Essar Ports seeks relief on Rs 6,000-cr loans under 5/25

By: and |
Updated: May 21, 2015 12:54:04 AM

The Ruia family-promoted Essar Ports has sought relaxed loan terms from bankers even as it plans Rs 3,000-crore ...

The Ruia family-promoted Essar Ports has sought relaxed loan terms from bankers even as it plans Rs 3,000-crore (including Rs 2,000-crore debt) new investments on three key port projects that have recently got long-pending regulatory clearances, CEO and MD of Essar Ports, Rajiv Agarwal, told FE.

Essar Ports has sought relief from bankers to spread out its existing Rs 6,000-crore loan obligations over a longer tenure. The company is in talks with bankers to migrate its debts to the Reserve Bank of India’s (RBI) 5/25 scheme, said Agarwal.

“All regulatory clearances for these investments are now in place. Essar Ports plans to invest approximately Rs 3,000 crore for the new investments across east and west coasts. The investment will be made through a mix of debt and equity, with about Rs 2,000 crore being raised as new debt and Rs 1,000 crore being funded through internal accruals,” he said.


Agarwal said the 5/25 scheme will match the repayment schedule of loans with the life of asset and, hence, will address the current mismatch where a 30-year port concession is financed through 10-15-year loans. “Our current debt equity ratio is 1.8:1 and the company will maintain the leverage ratio even after the investment plan which is a comfortable leverage for an infrastructure company. Ebitda for the current year stands at Rs 1,400 crore compared to debt levels of close to Rs 6,000 crore,” he added.

The three projects that were delayed due to regulatory clearances and litigation include the 14-million-tonne-per-annum (mtpa) coal terminal at Paradip Port in Odisha, the 16-mtpa iron ore berth at Visakhapatnam Port in Andhra Pradesh, and the 20-mt port terminal at Salaya Port in Gujarat. Essar Ports completed the acquisition of the iron ore-handling complex of Visakhapatnam Port Trust last week.

The coal terminal at Salaya saw a 4-5 year delay in getting land acquisition and forest clearances. While despite winning concessions for Paradip in 2009, the coal importing facility was handed over only in 2015, the Vizag Port project had been delayed as labour unions of the port protested against the terminal’s privatisation.

Agarwal explained that Salaya will be operational by March 2016, the modernisation of the Vizag port will take 24 months and the construction of the Paradip coal terminal will be completed in the next 30 months. “The company expects to increase its operating capacity from the existing 120 mtpa to 194 mtpa by 2018,” he added.

The delays in clearances have led to project cost escalations and affected business plans. For instance, at Paradip, financial closures had been achieved in 2013, but the company has now gone back to bankers for tying up loans. Also, most of the company’s projects that have got delayed were for third-party business, thus impacting its plans of increasing the share of third-party business, which is small today. At present, a vast majority of the company’s business come from captive business with Essar Group’s other businesses.

In the March quarter of FY15, revenues were up 6% to Rs 440 crore over the same quarter the previous year, and net profit was up 15% at Rs 104.6 crore. Agarwal said there were certain areas where the ports business has got affected.

The iron ore exports got impacted due to the mining ban and levy of duty, but increase in coal imports compensated for the loss on cargo throughput on account of iron ore. There was still marginal growth overall in cargo and containers business also grew. “We have not seen a decline but growth has been relatively slower in last few years.

There is no significant growth pick-up, but no slowdown either. We expect high growth once the mining and power sector takes off. Global sales are not looking very buoyant. But in India growth looks intact,” he added.

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