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ANNEXURE –A (COVER PAGE)

IBMR- INSTITUTE OF BUSINESS MANAGEMNT &


RESEARCH

Code:-2911

Project title: - Indian Ports Industry & Coverage On


Mundra Port SEZ

By

Tapan Jatakia

Sagar Bhatt

A project report submitted in partial fulfillment of the


requirement for the degree of MASTER OF BUSINESS
ADMINISTRATION of SIKKIM MANIPAL UNIVERSITY INDIA.

Sikkim –Manipal university of Health, Medical and


technological Sciences

Distance education wing

Sydicate house

Manipal-576 104
ANNEXURE –B Student Declaration

We, Mr. Tapan Jatakia and Mr. Sagar Bhatt, hereby, declare
that the Grand Project titled, “Indian Ports…An emerging
Gateway to Investments” is original to the best of my
knowledge and has not been published elsewhere. This is for
the purpose of partial fulfillment of the requirement for the
degree of MASTER OF BUSINESS ADMINISTRATION to SIKKAM
MANIPAL UNIVERSITY.

Place: - Ahmedabad

Date: - 31 March, 2009

Sign:-.............................

Sign:-.............................

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ANNEXURE –C (EXAMINER’S CERTIFICATE)

The project report of Mr. Tapan Jatakia and Mr. Sagar Bhatt on
“Indian Port Industry & Coverage On Mundra Port SEZ”
is approved and is acceptable in quality and form .

Internal examiner External


examiner

Name:- Name:-

Qualification: - Qualification:-

Designation: - Designation:-

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ANNUXERE – D (UNIVERSITY STUDY CENTRE
CERTIFICATE)

This is to certify that the project report entitled


Submitted in partial fulfillment of the requirement for the
degree of MASTER OF BUSINESS ADMINISTRATION of SIKKIM
MANIPAL UNIVERSITY of Health, Medical and Technological
science.

has worked under my supervision and that no part of this


report has been submitted for the award of any other degree,
Diploma , fellowship or other similar titles or prizes and that
the work has been published in any journal or Magazine.

NAME REG NO:-

Tapan Jatakia 520782074

Sagar Bhatt 520782118

Certified

NAME: Dr.Renu Choudhry

QUALIFICATION: Ph.D, C.S. &


M.Com

(Guide’s Name & Qualification)

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Preface

“Practice makes man perfect” is a very popular quote but I would


like to write it as “Practice and experience makes man perfect.”

A management student needs practical hands on experience to succeed


as a manager. As a part of MBA course and being student of management,
Project Reports are part of our study. Management teaches us what to do,
when to do and where to do throughout the Project Report. We can know
practical action of business that how the work is done.

This Project assists us to study the organizations and observe the real
life situation existing in a company. This will help us to relate how to put the
theory in to practical use. Thus, this practical work will be of great help to us
to survive in such a cutthroat competition and to be successful.

We got an opportunity to work on one of the Best Subject which is


recently got popularity in last few years: “Indian Port Industry &

Coverage On Mundra Port SEZ” This project report is


comprehensive work and covers all the functions of management and research.

We have put our best efforts to get the necessary information and after
that we have analyze the data in an appropriate way. We pleased to submit this
report for the purpose of evaluation by the evaluator. Thus, any constructive
suggestion for improvement of this report is always welcomed and
implemented.

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ACKNOWLEDGEMENT

Any purpose and its fulfillment require deep routed efforts for its
completion. Many characters play a vital role. This is more when a project
undertaken is directly to a cause.

We would like to thank Prof. Dr. Renu Choudhary, our Project guide,
not only for giving us the opportunity to work on this project, but also for
providing us with sound guidance and the necessary facilities to carry out the
project. She constantly insisted and helped us in learning new things. She
provided us a lot of learning opportunities.

Our sincere thanks to Prof. Dr. R. K. Balyan, Director of IBMR


Business School for gave this opportunity to us. Our sincere thanks to Prof.
B.N.Mehta, Academic Director. He was introduced as one of the pillars of our
Organization. It is from him that we learned the nuance of the day-to-day
affairs. He made us to learn more processes beyond our project.

Finally I would like to thank all those who were directly and indirectly
concerned in making my project successful. To put it in a nutshell a difficult
and arduous journey was made simple and quiet enjoyable due to their support

Tapan Jatakia [39]


Sagar Bhatt [64]
III Semester
IBMR, Ahmedabad.

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EXECUTIVE SUMMARY

There are 2,814 international ports catering to freight traffic registered


in the world port traffic increase at an average rate of about 3% per year.
Nearly 90% of goods exchanged through international trade in the world rely
on maritime transport along the logistic chain that takes them from their origin
to their destination. A large share of that trade would not exist without the port
infrastructure, which is at the interface between maritime transport & land
transport as economic & service units of notable importance in the global
economy.India was a rather marginal participant in world trade during the
early years after independence. Since 1980, however, the structure and
orientation of Indian export trades have undergone fundamental changes in
line with world trend in the industry adopting new maritime transport
technologies as they emerge & searching for organizational form which allows
them to improve their efficiency & ease their integration in the transport
component of the logistic chain. Substantial progress has been made in
diversifying the export base - manufactured goods have increased.

The national economic development of India requires a well


functioning seaport system, realizing this fact & due to the foreseen national
economic development and increasing EXIM trade in the coming decades,
GoI along with Private Participation initiated several reforming steps to
improve port’s functional efficiency which ultimately results in a strong
further growth of the Indian port sector.

One among the private players is MUNDRA-SEZ, which has shown a


phenomenal growth trajectory over a period of time MPSEZ has shown a
CAGR of 46% in the top line & 77% in the bottom-line in the last 3 years
(FY06- FY08). So I decided to value its present stock price using Two Stage
Valuation Method. From my valuation I derived the equity value per share at
INR 607.41 from current financials (FY08), whereas stock is trading at INR
570.75 (5/09/08), which seems to be undervalued & hence very attractive to

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bag, it. I have also done competitors analysis of MP-SEZ with Mumbai &
Kandla Port.

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Introduction
Of
Indian
Economy

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INTRODUCTION

The role of a modern seaport can be summarized in the following


UNCTAD definition (United Nations Conference on Trade and Development):
"Seaports are interfaces between several modes of transport, and thus they are
centers for combined transport. Furthermore, they are multi-functional markets
and industrial areas where goods are not only in transit, but they are also
sorted, manufactured and distributed. As a matter of fact, seaports are multi-
dimensional systems, which must be integrated within logistic chains to fulfill
properly their functions. An efficient seaport requires, besides infrastructure,
superstructure and equipment, adequate connections to other transport modes,
a motivated management, and sufficiently qualified employees."

There are 2,814 international ports catering to freight traffic registered


in the world port traffic increase at an average rate of about 3% per year.
Nearly 90% of goods exchanged through international trade in the world rely
on maritime transport along the logistic chain that takes them from their origin
to their destination. A large share of that trade would not exist without the port
infrastructure which is at the interface between maritime transport & land
transport as economic & service units of notable importance in the global
economy.

India was a rather marginal participant in world trade during the early
years after independence. Since 1980, however, the structure and orientation
of Indian export trades have undergone fundamental changes in line with
world trend in the industry adopting new maritime transport technologies as
they emerge & searching for organizational form which allows them to
improve their efficiency & ease their integration in the transport component of
the logistic chain. Substantial progress has been made in diversifying the
export base - manufactured goods have increased.

The national economic development of India requires a well


functioning seaport system, realizing this fact & due to the foreseen national
economic development and increasing EXIM trade in the coming decades,
GoI along with Private Participation initiated several reforming steps to

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improve port’s functional efficiency which ultimately results in a strong
further growth of the Indian port sector.

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INDIAN ECONOMY AT A GLANCE

Indian economy continues its growth journey even in the scenario of


global slowdown led by possible recession in the US. The strong domestic
demand is the real strength of the Indian economy, which makes India one of
the fastest growing nations in the world. However, there are several challenges
facing Indian economy that needs to be address for sustainable economic
growth. One of the key challenges that Indian economy is facing is increasing
inflation rate. Globally, sharp rise in prices of commodities and primary
articles fuels the inflation and India is no exception to that. Poor
infrastructures, higher liquidity in the market are other key challenges that
India is facing.

Despite several challenges, Indian economy is resilient enough to grow


at a higher rate in the last couple of years. Over the past several years, Indian
economy grew faster than average growth rate of the world and this was
largely due to factors such as increasing level of domestic demand, solid
economic growth in all economic sectors, emergence of low cost
manufacturing destination, etc. India’s real GDP growth rate for the last five
years from 2003-04 to 2007-08 averaged 8.7%.

The growth trajectory continued even in 2007-08 but at moderate rate.


During FY2008, India’s real GDP grew by 9.0% compared to 9.6% in FY2007
and expected grow at 7.5-8% in FY2009. However, Indian economy witnessed
some slowdown in industrial activities largely on manufacturing front.

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Chart 1: GDP growth trend

Yearw ise GDP Grow th rate


10.00%
9.00% 9.40% 9.00%
8.50%
Percentages 8.00% 7.50%
6.00%
4.00% 3.80%
2.00%
0.00%
2002 2003 2004 2005GDP Grow2006
Year th rate 2007 2008 2009

Source: RBI

Increasing per capita income

The per capita income of India is also rising rapidly mainly attributed
to sharp economic growth. Growth in per capita income accelerated from
7.4% in 2005-06 to 8.4% during 2006- 07 and stood at INR 34, 271. Per capita
income growth averaged 6.1% per annum during the Tenth Plan period
(2002--07) and 7.1% per annum during the last four years (2003-04 to 2006-
07), which was more than double of 3.4% per annum recorded during 1980s
and 1990s. As the strong growth in the economic activities is expected to
continue, per capita income is also expected to grow rapidly and is likely to
reach INR 43, 000 by the end of current fiscal.

Chart 2: Rising per capita income

Per Capita Income (INR)

45000

40000

35000

30000

25000
INR
20000

15000

10000

5000

0
2005 2006 2007 2008
Year

Source: Economic Survey 2006-07

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Improving Purchasing Power
With rising per capita income and increasing size of earning class,
people’s spending power has also risen substantially in recent years. Indian
middle class, which includes households with annual disposable income of
INR 1, 88,340 to 9,41,270 is expected to go up to 583mn by 2025 from current
50mn. Per capita income of India is expected to triple over the next two
decades and India would become the 5th largest consumer market by 2025,
from the current 12th place, surpassing Germany. Besides this, increasing
urbanization also boost spending power of the people and results in rising
consumer class. All these factors make India big consumer market thus
attracting global corporate giants towards it.

