An LNG terminal will help the port get specified cargo and improve operational efficiency.
MUMBAI: India's largest asset reconstruction company, Edelweiss ARC, which took over 97 per cent debt of the company in 2015, has plans to set up a LNG terminal to monetise the operations of Karaikal Port, extending the wait for PE investors planning to exit as stake sale plans for the port have being shelved, sources close to the development said.
The decision will push back any stake sale deal being run by the PE (private equity) investors looking to exit their five-year old investment in the company, they said.
In 2012 homegrown PE fund Jacob Ballas picked up a minority stake in the company for Rs 200 crore after which other PE funds such as Standard Chartered PE, IDFC Project Equity and Ascent Capital invested in the company. Today, the PE funds jointly hold about 44 per cent stake in the company.
"Edelweiss has converted part of the outstanding loan (interest haircut that it took) into equity and now holds around 11 per cent stake in the company," said one of the persons with direct knowledge of the development.
Armed with equity stake and majority debt, the asset reconstruction company has taken over the day-to-day operations of the Karaikal Port in Puducherry from Marg Ltd that owes banks Rs 1,800 crore.
In 2015, Edelweiss ARC bought 97 per cent of Karaikal Port's debt from various banks. In the last 18 months, the earnings before interest, tax, depreciation and amortisation or EBITDA has improved from Rs 70 crore to Rs 180 crore.
"The improvement in EBITDA and the extra line of credit has again made the port viable and now the ARC is planning to set up a LNG terminal at the all-weather port and bring in global companies to run it," said another person with direct knowledge of the development. The setting up of the terminal will take some time and global bids have been invited.
"This will push back exit plans of the PE funds that have been patiently waiting for the company to turn around," the person quoted above added.
An LNG terminal will help the port get specified cargo and improve operational efficiency. Handling of specific cargo such as LNG requires specific equipment and has high capital costs.
Setting up specialist terminals for such cargo result help optimise use of resources and increase efficiencies.
Some of the existing LNG ports include ICTT in Cochin, LNG terminal in Dahej Port. Adani Group plans to convert the Dhamra Port in Odisha into country's biggest seaport with an industrial park and set up LNG and LPG terminals there by 2021.
Emailed queries sent to the spokespersons of Jacob Ballas, IDFC, Ascent Capital and Karaikal Port did not elicit any response. In an emailed response, Standard Chartered PE spokesperson declined to comment as did the Edelweiss spokesperson.
Last year, PE investors and promoter Marg were in advanced talks with Shapoorji Pallonji & Co for a 51 per cent stake sale for Rs 900 crore. Disagreements over the equity structure and management control over the company led to the deal falling through.
A July 2017 report by India Brand Equity Foundation or IBEF said about 95 per cent of India's trading by volume and 70 per cent by value is done through maritime transport.
