Adani Group bets big with Krishnapatnam Port Co acquisition

The ports of Dhamra, Vizag, Krishnapatnam, Kattupalli and Kamarajar on the East Coast may be located in different states but have something in common ― the Adani Group.

The latest acquisition of the privately-run Krishnapatnam Port Company Ltd (KPCL) in Andhra Pradesh for ₹13,500 crore, announced on January 4, by Adani Ports and Special Economic Zone Ltd (APSEZ), is a perfect strategic fit for the Gujarat-based conglomerate. However, trade members (port users) are worried that the Adani group will have a dominant position on the East Coast, and this could possibly create a monopoly type of a situation in the long run.

Their worry is understandable considering that APSEZ, India’s largest private port operator, had increased its market share considerably in the last two decades. Today, it has nearly 27 per cent market share of the country’s total port traffic of over 1,200 million tonnes, up from 22 per cent before the KPCL acquisition.

Consolidation by private port companies will create a monopoly situation. While the 12 major ports are operating under different entities and competing with each other, the private ports are consolidating their positions and taking cargo from government ports, said an industry source.

Karan Adani, CEO, APSEZ, in a statement, said that the KPCL acquisition will accelerate the company’s fiscal 2025 vision of handling 400 mt of cargo. With the experience of successfully turning around acquisitions of Dhamra and Kattupalli ports, the company is confident of harnessing the potential of KPCL, he added.

The addition of KPCL to Adani’s port kitty means a ship can move cargo from the eastern port of Dhamra port in Orissa to Mundra in Gujarat by touching nine ports ― Dhamra, Vizag, Kattupalli, Ennore, Vizhinjam, Mormugao, Hazira, Dahej, Tuna and Mundra ― in between where Adani has operations.

Having established a strong presence on the west coast, the Adani group turned its attention to the east coast eight years ago. It has so far invested nearly ₹22,000 crore in the eastern ports of Vizag (₹400 crore); Dhamra (₹5,500 crore); Kamarajar (₹800 crore); Kattupalli (₹1,850 crore), and the biggest being KPCL (₹13,500 crore). Interestingly, Adani group plans to invest over ₹50,000 crore at its Kattupalli port in Tamil Nadu in the long run to consolidate its position further, as was earlier reported by BusinessLine.

The huge coal handling will be strategic for Adani with the company’s mega coal mine project in Australia at Carmichael coal mine back on track. The project envisages developing the mine and railway to a port called Abbots Point, from where the coal will be shipped by Very Large Bulk Carriers (VLBCs) to the east coast of India. Their original plan was to discharge at Kattupalli. However, that involved building a very expensive outer harbour and breakwater to cater to the deep drafted VLBC. There are protests due to beach erosion and environmental issues. Krishnapatnam provides a better and far cheaper alternative. Some of the coal will also go to Dhamra for the Jharkhand/Odisha market, said an industry source.

KPCL handled nearly 41 mt of coal in 2018-19, up from 33 mt in the previous year. The upcoming power projects in the vicinity of Krishnapatnam port will require coal in excess of 40 mtpa. KPCL is also a hub for handling edible oil, thanks to the presence of edible oil manufacturers, such as South India Edible Oils, Adani Wilmar and Emami Foods.

Fitch Ratings said that acquisition of KPCL complements APSEZ’s existing port portfolio by diversifying its concentration away from the west coast of India. The company management say that the ratio of cargo volume in the western and eastern coasts will shift from the current 80:20 to a more balanced 55:45 following the acquisition. The transaction will also enable the company to tap the coastal cargo market such as shipping of coal from Dhamra to Krishnapatnam.

The addition of KPCL to APSEZ will increase the latter’s market share and its diversity, both geographically as well as its cargo composition. With this, APSEZ will cater to a new economic hinterland of Andhra Pradesh that is currently not served by its existing ports. This acquisition is also in line with APSEZ’s target of throughput volumes of 400 mt by fiscal 2025, Moody’s Investors Service said in a report.
Source: The Hindu Business Line