Demographic pattern an Advantage to India


India’s current population is expected to be around 1.18bn and it is the
second most populated nation in the world. India’s population is amongst the
youngest population in the world. The average age of India’s population is
24.8 years.

Table1: Population projections (in Mn.)

Year 2001 2006 2011E 2016E 2021E 2026E

Below 15 365 357 347 340 337 327

15 to 64 619 699 780 851 908 987

Above 45 56 66 78 95 116
65

Total 1029 1112 1193 1269 1340 1400

Source: Economic Survey 2006-07

Major portion of India’s population falls into the age group of 15-64
which is earning population. In 2006, this particular age group constituted
around 62.9% of total population and is expected to constitute around 68.4%
by 2026. The rapid rise in young population will boost domestic consumer
spending, which will be the main driver of Indian economy. Due to larger

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portion of population falls into earning class, India’s dependency ratio is also
very low compared to other emerging economies.

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Chart 3: India’s demographic pattern

Demographic Pattern 0-14

15-64

5% 65+

32%

63%

Source: Economy Survey 2006-07

Normalization in industrial production


During FY2008, industrial production has witnessed some slowdown
largely because of slowdown in manufacturing and electricity sector. Index of
Industrial Production (IIP) grew by 8.1% during FY2008 compared to 11.2%
in FY2007. Manufacturing sector grew by just 8.6% compared to 12.2% in
FY2007 and electricity sector grew by 6.4% compared to 7.2% in previous
year.

In March 2008, IIP grew by only 3% compared to 14.8% in March


2007. This growth was the weakest growth in the past six years since February
2002. This moderation in growth was largely due to lower growth in
manufacturing and electrical sector and to some extent higher base effects.
During the month, manufacturing sector grew just by 2.9% compared to 16%
growth in March 2007. Electricity sector also witnessed slower growth of
3.7% in March 2008 compared to 7.9% in March 2007. Despite moderation in
IIP, interest rate cut in the near future is unlikely due to current high
inflationary situation.

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Chart 4: IIP movements Source: Economy Survey 2006-07

Growth-Inflation maintaining a tradeoff


India has witnessed inflationary pressure since the past four months.
Inflation in India is now at highest point since last three and half years.
Increasing commodity prices especially food articles and crude oil price is
fueling inflation globally and India is no different story.

Preemptive steps taken by the government to curbed the inflation to


some extent in first half of 2007-08 but rising crude oil prices and supply side
constrains of primary articles fueled up inflation so sharply that it crossed the
past three and half years inflation figure. As per latest data available, the
wholesale price-based annual rate of inflation rose to 11.89% for the week
ended July12-2008, its fastest pace since February 2001.

With an intention to curb the inflation the government started taking


fiscal measures like scraping the import duty on crude edible oil, banning
export of rice and pulses to boost the supply side and drive down the prices.
Indian government also requested steel makers to reduce or hold the prices of
steel. Additional fiscal measures are expected in the coming days to curb the
inflation. The government has a clear choice between inflation and growth.

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The government is ready for slower growth but not higher inflation as this will
affect large sections of Indian society. The Indian government expects
economic growth to slow, for the first time in last three years. Indian economy
expected to grow at 7.5-8% for FY2009, lowest in last three years.

RBI’s Role in managing liquidity


Recently, Reserve bank of India (RBI) hiked cash reserve ratio (CRR)
for banks by 75 bps to 9% (as on 30/08/08) to control the rising inflation. CRR
hike move followed by duty cuts on imports and export bans of key
commodities which fuelled the inflation to three year high. It is estimated that
this move by RBI would suck around INR bn 185 from the banking system,
which is flooded with excess liquidity of around INR bn 500. Further in its
recent move RBI hiked repo rate by 25bps to 8%.

Looking Forward
In a healthy domestic demand environment and global demand, the
Indian economy continued to exhibit robust growth for the next 5-6 years.
Real GDP growth accelerated to 9.6% in 2006-07 from 9.0% in 2005-06. The
good thing about this growth trajectory was, this economic growth achieved
despite challenges like rising inflation, fear of global slowdown and
infrastructure constraints.

India has the potential to grow at a sustainable rate of ~8% in the next
couple of years provided the government continues its fiscal measures to boost
the economy also government need to address issues like higher inflation, poor
infrastructures and employment creation on urgent basis. Further, government
needs to improve performance of agricultural sector on which larger portion of
population depends.

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Introduction of
Indian Port
Industry

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INDIAN PORT INDUSTRY

The objective of this report is to bring one of the emerging components


of an Indian Trade System in to limelight i.e. Port Industry.

So, let us see how Indian Port Industry is all about

Indian ports are divided primarily into Major Ports and Minor Ports
(Non- Major). As of 5th of July 2008, there were 12 major and 187 minor and
intermediate ports spread across nine coastal states along its 7,517 kms
coastline (excluding Andaman & Nicobar Island). The classification of a
Major Port compared to a Minor Port is not based on the capacity or cargo
traffic but on control and governance. Port trusts, which are regulated by the
Central Government, manage 11 out of the 12 Major Ports. They come under
the purview of the Major Port Trusts Act, 1963. Only exception is Ennore,
Major Port at Ennore is a corporate entity incorporated under the Companies
Act, 1956 while all Minor Ports are regulated by the respective state
governments and many of these ports are private ports or captive ports.

Other than the ports in the public sector, there are a number of public-
private joint venture ports and private sector ports. Over the last seven years,
there have been significant developments in minor ports, which are under the
respective state government jurisdictions. This has been possible because of
the proactive policies of the state maritime boards, more particularly in states
such as Gujarat, Andhra Pradesh and Orisa etc. The three such minor ports
under the state government jurisdiction in the private sector are located at
Mundra in Gujarat, Pipavav in Gujarat and Kakinada in Andhra Pradesh. The
state government of Gujarat has been a pioneer in formulating proactive
policies for development of ten minor ports in joint and/or private sector along
its coastline out of which two commercial cargo ports are operational.

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Table2: Indian Port Overview

Major Ports 12 Non Major Ports 187

Berths 259 Berths 97

% Of Total Traffic 71.5% % of Total Traffic 28.5%

Cargo Handle MT 464 Cargo Handle MT 185

Total Cargo MT 649

Table3: Port Distribution

Port Type West Ports South West Ports South East Ports East Ports

Major Ports JNPT, Mumbai, Cochin, New Vizag, Chennai, Kolkata,


Kandla Mangalore Tuticorin Haldia,
Paradip

Minor Ports Mundra, Pipav

Up-coming Ports Hazira, NSICT, Vallarpaddam, Ennore,


Vizanjam Gangavaram
Rewas

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Ranking of Indian Ports:
From the chart shown below it is very clear that Kandla & Visakhapatnam
Port stands ahead among all major ports in India with a total cargo 65 MT in
the year 2007-08

Chart5: Ranking of Indian Ports (Based on Total cargo


handled in 2007-08)

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Fig1: Location of Indian Ports

Source: www.mapsofindia.com

Organizational modes for seaports:

There are several organizational modes for seaports, depending on the role that
port authorities assume. These are usually labeled as landlord port, tool port
and services port

1. Landlord port: In this model, port infrastructure is owned by the port


authority, which is also in charge of its management. Meanwhile,
remaining port services are provided by private firms that own the assets
conforming to the port superstructure and all equipment required for
service provision (cranes, vans, forklifts, etc). Examples of this type of
port organization are Buenos Aires (Argentina) and Rotterdam

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(Netherlands). In general, this is the most common form of organization
for large ports.
2. Tool port: As in the landlord model, port authorities are also the owners
of infrastructure, but in this mode of organization, they also own the
superstructure (buildings, etc) and the equipment (cranes, etc). Private
firms provide services by renting port assets, through concessions or
licenses. Examples of this category are Antwerp (Belgium) and Seattle
(US).
3. Services port: In this model, port authorities are responsible for the port
as a whole. They own the infra- and superstructures, and they also hire
employees to provide services directly. The port of Singapore has usually
been used as an example to illustrate this type of organization, since its
port authority (PSA) is the owner of all assets and it provides all
services. However, there are already advanced plans for PSA to
introduce private participation and thus become a tool port.

If a connection between the type of port and ownership is to be


established, it can be concluded that port authorities of the landlord and tool
models are generally public, while the port operators are private firms.
Therefore, these two types could be classified as mixed ownership, since
although the basic infrastructure is generally public, many elements of the port
can be owned by operators. Meanwhile, services ports are more likely to be
privately owned, where there is a single private firm operating the port as a
single unit.

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Table 4: Port Management Models

Model Type Infra- Superstructure Stevedoring/labor Other function


structure

Landlord port Public Private Private Public/private

Tool port Public Public Private Public/private

Public service Public Public Public Majority public


port

Private Private Private Private Majority


service port private

(Source: DoS, GoI)

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Drivers for Port Industry:

Ports handle approximately 95% of India’s total trade in terms of volume and
70% in terms of value so it becomes very important to see what actually
drives the port industry.

1. Passenger Traffic (Tourism)


2. Inland Water Transport ( IWT )
3. Cargo Traffic (EXIM)

Out of these above two factors Passenger traffic & Inland Water
Transport (0.12% of total cargo handle by Indian Ports) accounts very less &
can be neglected while looking for the future prospectus of Port Business. But
Cargo traffic plays a crucial role in estimating the fortune of Port Business.

Cargo Traffic:

1. Total cargo traffic carried by both major and minor ports in fiscal 2007
was approximately 649 million tonnes, of which approximately 464
million tons, or approximately 71.5%, passed through Major Ports and
the remaining 185 million tones passed through the Minor Ports. Over
the last seven years, cargo traffic at Major Ports has grown at a CAGR of
7.6%. In comparison cargo traffic at Minor Ports has grown at a CAGR
of 13.3%. As a result the share of minor ports in total volume has
increased from 23.6% in fiscal 2000 to 28.5% in fiscal 2007.

2. Major Ports handled a total traffic of 464 million tons during fiscal 2007.
Petroleum products remain the largest principal commodity of the cargo
with one-third of the total cargo traffic at port during fiscal 2007 being
petroleum products. Container traffic increased to 16% during the same
period, over the 14% during fiscal 2006.

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Indian Port Performance

1. Indian ports lag behind their foreign counterparts. Earlier, Average Ship
Turn Around time (“ASTA”) in India used to be exceptionally high (11.9
days in fiscal 1985), and despite having progressively declined, stood at
approximately 3.5 days in fiscal 2007, which is the highest among Asian
ports which have an average turnaround time for container vessels of
approximately 13 hours, and where ports such as Hong Kong have a
turnaround average as low as 10 hours.
2. Inefficiency of Indian ports resulted in higher through-port and sea
transport costs, making cargo shipped from Indian ports cost-inefficient
and non-competitive in international markets. Coupled with this, the long
waiting time discouraged large cost efficient vessels and ship liners from
touching the Indian ports. Consequently, Indian container cargo had to be
transshipped in Colombo, Dubai or Singapore, resulting in additional
costs and transit times.

