Srei plans to acquire Sandesara group's stake in Dahej port project

PUNE, India - March 6, 2017 - PRLog -- As part of attempts to recover its loan, Srei Infrastructure Finance Ltd plans to acquire Sandesara group's stake in a Rs4,060-crore greenfield port being developed at Dahej, Gujarat.

This comes in the backdrop of around Rs6,000 crore in loans advanced to several companies of Vadodara-based Sandesara group turning bad, as reported by Mint.

The Gujarat Maritime Board (GMB), the regulator for all non-major ports in Gujarat, had signed a concession agreement with Sterling Port Ltd for the development of Dahej port in June 2015. Sterling Port Ltd is promoted by Sandesara group and requires an investment of around Rs4,060 crore.

Kolkata-based Srei has invoked a clause in GMB's sub-concession agreement with Sterling Port wherein a lender has the right to approach the regulator with a request to replace the port operator by another developer.

"We are exploring various mechanisms to recover our dues, as permitted under the regulations prescribed by the Reserve Bank of India (RBI). We will not comment further on client-specific details," said a Srei Infrastructure spokesperson in an emailed response without disclosing Srei's credit exposure to Sterling Port-Dahej.

Sterling Port promoters hold close to 74% equity in the port project, with the remaining stake held by Sterling Biotech Ltd, the group's flagship company listed on BSE. The project has been awarded for a 30-year concession to the company for development of an all-weather, direct berthing port for handling dry bulk, liquid bulk and container cargoes.

"We will continue to remain a minority stakeholder in the Sterling Port through our group company Sterling Biotech, which holds 26% equity in it. We are planning to sell our majority stake to Srei as we see a strong partner in them who can propel the growth of Dahej port," said Chetan Sandesara, one of the group promoters said over the phone.

Sandesara claimed the group's debt was at a comfortable level and the decision to give up majority stake in Dahej port was because the promoters are currently more focused on their oil and gas exploration business in Nigeria.

"From an initial debt of Rs1,000 crore for our Dahej project, it has presently come down to about Rs150 crore. Our overall group debt which had reached about Rs10,000 crore at one point of time has come down to about Rs1,000 crore today. With our oil and gas business in Nigeria growing strongly, we aim to be a debt-free group in the next few months," said Sandesara.

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Experts say that consolidation is the way ahead in the ports sector wherein developers for minor ports have approvals in place but no capital for construction of such projects. "Such ports are greenfield in nature and have capital expenditure requirement. They are generally promoted by state-centric firms who don't have the required capital to develop them or expertise to run them. They will be on the lookout for investors and experts. So in that sense, it is a win-win for both sides," said Vishwas Udgirkar, partner at Deloitte Touche Tohmatsu India Llp.

Srei has made substantial investments in infrastructure, outside its core portfolio of project and equipment financing and has Rs37,500 crore in assets under management.

"A maritime subsidiary of Srei group is likely to undertake the development of Dahej port," said a Gujarat government official, seeking anonymity.

GMB had invited competitive bids for development of Dahej port in Bharuch District on build-own-operate-transfer basis. The environmental and coastal regulation zone clearance for the project has been received and the construction work had started.

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In the phase-I, two solid cargo terminals, a liquid cargo terminal, and a container terminal would be commissioned at the cost of around Rs2,500 crore.

In phase-II, one terminal each for solid, liquid and container would be added.

"The proposal is being looked into and a final decision will be taken shortly," said a GMB official who also did not want to be named.