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Management Case | Dhamra port—a wise move by Adani Group

LiveMint logoLiveMint 27-05-2014 PR Sanjai

The $8.7 billion Adani Group chose 16 May, when results of the national elections were declared, to announce a definitive agreement with L&T Infrastructure Development Projects Ltd and Tata Steel Ltd to acquire Dhamra Port Co. Ltd for `5,500 crore.

In April, Reuters had reported that Adani’s rapid ascent to the top tier of Indian business is often associated with the rise of Prime Minister Narendra Modi and that, based in Gujarat, Adani’s empire has benefited from Modi’s emphasis on economic development.

Dhamra dreams

The Dhamra Port started operations in May 2011 and handled 14.3 million tonnes (mt) of cargo in 2013-14. The port has two mechanized berths and 63km of railway tracks that connect to the national rail network. The Adani Group-controlled Adani Ports was set to buy Dhamra Port in Odisha after its operator secured environmental and coastal clearances for its second phase of expansion, Mint reported on 22 October. Adani owns and operates four ports—Mundra, Dahej, Hazira (all in Gujarat) and Visakhapatnam (Andhra Pradesh). The Mundra Port, India’s largest, benefits from deep draft, first-class infrastructure and its status as a special economic zone. Adani is also developing ports at Mormugao (Goa) and Kandla (Gujarat).

The group was looking for a stronger entry into the east, where the hinterland is growing quickly and where there is a huge amount of mineral wealth. It realized that Dhamra Port will allow the firm to grow all along India’s coastline by opening up entry and exit points into the country to drive economic growth.

Consult before buyout

Even as discussions were progressing on valuations with the Tata Steel-L&T consortium that ran the harbour, Adani Ports came on board of Dhamra Port as a management consultant. This was the first time in India a potential acquirer had come on board as an operational consultant, to run the port’s day to-day operations, at a target company ahead of an acquisition. Besides assisting in running the port, Adani Ports helped Dhamra to get all necessary approvals from the government.

Dhamra is a good proposition for Adani as it is a harbour outside the control of the government and is free to set its own rates. Following the acquisition, the second phase of development will be initiated within 90 days and completion is targeted in 30 months. This continued expansion will allow Dhamra Port to exceed 100 mt of cargo capacity by 2020 and allow Adani to achieve its stated vision of becoming a 200 mt ports business well ahead of time.

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