Performance parameters:
The readiness of ports to handle increased quantum of container traffic is
based on the following parameters:
1. Favorable physical infrastructure:
a. Availability of adequate draft to handle large vessels, 15 Meters or
above is considered favorable

b. Adequate backup land area (Hinterland Markets)

2. Mechanical infrastructure: Availability of high speed equipment –


benchmark for performance has been taken as 50 crane moves per hour

3. Adequate road and rail connectivity to hinterland

4. Efficiency parameters:
a. Average turnaround time for ships, benchmark – less than 12 hours
b. Average pre birthing time, benchmark – less than 3 hours
c. Average parcel size, benchmark – more than 20,000 tonnes

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5. Berth Occupancy Factor (BOF):
The berth occupancy factor is the time that the berth is utilized divided by the
total available time.
UNCTAD guidelines for BOF for conventional general cargoes as given in
table: (Source: IPA)
Table 13: BOF

Number of Max BOF % Types of berths Max BOF %


berths

1 40 Dedicated berths

2 50 One berth 60

3 55 More than berth 70

4 60 Common berth

5 65 Up to 3 berths 70

6-10 70 More than 3 berths 75

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Research
Methodology

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Descriptive researches

The use of Hypothetical-deductive method was found to be suitable by


the researcher. As the Hypothetical-deductive method utilizes and equips its
findings by establishing a relationship of concept with theory, and specifies the
test to be applied especially in context of meaningful value judgment. As it is
a tentative generalization, its validity can be determined when it is tested for
which the use and effect of a hypothesize is actual and essential. Which helps
in establishing value judgments for its variables (Sekaran,1992)

Methods of Data Collection

There are two methods for data collection which are very useful in
collecting data.

Primary Data and Secondary Data. Our project report is totally based on
Secondary data.

Secondary Data
Secondary data are data that were collected by persons or agencies for
purposes other than solving the problem at hand. They are one of the cheapest
and easiest means of access to information. Hence, the first thing a researcher
should do is search for secondary data available on the topic. The amount of
secondary data is overwhelming, and researchers have to locate and utilize the
data that are relevant to their research.

Sources of data collection

We have collected secondary data from various financial newspapers,


business magazines and various search engines and websites.

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OBJECTIVE

 To briefly study the Indian Economy specifically Export Import


(EXIM)
 To study the Indian Port Industry
 To study the Mundra Port SEZ & thereby value it, based on various
Financial as well as Non Financial measures

SCOPE

 Scope of this report is a bit broad, as this Project report tried to unearth
various investment opportunities in whole Port Business
 It helps investor to understand Industry, Company, Business Models
through financial as well as non financial analysis
 All in all, Report gives a brief idea about an emerging avenue to an
investor to invest his hard earn money

Limitation of the study


 Duration of four months weren’t enough to understand the whole new
business sector, related companies, their business model & operations
 It was very difficult for a novice to access the complete data of
companies

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Analysis
Of
Ports in
India

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SWOT Analysis for Ports in India:

Chart6: SWOT

Strengths Weaknesses
 High growth  Old infrastructure
 High market share  Limited water depth
 Financial means available  Old and inefficient cargo handling systems
 Most ports located at
strategic locations
 Poor hinterland connections

 Rigid institutional framework


 High tariffs
 Poor quality of services / business attitude
 Overstaffing
 Lack of capacity
 Lack of extension possibilities
Opportunities Threats
 To emerge as GATEWAY PORT  International contenders
 Huge Indian market, and  Organizational setup
landlocked countries in the North  Bureaucracy
 Delay in operations
 Improve organization:
training, IT, downsizing
 Port reform – more autonomy
 PPP other than BOT
 Invest in infrastructure, lower
costs for port users
 Introduce competition

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Table 5: Port Traffic

Ports 2007-08 2006-07 Growth%

Kolkata, including Haldia (Ko) 57.28 55.05 4.05

Paradip (P) 42.43 38.51 10.18

Visakhapatnam (V) 64.59 56.38 14.56

Ennore (E) 11.56 10.71 7.94

Chennai (Ch) 57.15 53.41 7.00

Tuticorin (T) 21.48 18 19.33

Cochin (Co) 15.31 15.25 0.39

New Mangalore (NM) 36.01 32.04 12.39

Mormugao (M) 35.12 34.24 2.57

Mumbai (Mum) 57.03 52.36 8.92

JNPT 55.75 44.81 24.41

Kandla (Ka) 64.89 52.98 22.48

(Source: DoS, GoI)

Chart 7: Trends in Traffic at all Indian Ports

Port Traffic Growth


700
649
600

500 CAGR 7.6%


Traffic MT

400
310
300

200
120
95
100

0
1981 1991 Year 2001 2007

(Source: DoS, GoI)

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Chart8: Commodity-wise share at Major port

Commodity Share %
17%

34%
3%

13%

16% 17%
POL Iron Ore Container Coal Fertilizer Other Cargo

Reasons for increase in cargo traffic are as follows:

1. The strong economic growth driven by liberalization policies has led to


India’s trade in goods increasing at a five-year CAGR of 11.49% to INR
bl 15,746.85 in fiscal 2007.
2. Exports have increased at a five-year CAGR of 17.7%; imports have
increased at a five-year CAGR of 22.6%. There has been sustained rise
in volume of exports with revival of growth in the manufacturing sector
and improved export competitiveness
3. Oil imports during April- March, 2008 were valued at INR bl 3,312.44
which was 35.27% higher than the oil imports of INR bl 2,448.64 in the
corresponding period last year.
4. Non-oil imports during April-March, 2008 were valued at INR bl
6,831.71 which was 23.36% higher than the level of such imports valued
at INR bl 5,537.95 in April- March, 2007
5. Ministry of commerce (MoC) under FTP (Foreign Trade Policy)
announced extension of the Duty Entitlement Pass Book (DEPB) scheme

36 | P a g e
till May 2009 and tax exemption to 100 per cent for Export Oriented
Units till 2010 which expects to boost exports & will help to achieve 5%
share in world’s trade by 2020
6. As a result of liberalization and economic reforms undertaken by the
government, India has become fastest growing economy after China
7. GDP has grown from 4.4% for the year 2000-01 to 8.4% for 2007 &
more specifically 11.4% in case of trade, hotels, transport and
communication whereas Growth in manufacturing is 8.6 %. But recently
India’s GDP growth rate experiencing some slow down ~8% due to
inflationary scenario, but still transportation sector would be least
affected & will continue to show ~11% growth rate
8. India’s liberalization policies have led to a volume growth of 8% per
year in foreign trade and India is expected to sustain this growth rate in
the coming decade as well
9. India’s Total Export Import data as mentioned in table below

Export INR bl Import INR Total INR bl Trade INR bl


bl Trade Balance

2006-07 5,717.7 2006-07 8,405.06 2006-07 14,122.85 2006-07 (-) 2,687.27


9 (April-March)
(April-March) April-March)

2007-08 6,254.7 2007-08 9,491.33 2007-08 15,746.05 2007-08 (-) 3,236.62


1 (April-March)
(April-March) (April-March)

% Growth 9.39 % Growth 12.92 % Growth 11.49 % Growth 20.44

(Table 6: EXIM Data)


Source: MoC&I, GoI

37 | P a g e
Fig 2: EXIM Share

Source: Directorial General of Foreign Trade

India’s international trade volumes indicate that trade with Asian


countries contributes more than 35% of the total trade, which is higher than
any other continent. Also, the CAGR of trade with Asian countries is in the
range 23 to 27 per cent, which is higher than the rest of the world and it is
expected to remain higher than the CAGR of trade volumes with the US and
Europe. India’s trade with Asia is expected to continue to grow at a higher rate
than the rest of the world. The point to note here is that, while the average
proportion of intra-Asian trade for Asian countries is 51 per cent of their total
trade with the world, India’s share of trade with rest of Asia, on a standalone
basis, is only 35 per cent. This clearly indicates that there is substantial
headroom for India to increase its trade with the rest of Asia. The Asian
economy is growing (marked by growing consumption levels) at a higher rate
than that of North America and Europe. As a result, there is a higher trade
growth in Asia than in North America and Europe; in 2006-07, trade growth
by volumes in Asia was 11 per cent as against 7 per cent in North America and
6 per cent in Europe. This enhances India’s potential to increase its trade with
other Asian countries. An important aspect of this phenomenon is that China

38 | P a g e
alone is the major contributor to the positive balance-of-trade of Asia. China’s
balance-of-trade with the US & Europe is positive, while it is negative with
that of rest of Asia.

Based on the total commodity wise, container export / import volumes


and the above analysis of trade growth projections of India’s international
trading volumes for the period 2015-16 reveal that its largest trading partners
would be north Asian and SEAP nations.

A snapshot of India’s expected Laden Container trade with various external


regions is exhibited below:

Fig 3: Laden Container Trade Share

(Source: MoC&I GoI)

Indian EXIM comprises of many commodities, so let us have a detail


analysis of which commodity contribute (present contribution) & will likely to
contribute in port traffic.

39 | P a g e
Commodity wise demand forecasting (MT):

Liquid Bulk:

POL: India is an important energy consuming country. Oil and gas with a
total share of 40% appear to be primary energy sources. POL import (160
MT) amount to some 26% of the total import of India and POL export
some 8% of the total export.

Crude Oil:

 The production of crude oil remained stagnant during past sixteen years
whereas the refinery crude throughput has increased 2.5 times during the
same period.
 Taking into consideration the fact that indigenous production is likely to
move at the same laggard pace, the imports of crude oil are estimate at
198.60 MT & total crude traffic through the ports including coastal
movements as 230 MT by 2011-12. In addition to the EXIM, The Bombay
High supplies the crude to Vizag & Kochi refineries through ships.
 No. of registered vehicles on road stood at 92.94 million in 2007 with
CAGR of 8.52% & especially demand for luxurious vehicle has gone up
recently ( Luxurious vehicles consumes more fuel )
 In Rupee terms, the crude oil imports cost INR bl 2,448.90 during 2006-07
against INR bl 1,717.02 in the previous year

Table 7: Crude Oil Expected Import

Item (MTPA) 1990-91 2001-02 2005-06 2006-07 2011-12E

Refinery crude 51.772 107.274 131.6 154.85 230


throughput

Crude oil 32.16 32.03 32.19 33 31.4


production

Crude oil 78.17 99.41 121.85 198.60


imports

40 | P a g e
Source: Ministry of Petroleum & Natural Gas

1. Petroleum Products:
The consumption of petroleum products has grown at CAGR 2.7% during
the period of 2002-06 & will likely to move with increased pace of CAGR
3.8% with estimated consumption of 135 MT from present 112 MT.
Projection for 2011-12 of export of petroleum product will move up from
present 32.39 million tons worth INR bl 801.72 to 90.39 MT & oil product
imports at 16.96 million tons for INR bl 403.89 in 2006-07 were up 45.2
per cent over 11.67 million tonnes of products worth (INR bl 255.75)
imported last year.

