Essar Ports, US giant TPG capital in race for acquiring Karaikal Port

port Essar

India’s second largest private sector port and terminal company Essar Ports and US private equity giant TPG Capital are in the fray to acquire a majority stake in Karaikal Port, a subsidiary of debt-ridden Chennai based Marg group, three sources familiar with the development told ET NOW.

“The talks with the two suitors are at a preliminary stage and may or may not conclude into a deal. The promoters of the Marg Group are looking to substantially reduce their debt exposure of around Rs 1000 crores and are expecting an enterprise value in excess of Rs 3000 crore rupees. The plan is to use a part of the proceeds to settle Karaikal Port’s debt of 1600 crore rupees. The balance would be divided between Marg promoters and the private equity investors of Karaikal Port,” said one of the three individuals cited above. Motilal Oswal Investment Advisors are advising the Marg Group on the deal.

4 private equity investors namely Standard Chartered Private Equity Ltd, Jacob Ballas India, IDFC and Ascent Capital Advisors together hold around 49 per cent stake in Karaikal Port. Essar Port, responsible for the operation of ports at Hazira, Vadinar and Paradip can ” bolster its geographic presence in South India through the deal,” sources added.

The deal talks mark an attempt by TPG Capital to make its debut in the Indian ports and logistics sector. ” TPG is sector agnostic when it comes to India,” says an advisor familiar with the firms investment strategy.

In response to an email query from ET NOW, a Marg group spokesperson said, “Having created all the infrastructure and established successful operations, Karaikal Port is today looking at a business model based on optimization of infrastructure and enhanced productivity. Hence, the port as a regular process is exploring various options to enhance productivity by partnering with different organizations for strategic investments in the container, liquid and project cargo fields.

The Port is also looking at terminalisation and creating facilities to handle new cargos like containers. This is a continuous process intended to further improve synergy of operations and increase cargo traffic in a short span. As a policy we will not like to comment on any speculation with reference to any specific PE investor”. The company did not comment specifically on the interest by Essar Ports.

Essar Ports declined to comment while a TPG spokesperson said the firm does ” not comment on market speculations and rumours.” Standard Chartered Private Equity responded to ET NOW saying ” we decline to comment on market speculation”. ET NOW is awaiting official responses from the 3 remaining PE players.

TPG is a leading global private investment firm with $ 56.7 billion of capital under management. In February, it had raised $305 million by selling a 10 per cent stake in Shriram Transport Finance Co Ltd.

Essar Ports Ltd BSE 1.45 %, had recently emerged as the highest bidder for Rs 845 crore iron ore handling project at Visakhapatnam Port. On commissioning of this project, EPL’s total capacity for iron ore export at the east coast would reach 39 mmtpa with four highly-mechanised iron ore berths (three in Visakhapatnam port and one in Paradip port), the company had stated.

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