnes of bulk cargo, particularly coal, liquid cargo.

In 2012, private equity fund Jacob Ballas invested about ₹200 crore in the port. This was followed with investments by Standard Chartered PE, IDFC Project Equity and Ascent Capital.

The Marg group, promoted by GRK Reddy, has 14.21% stake in the port while the remaining 85.8% is held by banks, foreign institutions, and venture capital funds as of March 2019.

In 2015, Edelweiss Asset Reconstruction Company took over 97% of the port’s ₹1,800 crore bank debt, turned around operations, brought in management changes and started setting up an LNG terminal. Edelweiss also converted part of its debt exposure to equity and now holds 11% stake in the company.

“The prospects of the port are good,” the person quoted earlier said. “Chennai Petroleum Corporation, which is close by, is expanding its refinery capacity. Once this finishes, the port’s liquid cargo business will go up. The LNG terminal will also add significantly to the EBITDA.”

At the end of 2019, Karaikal port reported turnover of ₹366 crore and negative net worth of ₹42 crore, according to filings with the Ministry of Corporate Affairs.

An email sent to a spokesperson for Karaikal Port did not elicit a response. A spokesperson for Ambit declined to respond to Mint’s queries.

Acquisitions in the ports and logistics space have slowed down because of the covid-19 pandemic and the prolonged lockdown, which has made companies shift focus to cash preservation. Cargo volumes at major Indian ports fell 22% year-on-year in April and May, with some ports like Chennai seeing volumes fall by over 40% during the period.

Mint reported on 2 June that Adani Ports and Special Economic Zone (APSEZ) has dropped plans to buy a 75% stake in Krishnapatnam Port Company Ltd, promoted by the Hyderabad-based CVR Group which runs the deepwater port in Andhra Pradesh’s Nellore district, for ₹13,500 crore. The deal was to close in March.

APSEZ has also put the brakes on its acquisition of the under-construction Dighi Port in Maharashtra from the corporate insolvency resolution process.
Source: Live Mint

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