2. Liquefied Petroleum Gas (LPG):

LPG is used for household cooking purpose as well as for industries such
as glass, petro chemicals, baking & confectionary, ceramics, printing,
beverages, auto, etc., Demand for LPG is on uphill, prevailing growth rate
in LPG consumption is ~10%. Projected domestic demand for LPG is 11.9
MT for the year 2007-08 as compared to consumption 10.30MT (2006-07)
& imports will be 3.58MT (INR bl 90.34) as compared to previous year
imports of 2.719 MT. With above scenario, the projected traffic for LPG
imports during 2007-12 will be 4.728MT which in turn to increases port
traffic.

3. Liquefied Natural Gas (LNG):


The consumption of natural gas in 2005-06 is 31.33 MTOE & is expected
to rise to about 55 (MTOE) million tonnes oil equivalent with imports
reaching 20 MTOE by 2011-12 (which includes 5 MT for New
Mangalore) from present 5 million tonnes.

“IN OVERALL POL TRAFFIC EXPECTED TO REACH 378.45MT


BY 2011-12”

41 | P a g e
CHEMICALS & OTHER LIQUIDS:

The existing level of traffic in respect of edible oil, chemicals &


other liquids is about 18.63MT at major ports in 2006-07. In addition non
major ports are also handling edible oil & other liquid cargoes to the tune
of 4MT making the total other liquid cargo traffic to 22.63MT.
Government is contemplating to set-up two mega petro-chemical hubs,
additional chemical traffic to the tune of 10MT may be expected. Thus
total chemical & other liquid traffic by 2011-12 will be 42MT.

Dry cargo:

IRON ORE & PELLETS:

1. Global trade in iron ore has increased with some 505 M tons in the
period from 2001 to 2005. Iron ore import by China has grown by 31%
per year in this period in order to feed China’s steel industry. Australia
and Brazil are prime sources of iron ore. India is another main producer
of iron ore catering for the Indian domestic (steel producing) market and
for export. The main mining areas are located largely in Eastern and
Central India (Jharkand, Orissa and Chhatisgarh) and in Karnataka in
South India. Goa and Andhra Pradesh are other iron ore producing areas
2. The steel production in India is estimated to be of the order of 79MT by
2011-12. This will require about 119 MT of iron ore by the steel
industries (assuming 1.5 tonnes of iron ore required for per tonnes of
steel. Presently, about 13% of iron ore required by Indian Steel Industry
is moving by coastal shipping. Assuming the domestic iron ore resources
will be consumed on a higher level & to be moved through hinterland
modes, the coastal share may be reduced to 9-10%.
3. The pellet movement will be around 7MT on account of palletisation
plants. Hence the total overseas & coastal movement of iron ore & pellet
traffic through Indian ports during 2011-12 given in the table below

42 | P a g e
4. Other broad reason for increase in iron ore demand is growth in steel &
steel based industries like infrastructure, automotive, real estate, etc.

43 | P a g e
Table 8: Demand projection by 2011-12 for iron ore & pellet

Item Base case (MT) Upper case (MT)

Oversea exports 100.00 120.00

Coastal movement 21.04 35.00

Palletisation plants 7.00 7.00

Total 128.04 162.00

COAL:
1. Coal production is nationalized at present and private investment in coal
mining is only allowed for captive mines supplying coal to designated
sectors as power, steel and cement.
2. Next to crude oil, thermal coal mainly from Orissa is another key energy
resource for the power sector. India’s coking coal usually lacks the
quality needed for steel production. Poor quality domestic coking coal
therefore is blended with imported coal which leads to increased import
of coal. Due to the increasing demand for power (since industrial growth
& changing lifestyle, people are moving more towards luxurious utilities
which consumes more power), import of coal has shot up recently to
many folds
3. India present imports of thermal coal mainly from Indonesia (13 MTPA),
China (4 MTPA), South Africa(5 MTPA), & Australia(3 MTPA), but
China’s share will be lesser in future & all other sources’ contribution
will increase which tend to increase in trade through sea route.
1. Coking coal:
Coking coal is primarily utilized by steel industries which requires about
0.9 tonne of coking coal for producing one tonne of steel. The projected
steel capacity by 2011-12 under two scenarios given by two different
studies namely “Iron & Steel Review” and “Indian Infrastructure” are

44 | P a g e
78.6MT & 125.10MT respectively. So under these two scenarios 50MT &
78.8MT will be the import respectively (assuming 0.9 tonnes of coking
coal for per tonne of steel & 70% of requirements would be met by
imports)

2. Non coking coal:


In the year 2006-07 over 80.5% of country’s total electricity generation
came from thermal station & the reliance on thermal generation is
expected to continue. According to CEA about 20MT (2006-07) of non
coking coal was imported to meet the shortfall in the year 2006-07. As per
the study conducted by the CEA need based installed capacity of coal fired
stations would be 1, 14,806 MW is required by 2011-12 for which the
requirement of coal for 2011-12 as 537MT & the likely availability of coal
from coal companies & captive mining will be of the order 492.56 MT
assuming distribution of 72% of CIL coal to power sector (except CPPs),
so the remaining coal to the tune of 40-44 MT (2011-12) needs to be
imported.

Presently 5% of overall coal production (other than coking coal) is


moving though coast. However future plants are planned to come up in coastal
areas & also the existing coastal power plants are going to rely more on import
coal, the coastal movement of domestic coal is likely to come down in future.
Hence domestic movement of coal by coastal route in future has been assumed
to be around 3% of the overall coal production. Accordingly, the coastal
movement of coal will be in the order of 15 MT. Therefore, the port traffic has
been assumed at the level of 30MT of coastal movement. The total non coking
coal traffic for 2011-12 is projected as follows on the basis of above analysis

Table 9: Total non coking coal traffic for 2011-12

Item Base case Upper case (MT)


(MT)

Power/ Cement Plant 40.00 44.00

Steel plants 18.94 30.00

Coastal movements 30.00 40.00

45 | P a g e
Total 88.94 114.00

Source: DoS, GoI

Container:
1. The economic modernization in India has resulted in strong growth in
the value of India’s exports. India’s export mix is changing with higher
value goods (e.g. high tech, pharmaceuticals, engineering and
automotive components) growing at a faster pace than resource based
and agricultural products. The growth and changing mix of cargoes will
logically result in further unitization of the country’s general cargo trades
2. Share of containerized cargo at major ports has gone up from 8% in 1996
to 16% in 2007 & will likely to move with this pace. Present container
traffic is 5 MTEU out of which 4.11MTEU (82.1%) contributed by
Laden container, 0.71 MTEU (14.3%) by Empties & 0.18 MTEU (3.6%)
by Transshipment
3. Increasing containerization in general cargo (consumer durables,
engineering comp. machinery, auto comp., food products, infrastructure
I/P, apparel)
4. According to a study conducted by ESCAP, the rate of growth in
container traffic projected for India is 9.4%. However, the estimate for
container traffic has been made based on future growth in GDP (8%) and
past growth in General Cargo traffic. The level of containerization has
been assumed to grow @ 2% every year from the present level of 64%
of the projected general cargo traffic and is expected to get stabilized at
75%.
5. Further, according to ESCAP study, the transshipment traffic from
Colombo to India is estimated to reach 4 million TEUs by 2011, of
which 80% is expected to either originate or destined to Indian ports.
6. By Regression Analysis Total Container traffic including Laden, Empties
& Transshipment cargo (Port Region-wise) can be projected for the year
2015-16 as given in table: (Mn TEU)

46 | P a g e
Table 10: Total container traffic by 2015-16

Port Region Laden Empties Transshipment Total (Mn


TEU)

Maharashtra 7.38 2.57 0.39 10.33

Gujarat 4.46 1.51 0.24 6.21

South West 3.80 0.54 0.20 4.54

South East 0.52 0.15 0.03 0.70

East 1.14 0.21 0.06 1.41

Total 17.29 4.98 0.92 23.19

Source: DoS, GoI


Chart 9: Increasing Container Traffic

2006-07
2006-07
2005-06
2005-06
2004-05 2004-05
Year

2003-04
2003-04
2002-03
2002-03 2001-02

2001-02 2000-01

2000-01

0 1 2 3 4 5 6
MTEU

Source: Shipping Corporation of India (SCI)


Fertilizers & Fertilizer Raw Materials:
As per CIER market study, the demand for finished fertilizers will be
around 28.4 MT by 2011-12. The capacity as indicated by FAI is around
17.72 MT by Indian fertilizer plants. Accordingly, the import of finished
fertilizers is assessed as 11 MT tonnes. The present level of fertilizer raw
materials imports at major ports is around 8.49 MT traffic in 2006-07. Since,
there is no specific indication from FAI regarding creation of additional

47 | P a g e
capacity; therefore, assumed that same level of import for FRM (i.e. 8.49 MT)
will remain till 2011-12.

Alumina:
There is proven reserves of Bauxite in district of Orissa. Three firms
namely, UAIL, L&T and Vedanta International have formulated definitive
course of action for establishment of Alumina plants for exports of initially 1
MT each and 2 MT in the subsequent years. NALCO is already exporting
Alumina to the tune of 1 MT and is poised to reach 2 MT by 2007.
Accordingly, the total export of Alumina is assessed at 6 MT by 2011-12.

