ESSAR PORTS LTD

Rs.59.30

[Editor: There were media reports last year that: India's second largest private sector port and terminal company Essar Ports and US private equity giant TPG Capital were in the fray to acquire a majority stake in Karaikal Port, a subsidiary of debt-ridden Chennai based Marg group. If anyone has any update on the same, kindly mail me at: suman2005s@rediffmail.com]

Essar Port develops and operates ports and terminals and is one of India’s largest private-sector port company by capacity  and throughput. The Company provides these services through its subsidiaries which provide port and terminal services for liquid, dry bulk, break bulk, general cargo and small volumes of container cargo for specialised project equipment, with an existing aggregate capacity of 104 million metric tons per annum (MMTPA) across facilities located at Vadinar and Hazira in the State of Gujarat. The Company is also in the process of scaling this capacity to 181 MMTPA.

• Essar Ports (EPL) was demerged from Essar Shipping and Ports Ltd (ESPLL) in June 2011. The existing company operates only the port business.
• The company enjoys significant revenue visibility on account of long-term take or pay agreements with its anchor clients. Most of the projects are progressing well and completion of Paradip CQ3 berth would generate higher volumes and catalyse growth in revenue and profitability. 
• Significant value creation is expected as new capacities get commissioned and cargo traffic gains traction over the next couple of years.
• Vadinar: Liquid cargo port (58 MT): Vadinar Oil Terminal Ltd (VOTL) and Vadinar Port Terminal Ltd (VPTL) operate all-weather, deep-draft port and terminal facilities to handle receipt, storage and dispatch of crude oil and petroleum products at Vadinar in Jamnagar, Gujarat. This port is a captive port established to service Essar Oil’s refinery in Jamnagar. The port can handle three vessels at a time and the facilities include product port, crude oil and petroleum product tankages, single point mooring facility and cross country and sub sea pipelines, including rail and road connectivity. The single point mooring is located 8 km in the sea and is connected by subsea pipelines and is capable of handling VLCC vessels while the jetty has the capability to handle two Aframax vessels simultaneously.
• Hazira: Dry cargo port (50 MT): Hazira is a 50 million tonnes (MT) all weather, deep-draft dry bulk port in Gujarat and commenced operations in April, 2010. The facilities include a dedicated all-weather channel and 550 metre long jetty capable of handling up to 105,000 dwt bulk carriers. The port handled import of iron ore, pellets, coal, limestone and export of finished steel products. 
• Other Port/terminal details (Commissioned and under construction): 
  Salaya: Dry cargo port (20 MT), 
  Paradip CQ3: Dry cargo port (16 MT), 
  Paradip Coal: Dry cargo port. 
• During FY12, EPL’s anchor clients, namely, Essar Steel and Essar Oil completed their expansion of capacities. Essar Steel increased its capacity from 4.6 mmtpa to 10 mmtpa, while Essar Oil increased its capacity from 14 to 18 mmtpa. The completion of expansion plans of anchor clients augurs well for EPL. Revenues are expected to increase at a rapid pace in line with expansion of port capacity.
• EPL has already commissioned 88 MMT of port capacity (58 MMT at Vadinar and 30 MMT at Hazira) in the last few years. Going ahead, the port capacity would be further increased to 158 MMT by FY14 with the commissioning of Hazira II, Salaya, Paradip CQ3 and Paradip Coal berth. This would provide revenue growth and also catapult EPL.

• The ports sector in India has grown at a CAGR of 10% in the last 10 years. However, in the last 2 years, growth in the ports sector has been below its potential due to imposition of higher export duty on iron ore and higher railway charges for transportation of iron ore. Growth of the port sector has also been affected by rise in prices of imported coal. However, these issues are expected to be temporary in nature and the port sector growth story is expected to remain intact in the long run.
• As per Maritime Agenda 2010-20 published by the Ministry of Shipping, port traffic is expected to reach to 2,495 MMT by 2020 from 850 MMT in 2010. As the economy grows, port traffic will increase and more investment opportunities will be created in this sector. Considering high capacity utilisation of existing port assets and expected higher traffic growth in future, new capacity addition in ports will have good utilisation and the port sector will remain an attractive investment destination.

FY13 Performance Highlights:

• Essar Ports Board recommended a dividend of 5% of face value of the share (Rs. 0.50 per share) for FY2013, amounting to Rs. 21,39,43,999/-.

• Highest ever cargo handled in a year for Essar Ports at 54.52 MMT, up from 43.23 MMT in FY2012, an increase of 26%. For Q4FY13, cargo handled  increased by 20% to 14.82 MMT as against 12.36 MMT in Q4FY12.

• Net Profit for FY13 increased 5 times to Rs.331.9 crore from Rs.64.0 crore in FY12. For Q4FY13, the Net Profit was Rs.92.5 crore up from a loss of Rs.61.5 crore during Q4FY12.

