Adani to buy Kattupalli Port near Chennai from L&T

Adani Kattupalli Port Pvt. Ltd, a subsidiary of Adani Ports, has entered into an in-principle agreement for the strategic acquisition of the Kattupalli Port in Tamil Nadu from L&T Shipbuilding Ltd (LTSB), a subsidiary of Larsen and Toubro Ltd.

While the two companies have not disclosed the acquisition cost, industry sources and people familiar with the deal have estimated the deal value at about Rs2,000 crore.

Currently, L&T Shipbuilding operates both the port and shipyard. The strategic sale is subject to approval from the Tamil Nadu and the union governments and the port being demerged from LTSB. The whole process is expected to take at least six months to complete, till which time Adani would have management control of the port.

Kattupalli is a deep-water all-weather port with an international container terminal near Chennai. The port commenced commercial operations in January 2013.

Gautam Adani, chairman, Adani Group, said the Kattupalli port was a strategic complement to company's Ennore Container terminal (10 km before Kattupalli), which would be commissioned next year.

The Kattupalli port is located adjacent to and north of Ennore Port, where APSEZ is developing the Ennore container terminal. This move of APSEZ is yet another step to continue to build out a network of ports across the Indian coastline and further expand its footprint across the South East Coast

Kattupalli port has two berths with a total quay length of about 710 metres and equipped to handle containers with an installed capacity of 1.2 million TEUs per annum.

Ennore Terminal's capacity would be 1.2 million TEUs, of which 0.8 million TEUs will be ready in the first phase.

Adani Kattupalli Port Pvt Ltd, a 100 -per cent subsidiary of Adani Port & Special Economic Zone Ltd, will operate and manage the Kattupalli Port in Chennai with effect from November 1, 2015, according to a note issued to customers of L&T, which was accessed by Business Standard.

Gudena J Rao, director of Adani Port & SEZ will be the key person for the Kattupalli project.

Sources in the industry said Adani might consider handling all the containers at Ennore, while bulk cargoes, including coal, would be handled at Kattupalli. Another official said since there is a shipyard how were they were going to handle bulk cargo at Kattuapalli is a big question.

For the trade in the region, two positives and one negative aspect might emerge out of the advancement of Adani in the port sector in the south and Chennai, said an industry veteran.

The positives for the industry are better efficiency, faster turnaround and option of facilities off the Chennai port, which handles 1.2 million TEUs (twenty-foot equivalent units).

On the negative side, despite the argument that cost factors would be decided by competition and market forces would balance / blunt escalated costs, the possibility of a private monopoly cannot be ruled out when Adanis acquires many of the strategic ports / terminals in the east coast, especially when these are beyond the purview of any regulator on tariffs.

Apart from developing the Ennore terminal, the company has also received the letter of award from the Kerala government for the development of the strategically located Vizhinjam port