Steel Products:
As per the report by SAIL, consumption of steel in India is expected to
reach around 55 to 60 MT per annum by 2011-12 & likely to touch 66 MT by
2013-14. Besides the likely import of steel on the basis of CAGR of 7.1% as
indicated in the National Steel Policy by 2011-12 will be around 3 MT. In
keeping with likely production of 78 MT of steel in our country by 2011-12,
import of about 3 MT & consumption of about 57 MT, likely export of steel
product by 2011-12 will be about 24 MT (78+3-57)

According to a report by TCS, 2% of the country consumption will be


moved by coastal shipping. Considering 57 MT of steel as projected
consumption during 2011-12, the overall coastal movement of steel will be
about 1.5 MT by 2011-12

Other Dry Bulk:

1. Cement, whose imports has increased recently due to low supply from
domestic manufacturers irrespective of high demand & also Govt. has
reduce the import duties substantially on import of cement
2. Nylon, whose use has increased for many industrial as well household
goods
3. PVC (Polyvinyl chloride) use for manufacturing wires & pipes
4. PET (Polyethylene terephthalate) for PET bottles
5. Other like Polyethylene (P/E), Polystyrene (P/S), Polypropylene (P/P),
ABS Acrylonitrile butadiene styrene), Silica gel catalyst

48 | P a g e
Other Liquid Bulk:
Common liquid bulk includes many chemicals like Glycols, Lube oils,
Cleaning agents, Plasticizers, Surfactants, Amines, Epoxy resins, Fuel
additives, Solvent, other intermediate chemicals all of these above chemicals
are use in one or the other way

1. It mainly use for manufacturing of plastic & in recent days there is


tremendous growth in usage of plastic-made utilities & equipments
2. Many chemicals are use to manufacture medicinal drugs whose demand
has increased exponentially in the market
3. Also household population led to increase in demand of chemicals used
for cosmetic products, daily needs, toilet cleaner, etc.

Other Factors Which Contribute To The Growth Of Port Business Are As


Follows:

1. Increasing efficiency, including larger vessels(10,000 TEU), deeper


drafts at ports and improved equipment and technologies
2. Growth in Inter-modal logistics
3. Increased privatization, regulatory reforms and other institutional
dynamics: With increasing privatization, there has also been a shift from
the “service port” model to “landlord” model, under which port
authorities continue to own the land and infrastructure assets, but have
divested themselves of developing and operating the commercial
facilities
4. Foreign investment of 100% is permitted for construction and
maintenance of ports and harbors and in projects providing support
services to water transport
5. Foreign direct investment of up to 100% is allowed on automatic basis in
support services like operation and maintenance of piers and loading and
discharging of vessels
6. Private sector entities are allowed to establish captive facilities

49 | P a g e
TRAFFIC PROJECTIONS

1. As per an ESCAP(The Economic and Social Commission for Asia and


Pacific) study conducted in 2005, it is estimated that by 2015, Asia’s
share of containerized exports will increase from 55% of the world total
in 2002 to 64%, while the share of containerized imports is expected to
rise from 46% to 53% during the same period
2. The ESCAP study estimates that the total volume of containers trans-
shipped within the ESCAP region will increase from an estimated 42.2
million TEU in 2002 to 109.6 million TEU in 2015
3. The strong growth in India’s port traffic is expected to be sustained, with
growth of approximately 12% to 15% per year expected during the next
two to three years. Growth is expected to be driven by high growth in
exports and higher oil imports.
4. As per the Ministry of Shipping, Road Transport and Highways
estimates, the traffic at ports in India is expected to increase to 1,009 M
tonnes per year by fiscal 2012 and 1,225 million tonnes per year by
fiscal 2014 from the current 649 million tonnes per year in fiscal 2007.
The additional capacity expected to be built by fiscal 2012 is
approximately 763 million tonnes
Port-wise Traffic projections (MT):
Table 11: Port wise traffic projections

Port 2007-08 2011-12E 2025-26E


Kandla 70.63 98.13 204.51
Mumbai 52.38 76.13 128.61
JNPT 49.98 88.77 305.99
Mormugao 49.15 52.25 78.30
New Mangalore 37.41 52.17 84.14
Cochin 15.36 24.63 53.49
Tuticorin 21.20 30.80 71.80
Chennai 54.75 64.17 87.11
Ennore 11.30 40.64 136.40
Visakhapatnam 57.70 81.70 146.80
Paradip 45.60 71.55 125.60

50 | P a g e
Kolkata 45.01 58.47 172.32
Total (MT) 510.47 739.41 1595.07
Source: IPA’s Port Development Plan

Commodity-Wise Traffic Projections (M Tons):


Based on the below projections, CAGR likely to be achieved from 2005-06 till
2011-12 will be 11.91% for all ports, 10.82 for major ports and 14.76 for Non-
Major ports. Thus good demand for all types of commodities makes the
overall picture positive for growth of port business

51 | P a g e
Obstacle to the growth of Indian Port Industry

The analysis of the performance of the ports when examined through


different indicators described above clearly lead to the conclusion that even
though there is huge growth in port traffic during last 5-6 years period, ports
shown a dismal performance in comparison with International counterparts. So
it is worthwhile to take a note that, what actually hurdles the growth of Indian
ports.

1. Poor infrastructure is the single biggest obstacle to Indian companies’


ability to scale up their presence.
2. In addition, a complex administrative and tax law environment and
unfavorable labor laws are some of the other factors affecting the global
competitiveness of Indian companies.
3. Major Ports have generally suffered from inadequate capacity and
operating inefficiencies (resulting in poor utilization of existing
facilities). The Major Ports are also characterized by qualitative
inadequacies.
4. Outdated layout of berths, outmoded cargo handling equipment,
insufficient maintenance and inadequate operational dredges rendered
Indian ports operationally unsuitable for modern cargo handling.
5. Attachments for handling specialized cargo as well as the number of
technicians trained to handle modern equipment were in short supply.
6. Poor Rail & Road linkages with ports also impeded the flow of cargo.
Apart from serious obstacles posed by inadequate capacity, Major Ports
were also characterized by poor utilization of existing facilities
7. Many Indian ports lack the deep water draft facility. Thus, the large
vessels are berthed at Colombo, Singapore or Dubai and the cargo is
later shipped to India in smaller vessels, which in turn increases the
freight cost. In India, Mundra Port is the only port with an adequate deep
water draft facility (14.5m)

52 | P a g e
All these results in India’s ranking of 29 on the list of “world
merchandise trade” in 2005 published by World Trade Organization (WTO),
India’s share of world goods exports in 2005 was approximately 0.9%, which
is lower than the exports of many other countries with much smaller
economies, including Thailand.

53 | P a g e
What are we doing to accelerate the growth of Ports?

Ports in many countries, including in India are increasingly confronted


with the need to expand their facilities and cargo handling capabilities.
Continued growth of sea borne trade, and in particular growth of container
traffic, is forcing port authorities to develop their facilities and capacities
without further delay. The need for port expansion and modernization is also
driven by increasing deployment of large oil tankers and other mega-container
ships (up to a capacity of 10,000 TEUs and more), which require deep draft
facilities and sophisticated cargo equipment for handling containers. Port
authorities are also under pressure to improve productivity of port services and
to reduce handling charges from vessel operators and shippers, who are
themselves operating in a highly competitive market.

The Indian ports industry is not been isolated from such international
developments and there is a need to develop port facilities in India to service
the large container ships. Also one another reason which makes capacity
addition necessary is-

Indian ports are running at full capacity


Since the last few years’, Indian ports are running at their full capacity.
The capacity utilization of Indian ports in 2006-07 was 91% and it was as high
as 97% and 93% in 2004-05 and 2005- 06 respectively. The higher capacity
utilization was largely due to relative higher growth in traffic compared to
total capacity available and this demands huge capacity augmentation of
Indian ports to cope up with rising traffic in the coming years.

To handle tremendous traffic growth in the next 5 to 6 years, it is


necessary that major ports should be having total capacity of 1,009 MT by
2011-12. Hence a capacity addition of 545 MT is required in the next five
years. The Ministry of Shipping, Road Transport and Highways have taken a
number of steps in this direction. Some major projects are in pipeline &
expected to complete in next 5-6 years.

54 | P a g e
National Maritime Development Programme:

 Under this plan, the total capacity of all ports is expected to increase 2.14
times from 736.9 Mn tones currently to 1575.3 Mn tones by 2011-12
Table 17: NMDP

Port Existing capacity Addition capacity Capacity in 2011-


Type (Mn T) (Mn T) 12E

Major 508.6 493.2 1001.8

Minor 228.31 345.19 573.5

Total 736.91 838.39 1575.3

Source: DoS, GoI

 NMDP has envisaged an outlay of INR bl 558.04 till FY14 for the
development and capacity expansion of 12 major ports. Under this
programme, 276 projects have been outlined for all ports put together.
 Private sector participation: Under NMDP, major thrust is on private
sector participation; hence, ~62% (INR bl 346) of the total investment
outlay is expected to be contributed from the private sector
 Funding plan under NMDP (INR bl)
Table 17: Funding Under NMDP

Project Head No. Budgetary Internal Private Others Total


of support resources investment
project

Dredging 25 27.31 33.40 1.9 0.43 63.04

Construction/ 76 5.6 38.7 280.8 0.5 325.6


reconstruction
of berths

Procurement 52 0.0 14.3 10.8 1.3 26.3


of equipments

Rail & road 45 0.9 22.3 0.0 36.3 59.6


connectivity
works

Others related 78 2.3 29.0 51.6 0.6 83.5


schemes

Total 276 36.1 137.7 345.1 39.13 558.04

Source: DoS GoI

55 | P a g e
Other Ongoing projects:
Table 18: Other ongoing projects

Project Major Private developer Project cost Capacity


port (INR bl) (MT)

International Cochin India Gateway 21.2 From 5


Container Terminal (D P to 40 Mt
Transshipment World)
at Vallarpadam

LNG terminal Ennore Indian Oil 27.0 5.0


Corporation

Container Kandla ABG Heavy 1.6 7.5


Terminal Industry

Second terminal Chennai Chennai 5.0 10.0


International
terminal

Iron Ore Ennore Sical iron ore 4.8 12.0


terminal terminal

Coal terminal Ennore Chettinad 3.5 8.0


International Coal
Terminal

Source: DoS GoI

Upcoming projects:

Table 19: Upcoming projects

Project Port Developer Cost (INR Capacity MT


bl)

Marine terminal Ennore Ennore tank terminal 2.0 3.0

LNG Terminal Cochin Petronet LNG 28.0 5.0

Container Mumbai (offshore) Gammon India led 12.3 10.0


terminal consortium

JNPT (fourth) Planning stage 52.3 52.8

Ennore (first) Selection is under 13.0 18.0


processes

Tuticorin (second) Not awarded 5.1 4.8

56 | P a g e
Cargo berth Pradip ( iron ore Not awarded 5.1 10.0
berth)

Pradip (coal berth) Not awarded 6.1 10.0

Source: DoS GoI

Projected dredging requirement of major ports, State ports and Fishing


harbor during the period 2011-12 is summarized as under: (Quantity in
Million Cubic Meters)

Table 20: Dredging Requirements

YEAR MAJOR PORTS STATE PORTS FISHERIES HARBOUR


Capital Maintenance Capital Maintenance Capital Maintenance
2007-08 123.45 61.02 101.22 3.30 3.64 0.75
2008-09 93.62 61.91 51.89 3.25 3.48 0.22
2009-10 45.55 79.61 79.39 3.96 0.23 0.22
2010-11 25.81 89.01 71.51 10.30 0.17 0.32
2011-12 9.85 88.51 55.50 10.75 0.15 0.82
TOTAL 298.28 380.06 359.51 31.56 7.67 2.33
Source: DoS GoI

