Editor Speaks
Monday, March 08, 2010

Telenor Group’s Indian mobile operation, Uninor announced the launch of its mobile services in seven Indian telecom circles, making it the largest single day launch in the telecom history. On the first day of service Uninor will cover a footprint of close to 600 million people. Its interesting to note the organizational mode and the marketing strategy.

Uninor’s tagline is “Ab mera number hai” or “My time is now”, set to target the young and ambitious individuals.

This would mean now you have AirTel, Reliance Communications, Tata Indicom, BSNL, MTNL, Escorts, Idea etc etc ...as your telephone services.

Private companies are splashing money and are confident about their respective business models.

Bhandarkar Shipping News is not talking about the telecom war or number portability. We are purely talking about private money. Ports were waiting for government money by sighing “Mera Number Kabhi Ayega”. But it never came. If it all, it was there, with inimitable delays. So fund delayed is equal to fund denied. Even the budget was disappointing for the sector. So what is the way out. Private equity!! Yes, they will be there with your for long time and will offer you expert advice too.

Take this case.

IDFC Project Equity is investing Rs 150 crore in Karaikal Port Pvt. Ltd marking its first investment in the space. The port is located on India’s east coast in the Union Territory of Puducherry.

Karaikal Port, a wholly- owned subsidiary of Chennai-based Marg Ltd, is raising the funds from IDFC Project Equity managed India Infrastructure Fund.

The two parties have already entered into a Shareholders Agreement and Share Subscription Agreement. When contacted by VCCircle, IDFC Project Equity’s president & CEO M K Sinha confirmed the investment. “Port investments in India are fundamentally attractive because the trade volumes will pick up. Karaikal is a bulk port which will see a lot of throughput,” said Sinha.

Karaikal Port is being developed as a lagoon-type harbour connected to sea by an access channel protected by short breakwaters. The port recently completed its phase - I of development and it has an existing capacity of six million tonnes. Karaikal Port would look at ramping up this capacity to 20 million in the next couple of years as the traffic builds up.

“It is an opportunity to buy into a fully developed, partly constructed and operational port,” said Sinha commenting on the attractiveness of the deal. Karaikal Port already has the environmental clearances and has already started building traffic. The port is also connected through railways and roads.

There were several instances of private equity flowing into port and logistics sector and this newspaper had extensively reported about that.

3i Group, which manages a $1.2 million India-focused infrastructure fund, has invested around $161 million in Krishnapatnam Port Company Ltd and $50 million in Mundra Port and Special Economic Zone.

Gujarat Pipavav Port has raised funds from a number of investors including IDFC Private Equity, IL&FS and NYLIM Jacob Ballas. Another player that has raised money is Gangavaram Port Ltd, which got $35 million from Warburg Pincus.

To put into perspective, the traffic handling capacity of Major Ports has gone up by about 48 per cent in the last five years. It has increased from 389.5 MT in 2003-04 to 574.77 MT in 2008-09.

The point we are making is simple.

Be a bankable project. Draw strong business model and contain all risks possible. The private equity will follow if it is a sound business model. We are sure that the private equity players and private port operators would be singing

“Ab mera number hai

Views may emailed to BSN on editorial@bhandarkarpub.com.