Essar Ports to trim intl biz, focus on India

Written by Nikita Upadhyay | Nikita Upadhyay | MG Arun | Mumbai | Updated: Jul 9 2012, 08:45am hrs
Essar Ports, which gets as much as 98% of its business from group companies, has said it is at present insulated from the slowdown. We will leverage our partnership with Europes Port of Antwerp to get new clients outside the group, managing director Rajiv Agarwal told FE.

The firm will also curtail its international ambitions to focus on India, where it will boost port capacity to 160 million tonne (mt) by 2014 from 88 mt at present.

In May, Belgiums Port of Antwerp International (PAI) invested about R175 crore in Essar Ports through global depository shares. These shares, convertible after June 2013, would form around 4% of the diluted equity share capital in Essar Ports, post conversion.

Agarwal said PAI will help his firm attract new customers. They (PAI) want cargo from here to go to their ports and we want cargo from there to get offloaded on our ports. We are working towards a model through which we both can be benefited.

But slipping cargo volumes are a worry. Cargo handled at India's 12 major ports including Mumbai, Kandla, Kolkata and Vizag ports, controlled by the central government, dropped by almost 6% in the two month period April-May 2012 to 94 mt against 99.7 mt a year ago, data from the Indian Ports Association or IPA shows. IPA does not provide figures of non-major ports.

India's exports fell 4.16% to $25.68 billion in May against a year ago on a demand slump in Europe, government data showed Monday. Imports, meanwhile, fell 7.36% to $41.94 billion.

Definitely, there is some slowdown in cargo volumes, but we have guaranteed cargo base from our group companies so we are sort of unaffected by it, Agarwal said. Essar Ports, which has ports at Hazira and Vadinar, counts group companies Essar Steel, Essar Oil and Essar Power as its major customers. It now wants to reduce dependence on group companies to about 70% by 2015.

Essar Ports has received a one-time en bloc approval from the Gujarat Maritime Board to handle 1 mt third-party coal at Hazira during the monsoon of FY13. The company is currently handling some project cargo for L&T and others, wrote analysts Bharat Chhoda and Soumojeet Banerjee of ICICI Securities in a recent report. Also, coal traders have approached the company for handling their cargo.

Essar Ports is also applying for handling third party cargo (clinkers) to the tune of 1-2 mt in FY13. It is also planning to invest in crude tankages for traders and national oil companies. This would help in better utilisation of excess capacity at Vadinar. Last fiscal year, Essar Ports, now operating at a 50% capacity, handled close to 43 mt of cargo. This will go up to around 65 mt in FY 2012-13.

The firm is building a new port at Salaya in Gujarat and two terminals at Paradip in Orissa. With these becoming operational by 2014, the company will have 160 mt capacity. We can further increase this capacity to 250 mt, if we need, Agarwal said.

India's ports need to grow three time their present capacity by 2020 to meet growing demand, but infrastructure projects, that have long gestation periods, have an uphill task ahead, Agarwal said.