Some Major projects Port-wise:


Visakhapatnam Port:

 Expansion of Outer harbor project (Up gradation of outer harbor to handle


2,00,000 DWT vessels) is planned for completion by 2010
1. Mechanization General Cargo Berth;
2. Upgrading iron ore jetty
3. Handling facility for crude oil and POL (SBM);
4. Extension Container Terminal.
JNPT:

 Improvement of Internal Port Roads to upgrade the road connectivity at an


estimated cost of INR bl 0.35 is expected to be completed by March 2009.
 Investment of 8 INR bl proposed for dredging project at JNPT to increase
draft from 12.5 mts to 14.0 mts to handle up to 6000TEU capacity
container vessel

57 | P a g e
 Completion of Container Terminal GTI & Expansion berth towards
NSICT;
 Construction of Container Terminal 4, Marine Chemical Terminal, Second
Chemical Terminal
 Road, Rail and pipeline connectivity projects and programme.
Mumbai Port:

 Mumbai Port plans to take up the project of laying a dedicated freight rail
line from Wadala to Kurla at an estimated cost of INR bl 1.3

Kandla Port:

 Four multipurpose cargo berths at Kandla Port estimated investment of


INR bl 4.21
 Four lanes of existing road of NH-8A to oil jetties which is known as
Kandla – Kharirohar road with bye-pass and one ROB is going on which is
likely to be completed by mid 2008
 Development of container terminal at Kandla port on BOT basis is
underway of estimated investment INR bl 2.58
 Extend the Custom Bounded area by reclaiming area behind Cargo berth
no. 7 to 10 with all infrastructure facilities, the completion of which will
increase the open storage area by about 65,000 Sq.m. The cost of the
project would be INR bl 0.38 this project ha already started in April, 2007

Tuticorin Port:

 Investment of INR bl 27 has been earmarked to dredging at Tuticorin Port


which is on account of development of outer harbor project
 Deepening of existing channel and harbor basin
 On version of berth 8 into Container Terminal also North Cargo Berth for
thermal coal handling

58 | P a g e
Mormugao Port:

 Cruise cum container terminal at Mormugao estimated investment of INR


bl 1.76
 Bulk cargo berth at Mormugao Port at estimated investment of INR bl
1.33
 Integration of berth 8 and 9 for iron ore handling
 Introduction railway wagon tippler for iron ore transfer
 Additional iron ore storage capacity & mooring dolphins
 Mobile crane for general cargo berth 11
 New coal berth, Liquid bulk berths, Cruise vessel berth, Port craft jetty
New Mangalore Port:

 Mechanization of the new iron ore berth 14;


 Berth 15 of new Western Dock for handling coal;
 Restructuring of berth 1 and 2 for container handling;
 Construction/conversion of berth 13 for handling liquid bulk;
 Deepening of channel and turning basin;
 Marshalling yard near new Western Dock;
 Development of SBM facilities for crude oil imports;
 Construction of LNG Terminal, Container terminal in Western Dock
 National road and railway connectivity plans
Cochin Port

 Development of SBM facilities for crude oil imports


 Development of LNG and LPG Terminals, Bunkering Terminal
 Vallarpadam Container Terminal
 Development of Cruise Terminal & upgrading Willingdon Island
 National road and railway connectivity plans
Chennai Port:

 Development of Container Terminals 2, 3, 4 and 5


 Off-dock facility Tondiarpet
 Ennore – Manali Road & Elevated Expressway to Poonamallee;

59 | P a g e
 Railway Terminal at Tondiarpet and shuttle train connection between Port
and Railway terminal
Ennore Port:

 Upgrading existing Coal berths for handling thermal coal;


 Construction of Marine Liquid Terminal & Container Terminal
 Dredging and reclamation works
 National and state road and railway connectivity plans
Paradip port:

 Two PPP projects, both relating to the development of deep draught berths,
one for handling iron ore and other for handling of coal on BOT basis at an
estimated cost of INR bl 5.20 and INR bl 4.15 respectively
 Deepening of entrance channel to handle 1,25,000 DWT vessel estimated
cost INR bl 1.46 & Extension of breakwater;
 Construction of Iron ore and coal mechanized terminals; Container
Terminal; Fertilizer Terminal
Kolkata Port:

 Two riverine multipurpose jetties near Haldia Dock Complex


 Three riverine multipurpose jetties at Diamond Harbor
 Three riverine multipurpose jetties at Saugor

60 | P a g e
Financing Projects
The overall requirement of funds during period 2011-12 for the whole
port sector (Major + Non Major Ports) is estimated to be around INR bl
689.72, also a provision of INR bl 10 earmarked to create a Corpus Fund

Table 21: Funding Pattern for projects at ports

Internal Resources 145.02

EBR & Others 120.54

Budgetary Support 55.47

Private sector 368.68

Total Outlay 689.71

Source: DoS GoI

Financial strategy Port-wise:


Table 22: Financial Strategy

Port Trust Total Funding (INR bl) Available


investments Funds for
in fixed Internal Private Government Debt investments
assets by resources sector in fixed
2007-14 assets 2014
(INR bl) (INR bl)

Kandla 56.23 6.00 50.23 84.63

JNPT 151.01 43.79 107.22 79.63

Mumbai 45.31 28.97 16.34 106.07

Mormugao 27.90 5.54 1.40 20.94 8.90

New Mangalore 16.87 3.67 13.20 26.33

Cochin 10.21 5.56 4.65 21.55

Tuticorin 26.36 23.18 3.18 -3.08

Chennai 5.18 4.53 0.45 0.20 51.15

Ennore 33.24 7.48 25.76 22.91

Vishakhapatnam 27.63 10.96 16.67 27.76

61 | P a g e
Paradip 36.10 11.97 16.39 43.52

Kolkata 21.07 8.94 6.08 5.51 0.54 50.45

62 | P a g e
Available funds investment in fixed asset:
Table 23: Available Funds

Particulars INR bl

Available for investments 73.70

Blocked for pension etc 73.14

Available funds 2007 (investments & liquid means) 146.84

Investment in financial assets 2014 170.85

Liquid means 2014 66.23

Available funds 237.08

Blocked for pensions -73.14

Available for investments 2014 163.94

Equity = borrowing capacity (1:1) 382.33

Existing loans -26.05

Balance 356.28

Available in 2014 in funds & borrowing capacity

Net from investments & liquid 163.94

From unused borrowing capacity 356.28

Total available investment in fixed assets in 2014 520.22

Source: IPA’s Port Development Report

63 | P a g e
Strategies for port development projects
For implementation of above projects effectively it is very important to
draw a well define strategy for the same, three strategies could be worked out
as follows…

1. Develop large port in Mumbai System (JNPT IV/Rewas)


2. Develop terminals in Gujarat (Mundra/Kandla) and Maharashtra
systems
3. Strategy for East Coast
Prior to have an insight of these strategies it is better to understand
rational behind it…

Present & Expected allocation of traffic from India’s hinterland clusters to port
systems, backed by rational is summarized in table below:

Strategies:
1. Develop large port in Mumbai System (JNPT IV/Rewas): The
Maharashtra port system handled around 56% of all container traffic in
2005-06, the port system is expected to maintain it’s dominance in
overall container trade in future. The two new capacities being created at
the Maharashtra system are – the fourth container berth at JNP (JNPT
IV) and the Rewas Port. While Rewas Port is being developed privately,
JNPT IV presents a substantive investment opportunity. After completion
of its second phase, JNPT IV is expected to have a handling capacity of
4.4 million TEUs. Phase 1 and Phase 2 capacities if 2.2 million TEUs
each are expected to come on stream in 2010-11 and 2012-13
respectively. There is a high degree of certainty of cargo build up at
JNPT 4. The existing 2 terminals at JNP - JNPT and NSICT (DPW) – are
already operating at full capacity. Being the largest container port in the
country, there is presence of entire logistics value chain serving the port.
The port is also well connected by important liner services. The
upcoming projects of NMSEZ/MiSEZ can also add to cargo potential.
On the other hand, JNPT 4 may face high competition in case large

64 | P a g e
capacities are planned at Rewas Port, as of now plans for Rewas are not
clearly known. Also, Backup land area and cargo evacuation facilities at
JNP are constrained. New terminal development will need to rely on
NMSEZ for additional backup land.
2. Develop terminals in Gujarat (Mundra/Kandla) and Maharashtra
systems: While ports in Maharashtra will continue to handle the highest
container volumes, Gujarat ports are expected to see the highest growth
in traffic as they are close to the Northern hinterland and presently
handle relatively low container volumes. Existing transport infrastructure
to Gujarat ports is constrained, as there is a need for change in traction
from electric to diesel locomotives, which makes transit time higher
from TKD vis-à-vis JNP. This constraint, however, will be addressed
with the construction on the western DFC, as Ahmedabad-Palanpur has
been identified as the preferred alignment, this will better serve Gujarat
ports as compared to than the other alignment option via Ratlam (MP)-
Kota. The construction of DFC will facilitate the shift of Northern
Hinterland cargo to Gujarat ports. Currently, the two ports in the Gujarat
system with announced capacity expansion plans are Mundra and
Kandla; therefore, these present an investment opportunity. The port of
Hazira is also being developed, and is planned to have a container
terminal, the port is situated around 25 Km from Surat and 120 nautical
miles north of Mumbai. The port of Mundra offers good core
infrastructure of draft, birth length and availability of backup land that
would be useful for future expansions. The immediate investment
opportunity, however, is for investing at JNPT 4, which envisages an
addition of 4.4 million TEUs. Thus if both opportunities for investing in
Gujarat and Mumbai are perused then this will involve large capital
investments.
3. Strategy for East Coast: On the East Coast, terminal opportunities are
likely in Chennai/ Ennore systems. Both Chennai/ Ennore are likely to
play a leading role in Intra-Asia trade. Ennore as a site would be
preferable to Chennai, as Chennai has land constraints and would face

65 | P a g e
congestion problems. In addition, Ennore is adjoining an industrial area
that can provide captive traffic and has good transport connectivity.

66 | P a g e
Privatization of ports
In the last decades, we have witnessed profound changes in maritime
transport, which have modified the balance between capital and labor at
seaports. Ports are now increasingly becoming capital-intensive industries,
while in the past they used to be labor-intensive. This change has generated an
excess of employees in most ports around the world. The development of
containerized transport is another factor that has significantly modified ports'
operations. Containers have allowed large cost reductions in cargo handling,
but they have also imposed new needs on ports in terms of equipment (gantry
cranes, specialized terminals improved pavements, etc). On the other hand,
economies of scale obtained by the transport of large quantities of containers
and bulk cargoes have led to the building of increasingly larger specialized
ships that require substantial port investments in new infrastructures and
equipment which bring the concept of PPP (Public Private Participation) in
port industry.

