The second-biggest container port operator in the world, PSA Corp., has received the government’s clearance for its proposed investment of $60 million (Rs240 crore) in the company that operates container cargo handling terminal at the Kandla port in Gujarat.
PSA, owned by Temasek Holdings Pvt. Ltd, the investment arm of the Singapore government, plans to acquire a 49% stake in ABG Kandla Container Terminal Pvt. Ltd from Mumbai-based ABG Infralogistics Ltd, India’s biggest crane rental firm.
India’s Foreign Investment Promotion Board (FIPB), which clears investments by foreign firms in the country, cleared PSA’s proposal through a compulsorily convertible preference share subscription on Friday, said a person familiar with the decision. He did not want to be named ahead of an official announcement by the government.
These preference shares, on conversion into equity shares after October 2011, would not exceed 49% of the paid-up equity share capital of ABG Kandla Container Terminal, the operator of the terminal at the Kandla port.
“By investing in Kandla, PSA will help boost volumes at the facility,” said Saket Agarwal, managing director, ABG Infralogistics.
The Kandla terminal handled 1.65 lakh twenty-foot equivalent units (TEUs) in the 12 months through March 2008. A TEU is the standard size of a container and is a common measure of capacity in the container business.
PSA had in February purchased a 49% stake in ABG Kolkata Container Terminal Pvt. Ltd, another subsidiary of the crane rental firm, for around Rs50 crore. The container port operator also holds a 11.8% stake in ABG Infralogistics.
For the Singapore company, the investments will help it expand its operations and grab a bigger share of the market in the world’s second-fastest growing major economy.
India’s container cargo traffic has been growing at more than 15% a year, riding on foreign trade that has been clocking a growth rate of more than 16% a year.
About 95% of the country’s foreign trade by volume and 70% by value moves by sea, giving business to firms such as PSA.
Container cargo represents only 30% by value of India’s external trade. In comparison, the global average of containerized cargo is 70-75%.
At a growth rate of 15% a year, India’s container traffic is estimated to reach 21 million TEUs by 2016 from around 7 million TEUs now.
Capacities at the Kandla and Kolkata terminals are 4.5 lakh TEUs and 2.25 lakh TEUs, respectively. These are designed to handle small feeder ships that haul container cargo from India to big ports such as those in Singapore, Colombo and Dubai, from where they are discharged and loaded onto bigger ships for transportation to final destinations.
More than 60% of some 2 lakh TEUs handled at Kolkata are bound for or are coming from Singapore. “PSA has a big interest in this connection,” said Agarwal.
PSA runs its flagship terminal at Singapore, the world’s biggest container port, that handled 27.1 million TEUs in 2007, accounting for a fifth of the world’s total container traffic. The company handled another 31.75 million TEU’s from terminals outside Singapore.
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