The Adani Group is likely to acquire a 72 per cent stake in Krishnapatnam Port Company Limited (KPCL), the operator of Krishnapatnam deep water sea port in Andhra Pradesh. The two parties have signed a confidentiality agreement in this connection. Unconfirmed reports put the proposed deal value at over Rs 5,500 crore.
Promoted by Hyderabad-based CVR (Navayuga) group, KPCL had developed the green-field Krishnapatnam Port project ten years ago under a concession agreement signed with the Andhra Pradesh government.. The port, which commenced operations in April, 2008, has handled 54.37 million tonnes of cargo in 2018-19.
The proposed acquisition also includes an equity stake held by international private equity investment player 3i Group, which had invested little over $160 million in the company during the early days of port operations. Post acquisition, Navayuga group will retain 28 per cent in the port company besides a key management role either as chairman or as a managing director, according to sources.
"KPCL managing director Chinta Sashidhar of the promoter group will hold the position of chairman or MD after the acquisition as desired by Adanis," a top source in the company told Business Standard. There was no clarity yet as to when the deal would conclude as the process of due diligence is just underway.
Port operations in Andhra Pradesh have been on Adani Group's radar for quite some time. The country's biggest private port operator had tried to acquire Gangavaram Port about 2-3 years ago. Its efforts in this regard did not make a head way as the promoters of Gangavaram port were unwilling to divest their stake. Last year Adani Group had won the green-field Bhavanapadu Port project in Srikakulam district of Andhra Pradesh.
Navayuga group's decision to sell majority stake in its flagship port company comes in the wake of a stressed out financial situation being faced by this privately held infrastructure player. Two of its projects in Andhra Pradesh- a large Rs 4,500 crore construction contract of Polavaram Project and the development of Machilipatnam Port project- were recently cancelled by the new government headed by chief minister Y S Jagan Mohan Reddy.
The Krishnapatnam port also undergone deep financial turmoil in the past when iron ore exports, one of the major bulk cargos that it handled early on, completely stopped. Later it was also impacted by the economic slowdown. Operations picked up momentum in the last few years with the rise in coal imports required by the large coastal thermal power projects in its catchment area, besides other bulk cargo such as edible oil and container terminal operations.
Besides well-developed port infrastructure, the port company also has around 1,300 acres of land that can be used for the development of port-based industries.
Promoted by founder C Visweswara Rao, the CVR Group has a turnover of $1 billion and an order book of $10 billion consisting of power, steel, port development, IT and exports, according to the company website.