Even though the public sector has usually been present as port
organizer, it is not evident that public organization of this industry is
necessarily the best option. In particular, tighter public budgets and increasing
fiscal needs have led many countries to seek private participation in seaports.
Private firms' involvement in ports is not new for the provision of services,
since many firms were already present in ports around the world, but it is quite
innovative in the construction of port infrastructures. International experiences
have shown that private participation in both these aspects (operations and
infrastructure) has improved significantly the outcomes of some seaports.
These experiences make a case for a revision of the traditional organization of
seaports around the world, changes that will prepare ports for a more
competitive market and less financial help from governments

Reasons for Private Participation:


1. First, the private sector is able to provide services at lower costs than the
public sector, since it usually is more productive and efficient.
2. If private capital is used to finance costs, the public sector can devote its
scarce resources to other priority areas.

67 | P a g e
3. Last, the private sector is generally more able to search for business
opportunities, and to respond more swiftly than the public sector to
changing conditions in competitive markets
Due to above reasons Major ports experiencing a fall in traffic while
on other side there is a significant growth in traffic at Minor ports which can
be understood from under mentioned chart.

Chart10: Trends in traffic share

Trend in Traffic Share


100

80
percentages

60

40

20

0
1996 1998 2000 2002 2004 2006 2008
Year

Major Port Traffic Share % Minor Port Traffic Share %

Source: DoS GoI

Currently, share of major ports is around 71.5% of the total traffic


flows while for non major ports it was 28.5% in 2006-07. Over the last seven
years, cargo traffic at major ports grew at a CAGR of 8.6% and in comparison;
cargo traffic at non major ports grew at a CAGR of 13.3%. As a result, the
share of minor ports in handling the cargo has increased from 18.9% in
FY2000 to 28.5% in FY2007.

Forms of private participation at seaports and regulation needs:

1. Selling the seaport as a whole (full privatization)

68 | P a g e
2. Transferring to the private sector parts of the seaport for their
development by private operators (Build, Operate and Own, BOO).
Short-term financial needs justify the use of this form of privatization
3. Introducing private participation in the port in order to build or
renovate facilities required for service provision (Build/Rehabilitate,
Operate and Transfer, BOT or ROT)
4. Captive Jetties Model: To encourage the port based industries, private
companies have been granted permission to construct captive jetties.
As per this model, port based industries created port facilities to import
their industrial raw material and to export finished products. This
jetties are allowed to use till the industry continued by the respective
companies.
Under this model:

I. Jetties are Develop & Maintain by Port based industries


II. Concession in port charges, Operational freedom
III. The current captive jetty policy allows 80% set-off on wharfage
against the capital cost including interest during construction
period.
IV. Examples: Koteswar (Sanghi), Sikka (Reliance -DCC), Muldwarka
(GACL), Pipavav (L&T-NCCL), Dahej (Indo Gulf, IPCL) Hazira –
(Reliance- Essar-L&T GACL)
5. Creating a new independent company, from the combination of efforts
from two or more firms: Joint-Venture. However this mode has not
been popular, mainly because no reliable parameters have crystallized
for benchmarking the terms for entering in to a joint venture. JV route
is ideal in case where Government shareholding should be at max 49%
& the management control should be with the private operator.
6. Leasing: in some cases, port authorities simply rent port assets to be
used by private operators during a fixed period, and thus they obtain
income from contract fees
7. Licensing: in this case the port authority allows operators to provide
some services which only require relatively simple equipment, and
thus assets are generally owned by private operators

69 | P a g e
8. Management contract: The port of Bristol (UK) is an example of this
type of contract, where facilities are owned by the local government,
but the port is managed privately
While choosing among the various options for private participation one
need to consider following two cases:

I. Services that do not require an exclusive use of infrastructure or


superstructure port facilities:
Within this group, there are services such as pilotage, towing, and the other
ancillary services to ships and crew

II. Services that require exclusive use of assets: These services require the
use of one of the scarcest resources at seaports (space). Thus, within this
group, we would include terminals for cargo handling, storage areas,
repairing docks and fuel suppliers. It is more complicated to introduce
private participation in these services, since operators need to use assets
that are considered to be optimally owned by the port authority
PPP in Indian Context:
The Major Port Trust Act, 1963 permits private sector participation in
ports. Also, FDI up to 100% under automatic route is permitted for
construction & maintenance of ports & harbors. The Government has put in
place a scheme for private sector participation in major ports, mainly in
container terminals, specialized cargo berths for handling bulk, break bulk,
multipurpose & specialized cargo, warehousing/storage facilities, dry docking
& ship repair facilities. The preferred route under the scheme for selection of
the private operator is through open competitive bidding & the mode of
participation is on BOT basis, with a concession period not exceeding 30
years. Other than full controlling or operating private participation in ports two
more new areas could be Polatage & Dredging Operations.

Privatization Experience: Major ports

Till date, the government has approved 17 private or captive projects


worth INR bl 61. Of these, 13 are with a total capacity addition of around 38.8
million tonnes per annum (mtpa) and an investment of around INR bl 26 is

70 | P a g e
operational. Private interest has mainly been restricted to container terminals.
P&O was the first company to sign a BOT contract for a container terminal
with a major port, when it received the contract to develop a container
terminal at JNPT in 1997. There has been interest in setting up captive
facilities in major ports since the late 1980s. BPCL and IOC have captive oil
jetties in several major ports.

Privatization Experience: Minor Ports

The state of Gujarat has been most successful in attracting private


sector interest. Gujarat Pipavav Port Limited (Maersk, PSA), Mundra Port &
SEZ (the Adani Group) and Gujarat Chemical Port Terminal Limited have
been developed as joint venture with private players. Reliance operates captive
jetties at Jamnagar port, Gujarat, to cater to Reliance's refinery in Jamnagar. It
has also invested in captive jetties at Sikka port. However, the last two years
have seen an increase in private activity in minor ports all over the country.

Institutional Reforms & Corporatisation:


Corporatisation of Port Trust is expected to result in better accessibility
to funds; creation of a Board- managed corporate entity & facilitates
disinvestments. On the other hand, corporatisation with revaluing asset will
push up tariffs while port users will not see any change in the quality of
service, if such move is not supported by reforms required to achieve the
desired result. So Institutional reforms need to be gradual & involved the
following process:

 Granting financial & operational autonomy to individual port


management, thereby limiting Governmental interventions
 Separation of regulatory & management functions so as to
commercialize the latter area
 Improved access to long term capital & project finance
 Unbundling of various services & privatization of identified areas
including disinvestments

71 | P a g e
Gateway
port
an
emerging
opportunity

72 | P a g e
Gateway port an emerging opportunity
Around 50% to 55% of India’s container traffic volume is transshipped over
international hub ports. Of this transshipped container traffic, ports of
Singapore, Colombo, and Dubai account for more than 50% of the volume As
a step back from international transshipment hubs, a few large container ports
in India will emerge as “gateway ports”, these in turn will be aggregation
points for India’s EXIM container traffic. These gateway ports would be
serviced by either mainline vessels, or will be serviced by liners transporting
between them and larger transshipment hubs. Currently nearly all domestic
transshipment traffic is handled at Jawaharlal Nehru Port (the port also
handles 53 % of all laden container cargo). In 2005-06 JNP handled (176,000
TEU) 97% of all transshipment cargo handled at Indian ports. The only other
ports handling transshipment cargo were Mumbai (5,000 TEU) and
Visakhapatnam.

The likeliness of ports emerging as gateways will depend on a multitude


of factors, these are:

 Infrastructure: Draft availability, Berth size, Backup land area


 Multimodal access: Rail and Road connectivity, Efficiency of cargo
evacuation
 Operational efficiency
 Patronage by major liners / global terminal operators
 Proximity to East-West trade route
 Container traffic potential of immediate hinterland
After critically analyzing Indian ports for above mentioned factors the ports of
JNP, Vallarpadam, Mundra, Ennore, and Chennai are the most likely
candidates for emerging as gateway container ports. Following observations
can be made by critically analyzing the strengths & weaknesses of different
ports to emerge as a strong contender for “Gateway Port”

1. Mundra port in Gujarat has seen swift increase in traffic flows in recent
years, in 2005-06 it handled around 0.3 million TEUs of containers

73 | P a g e
(more that the combined traffic of Kandla and Pipavav). The port has
excellent core infrastructure in terms of draft, birth size and backup area.
It however currently suffers from less than optimal cargo evacuation
efficiency, and is also distant from the East-West container route. Also,
its current level of cargo traffic is far less than ports in Maharashtra
2. Currently, the ports on the western coastline transship majority of their
containers to Dubai, Colombo. Only JNPT handles some trans-shipment
on its own. While the port has many positives in terms of traffic volumes
and efficiency of existing private operators, it is constrained due to
shortage of backup area and congestion in evacuation of cargo.
3. Chennai handles more than half of the total traffic of the hinterland.
However, like Mumbai, the port suffers from a huge congestion problem.
There is also not adequate storage infrastructure. The connectivity to the
NH is through city roads which remain congested. Moreover, the port
has a draft of only 10.7 –11.4m which is not suitable for larger vessels.
4. With the center's go-ahead Vallarpaddam is expected to start operations
by 2010 with an initial capacity of 1 mn TEUs. The port has a planned
deep draft of 15m, and is proximal to the East-west trade route. With the
uncertainty over Vizhinjam, it is safe to assume that Vallarpaddam will
be the most probable site for emergence as a gateway port along the
western coastline. The port, however, is yet to come on stream and its
immediate hinterland has limited cargo potential.
5. Ennore has not yet started its container terminal. However, going
forward Ennore shall assume great importance on account of its
proximity with one of the largest ports in South India: Chennai. The port
also has a draft of 15m and an ability to handle vessels greater than 8000
TEUs. The port however, is at an early stage of development and its
immediate hinterland has moderate cargo potential.