• Earnings Per Share for FY13 were at Rs.7.76 as against Rs.1.56 for FY12.

• Revenue for FY13 increased by 27% to Rs.1437.9 crore from Rs.1131.1 crore in FY12. For Q4FY13, the Revenue increased by 32% to Rs.390.3 crore from Rs.296.6 crore in Q4FY12.

• EBITDA for FY13 increased by 27% to Rs.1159.0 crore from Rs.913.2 crore in FY12. For Q4FY13, the EBITDA increased by 26% to Rs.305.8 crore from Rs.243.2 crore in Q4FY12.

• Continued focus on Quality, Health, Safety and Environment resulted in ISO 9001 certification for quality; ISO 14001 certification for Environment and OHSAS 18001 certificates for occupational health and safety for the Company’s Vadinar and Hazira facilities.
Operational Highlights:
Projects Completed: The Company commissioned the state of the art 16 MMTPA Dry Bulk Terminal at Paradip, with a fully mechanised ship loading system with a capacity of 5,000 tons per hour. It is one of the most modern terminals of its type in India, connected to the stockyard by a 9 km long covered conveyor system.
The Company also completed the construction of 3 HSD tanks of capacity 180,000 KL during the year at Vadinar.
Operations on track:
• Essar Oil completed expansion of 20 MMTPA refinery in June 2012 and accordingly, the Vadinar terminal is now operating at an enhanced run-rate of 10.5 MMT per quarter (42MMTPA).
• During FY13, the company’s terminals handled a record 683 ships, as against 514 ships handled for the corresponding previous year.
Progress of the project under implementation:
• Progress of the construction of a 20 MMTPA coal berth at Salaya is as per plan. The project is 59% complete. Piling and Decking works of the Jetty and Approach trestle to Jetty have been completed. Bund Work has started. Ship loader erection is completed and Unloaders erection is under progress. Stackyard is operational with two stacker cum reclaimers and Conveyor fabrication is under progress.
• Construction of a deep draft coal terminal at Paradip is expected to commence during FY14. Environment clearance and forest clearance have been received and the project is expected to start once the land for construction is handed over by Paradip Port Trust.
SUBSIDIARIES:
As on March 31, 2013, the following were the subsidiaries of the Company:
1. Vadinar Oil Terminal Limited (VOTL)
2. Vadinar Ports & Terminals Limited (a subsidiary of VOTL)
Outstanding GDRs / ADRs /Warrants or any convertible instruments: As on March 31, 2013 there are 2,800 Foreign Currency Convertible Bonds (FCCB’s) aggregating US$ 39,999,998 which can be converted into equity shares of the Company at a conversion price of Rs.91.70 per share. As per the terms of the offering, the US$ - INR conversion rate has been fixed at 1 US$ = 46.94 INR. These FCCB’s are listed on the Singapore Exchange Securities Trading Limited.
As on March 31, 2013 there are 17,432,446 Global Depository Shares which can be converted into equity shares of the Company as per the terms of the offering.
 Investments in equity shares (unquoted, fully paid up )
Trade investments (valued at cost):
(a)Investments in equity shares (unquoted, fully paid up) Investment in subsidiaries: Rs.1,31,147.08 lakhs (As at 31 March 2013):

• 45,000, equity shares of Rs.10/- each of Essar Paradip Terminals Limited.
• 37,00,000, equity shares of Rs. 10/- each of Essar Bulk Terminal Limited
• 7,86,54,397, equity shares of Rs 10/- each of Vadinar Ports & Terminals Limited
• 1,04,61,42,000, equity shares of Rs 10/- each of Vadinar Oil Terminal Limited.
• 30,04,875, equity shares of Rs 10/- each of Essar Bulk Terminal (Salaya) Limited. 

(b) Investments in preference shares (unquoted, fully paid up): Investment in subsidiaries: Rs.3,54,392.00 lakhs (As of 31 March, 2013)

• Nil (PY 11,55,00,000), 0.01% compulsorily convertible cumulative participating preference shares of Rs. 10/- each of Essar Bulk Terminal Paradip Limited.
• 3,29,30,000, 0.01% optionally convertible redeemable cumulative preference share of Rs.10/- each of Essar Bulk Terminal Limited.
• 7,90,22,903, 0.01% fully convertible cumulative preference shares of Rs 10/- each of Essar Bulk Terminal Limited.
• 12,99,84,850, 0.01% compulsorily convertible cumulative participating preference shares of Rs 10/- each of Essar Bulk Terminal Limited.
• 20,50,73,630, 0.01% compulsorily convertible cumulative participating preference shares of Rs 10/- Each of Essar Bulk Terminal ( Salaya) Limited.
• 90,00,000, 0.01% compulsorily convertible cumulative participating preference shares of Rs. 10/- each of Essar Paradip Terminals Limited.