Creditors panel approve JNPT's BID to buy debt-laden Dighi Port

      02/03/2019

The Committee of Creditors (CoC) has backed the resolution plan placed by state-owned Jawaharlal Nehru Port Trust (JNPT) to buy the debt-laden Dighi Port Ltd under India’s bankruptcy and insolvency law.

The approval of the lenders panel will be submitted to the National Company Law Tribunal (NCLT) for ratification, at least two people briefed on the decision told.

Adani Ports and Special Economic Zone Ltd and a consortium of Veritas (India) Ltd, Veritas Infra & Logistic Pvt Ltd and Veritas Polychem Pvt Ltd had also filed their resolution plans for the private port located on the banks of Rajpuri creek in Maharashtra’s Raigad District.

JNPT, India’s biggest container gateway, had quoted an upfront amount of more than Rs 600 crores besides capital infusion to continue running the port as a going concern, a shipping ministry official, one of the two persons mentioned earlier, said.

The bid placed by JNPT is a huge hair cut on some Rs 2,628.84 crores that Dighi Port Ltd owes a clutch of 16 banks led by Bank of India (BOI).

Given the low price quotations, the resolution professional for Dighi Port, Shailen Shah, had attempted a Swiss Challenge round to improve the bids to which none of the three bidders responded.

Subsequently, the resolution professional had asked all the three bidding groups to improve their financial quotations, again without success.

“The resolution plan approved by the CoC is the one submitted by JNPT in November,” the ministry official said.

Dighi Port Ltd is promoted by Balaji Infra Projects Ltd and IL&FS Ltd.

For JNPT, the deal makes commercial sense given the constraints to expand further. Dighi is located in the same district as JNPT just a few kilo metres away.

It is also the first instance of a port (JNPT) owned by the Centre buying a private port under the Insolvency and Bankruptcy Code (IBC).

That aside, Dighi fits into its strategy of developing a new hub and spoke model with JNPT at the centre, the ministry official said.

“In India, it’s not easy to set up a port. It takes its own time. Dighi is a ready-made port, plus it’s a stressed asset. So, we are trying to get it a reasonable price, that’s the game,” the ministry official said.

JNPT’s revenues are steady. In some seven years, it will make net profit of over Rs3,000 crore. So, if the port is making Rs 3,000 crore net profit every year, it must create more asset base by taking advantage of depreciation. If it earns Rs 100 and invest 300 and claim 30 per cent depreciation on Rs 300, there will be zero tax. If it keeps on building assets and pay less taxes, it will be able to earn more,” the official pointed out.

The future of JNPT, he said, is in having a hub and spoke model on the waterside; keep JNPT in the centre, create 3-4 smaller ports nearby and start bringing cargo from those places through waterways.

“Dighi will be a satellite port but dealing with specialised cargo like the cargo which Mumbai Port Trust is not handling now, it will be shift to Dighi. It’s ready business available. South Korean steel-maker Posco is already having business there, coal market is already there. There is ready cargo rest you build up,” the official said.