Adani Ports builds on success of port acquisitions and expansions

Adani Ports & Special Economic Zone, the flagship company of India’s fast ascending businessman Gautam Adani, has advanced the target of handling cargoes of 200mt (million tonnes) by three years to 2017 buoyed by its success in acquiring ports and terminals and then rapidly expanding their capacity. The
company which last year bought Dhamra Port, a deep draught all season port in eastern state Orissa, from equal joint venture partners Larsen & Toubro and Tata Steel, is now eyeing Gangavaram Port, further down the east coast in Andhra Pradesh. Reports are doing rounds that Adani Ports are in talks
with private equity firm Warburg Pincus to buy its 31.50% ownership of Gangavaram, a dry bulk all weather port with water depth of up to 21 metres and equipped to handle cargoes from coal to iron ore to fertilizers and alumina. The deep draught allows Gangavaram to accept fully laden super Capesize vessels of up to 200,000dwt.

Expectedly, none of the parties involved in reported talks is ready to share information with the media at this early stage.
But India’s leading business newspaper The Economic Times has quoted a source familiar with the likely deal saying “the handshake is over. Due diligence and paper work are on.” Macquarie Capital, according to the newspaper, has been retained as adviser by Adani Ports. Once the Warburg Pincus holding is hopefully bought, Adani Ports will seek to increase its holding in Gangavaram to over 50%. About 15km from Visakhapatnam Port, which urgently requires capacity expansion, Gangavaram is in the news for Adani’s reported attempts to acquire a major stake. At the same time Adani’s buying interest coincides with steps taken by Gangavaram to double its annual cargo handling capacity to 42m tonnes.

Based on example of Dhamra, where immediately on a nearly $1bn takeover Adani made a bold declaration of raising the port capacity fourfold to 100mt in phases, experts foresee similar ‘fireworks’ at Gangavaram if he manages to move into the driver’s seat. In India’s pursuit for steel capacity of 300mt, Orissa being exceptionally rich in such steel making ingredients from iron ore to non-coking coal to chromite and manganese is having a big role. This will, however, require of the coastal state to beef up its port capacity to handle increasingly large quantities of coking coal to be imported for blast furnace use and finished steel products for export. Cargo handling capacity at Orissa’s leading government owned Paradip Port and Dhamra in the private sector will too require enhancement to handle other cargoes like thermal coal (India’s imports of this commodity is steadily rising), bauxite, alumina and aluminium of which exports are rising and fertilizers for which the country is import- dependent.