Strong International contenders of Indian Ports for Transshipment:

Ports of Singapore, Dubai & Colombo are the strong competitors of Indian
Ports in the race of becoming Gateway Ports, due to their superior
Infrastructure & Operational efficiency over Indian Ports. In the present

74 | P a g e
scenario around 50% to 55% of India’s container traffic volume is
transshipped over international hub ports. Of this transshipped container
traffic, ports of Singapore, Colombo, and Dubai account for more than 50% of
the volume. Currently nearly all domestic transshipment traffic is handled at
Jawaharlal Nehru Port (the port also handles 53 % of all laden container
cargo). In 2005-06 JNP handled 97% (176,000 TEU) of all transshipment
cargo handled at Indian ports. The only other ports handling transshipment
cargo are Mumbai and Vishakapatnam. (Source: MoC&I GoI)

Chart 11: Share in Transshipped cargo

% Share in Transshipped Cargo

22.4

40

16.6

3.3
14.2
3.5
Singapore Colombo Dubai Port Kelang Port Salalah Others

Source: MoC, GoI


Chart 12: Portwise Transshipment Cargo

Portwise Transshipment Cargo


200 178
158
150
TEU'000

100

50
20
3 0 3
0
Loaded Container Empties Total Transshipment
Type of Container
JNPT Momugao

Source: MoC, GoI


Advantage India:

75 | P a g e
Even though due to infrastructural and operational inefficiency Indian
Ports are lagging behind in the race of becoming Gateway Port, but one
unbeatable advantage that India has which gives India an incomparable edge
over other competitive ports is strategic geographical location, as India is at
midway in shipping routes to join East-West seaports.

76 | P a g e
International Shipping Routes:
Fig 4: International shipping routes

Source: International Maritime Organization

India’s proximity to international shipping routes:


Fig5: India’s proximity to international shipping routes

Source: Source: International Maritime Organization

77 | P a g e
Financial Statistics
1. EBITDA margins for all major ports, put together, are expected to rise
steadily from 32% in 2007-08 to 49% in 2011-12. Robust margins are
expected on the back of decreasing employee costs, change in business
model towards higher contribution from concession fee income, and
operating leverage. Net profit for the 12 major ports, put together, is
expected to increase from INR 14.9 bl in 2007-08 to INR 31.1 bl in
2011-12 at a CAGR of 20%. The net profit margin is also expected to
improve from 27% in 2007-08 to 38% in 2011-12
2. Cargo related charges are the most important category of revenue, in
2007- 08 this is INR bl 25.61 & for 2013/14 it will be INR bl 31.84 this
is 34% of total revenue. Vessel related charges form the second category
is important. It will be around INR bl 26.64 for 2013-14, which is 28%
of revenue. But all ports planned to use BOT contracts for development
in terminals. As a result the incremental revenue for cargo related
charges will be collected by the BOT operators on their account.
3. The highest increase is projected to be in concession fees and lease, and
4 fold increase to INR 21.46, which makes it the most important
category of revenues. The highest increase in operating revenue comes
from Ennore, however the starting point for Ennore is rather low since
this a relatively new port. Other ports with high increases in operating
revenue are Kandla, JNPT, Cochin and Tuticorin, but relatively low
increases are coming from Paradip and Mormugao (each 4% per year)
4. Total operating expenses increased from INR bl 37.29 in 2007-08 to INR
44.41 in 2013-14. Profit after tax (net earnings) for the 12 Major Ports of
India is projected at INR 14.94 in 2007-08, rising to INR 39.50 in 2013-
14. The highest increase is in Ennore with 137% each year, followed by
Cochin (91% per year). Only Kolkata and Tuticorin are projected with a
decrease in PAT
5. The solvency for Kandla and JNPT will increase to 98% in 2013-14; the
solvency for all Ports will increase except for Tuticorin, in Tuticorin the
solvency will decrease to 42%, which will be the lowest ratio of all ports.
By the year 2013-14 there will be 4 ports without long-term loans, these

78 | P a g e
ports are not using their borrowing capacity, only one port (Tuticorin)
increasing their long-term loans with a substantial amount.
6. The 12 Major Ports of India project to invest more than INR bl 160 from
their own resources during the 7-year period (2007-08 to2013-14), over
the same period the 12 major Ports expect the private sector to invest
some INR bl 250 via BOT contracts. At the end of the 7- year period the
internal funds available for investments in fixed assets have augmented
to INR 160. The own equity for the 12 Major Ports at the end of the 7-
year period amounted to more than INR bl 380. Assuming a normal debt
equity ratio as 1 to 1 (in line with TAMP); which indicates a borrowing
capacity of INR bl 380. At the end of the 7-year period the outstanding
long term loans amounted to INR bl 26.05. The unused part of the
borrowing capacity is more than INR bl 350.

79 | P a g e
CMP INR 570
(5/09/08) Scrip

COVERAGE code:
592921 (BSE),
MUNDRAPORT
(NSE), MSEZ.IN
(Bloomberg),
MPSE.BO (Reuters),
Mkt Cap:
ON 334 bn,
Avg. daily vol: 1.56
mn shares
52 week H/L:
1324/388.10

MUNDRA PORT SEZ


Share holding pattern:

From the below Share


holding Pattern it can
be conclude that
Controlling stake is in
the hands of promoters
& hence on the
positive side it
increases operating
efficiency & quick
decision making
process. But on
negative side of coin
company has risk
associated with
Promoters

Stock Movement:

Monthly Returns:

80 | P a g e
COMPANY AT A GLANCE

Areas of business:
Port: Mundra Port & Dahej Port
SEZ: Special conomic Zone – Mundra
ICD’s: Dry Port Network
Logistic: Container Train Operations
Subsidiaries of company:

SN Name of Company Country of Proportion of


Incorporation Ownership
Interest (%)

1 Mundra Aviation Limited Cayman 100.00


Islands
2 MPSEZ Utilities Private Limited India 100.00
3 Rajasthan SEZ Private Limited India 100.00
4 Inland Conware Private Limited India 100.00
5 Adani Logistics Limited India 100.00
6 Gujarat Adani Aviation Private Limited India 100.00
7 Inland Conware (Ludhiana) Private Limited (Subsidiary India 100.00
of Inland Conware Private Limited)
8 Mundra SEZ Textile and Apparel Park Private Limited India 88.53
(MITAP)
9 Adani Petronet Dahej Pvt. Ltd. (Joint Venture) India 50.00

MPSEZ was incorporated as Gujarat Adani Port Ltd in 1998. The


company commenced phase operations in October, 1998 and full operations in
October, 2001. MPSEZ was initially promoted by Adani Port Ltd (APL) and
Gujarat Port Infrastructure Development Company Ltd (GPIDC), a Gujarat
government undertaking. APL promoters bought out the stake of GPIDC’s
stake in MPSEZ and APL was merged with MPSEZ. Further Mundra Special

81 | P a g e
Economic Zone (MSEZ) and Adani Chemicals Ltd (ACL) were merged with
MPSEZ in April, 2006.

The company has an exclusive right to develop and operate Mundra


Port and related facilities for 30 years pursuant to the Concession Agreement
entered on February 17, 2001 with the Gujarat Maritime Board (GMB) and the
Gujarat government, making it one of the first port-based multiproduct SEZs
in India.

MPSEZL’s port is principally engaged in providing port services for:


(i) Bulk cargo, (ii) Container cargo, (iii) Crude oil cargo & (iv) Value added
port services, including railway services between Mundra Port and Adipur. In
addition, MPSEZ also generates income from land related & infrastructure
activities also from rail related services.

Advantage Mundra:

MPSEZ is one of the first private sector ports in India. With a strong
competitive edge such as deep water draft facility, connectivity to the
hinterland, SEZ and the increasing industrial area close to the port, the
company is one of the early entrants in the port business. The growing
industrial base in the country has increased the volumes at a CAGR of 43
percent from FY03-FY07. The entry of MPSEZ into container business and
ICD business will provide end-to-end logistics solutions to its clients.

Location Advantage:

Mundra Port has a depth of 17.5 meters which offers the deepest
waters on the Indian coast. Mundra Port has a deep water draft which ranges
from approximately 15 meters to 32 meters in depth at a short distance from
the shore. This makes it one of the deepest water draft depths on the west coast
of India, which enables it to handle the future generation of large size vessels
carrying bulk, container and crude oil cargo. Further, because of the natural
protection provided by its location, Mundra Port is able to handle cargo
throughout the year in all weather conditions, including during severe weather
of the Monsoon season characterized by high rains, winds and waves, with

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minimal costs, delays and damages that often impact other more exposed
ports.

Mundra Port is strategically located with respect to the northern and


western hinterland, to which it is well-connected by both railways and
roadways. This area generates nearly 70 percent of India's containerized
international trade. Mundra Port's location near the entrance of the Gulf of
Kutch on the northwest coast of India places it near major maritime trade
routes. It is ideally positioned as an important hub for foreign trade to serve
imports from and exports to the Middle East, Asia, Africa and other foreign
destinations. Thus MPSEZ is well positioned to handle the increased foreign
trade from northern states.

Mundra Port is connected by rail, road and pipeline to the


transportation network of India, particularly the inland regions of western and
northern India. Mundra port is connected to Indian railways through a broad
gauge link, having a distance advantage through Gandhidham-Palanpur route
of 218 kms. Further there is a certain gauge conversion being implemented by
Indian Railway which enables the direct rail connectivity of Mundra Port to
upper Punjab regions resulting in distance advantage of 450 Kms over ports in
Mumbai. There is a four-lane approach road connected to Mundra which is
linked to national and state highway thus reducing the travel distance by 206
km from Mundra to Delhi. Mundra port is directly connected to IOCL’s
refinery in Panipat and HPCL transports liquid petroleum from Mundra to
inland regions in Northern India. Thus the existing rail, road, pipeline network
and available land for future transportation provide MPSEZ a competitive
advantage in attracting larger volumes of Cargo.

Relationship Advantage:

MPSEZL will benefit from its strategic arrangements and relationships


with wide range of third-party customers that operate at or use the port,
including the container sub-concessionaire MICT and the Indian Railways.
Indian Oil Corporation, Indian Farmers Fertilizers Cooperative, Food
Corporation of India and some of the Adani Group companies such as Adani
Enterprises and Adani Wilmar are the major users of the port services.

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Strategic arrangement with the Indian Railways and MICT allows Mundra
Port & SEZ to get revenue share for the infrastructure created by it. It gets a
share of the revenue on the cargo moved on Mundra-Adipur railway track.
Similar revenue-sharing agreement is in place for the private container
terminal operation at the port. Mundra Port is connected by rail, road &
pipeline to the transportation network of India, particularly the inland regions
of western & northern India including Delhi. Railways & roadways are
important links for the transportation of goods to & from any port to the cargo
centers at Mundra Port. The multi-model connectivity through sea, air and rail
link in the SEZ would make product delivery efficient and cheap.

Growing order book:

The company has already entered into a few strategic long term
contractual agreements, which provide the company with guaranteed cargo
volumes and revenues. The company already has long term arrangements with
MICT, as Container Sub-concessionaire for its container operations at Mundra
Port and IOCL for its crude oil cargo operations. Going forward, the company
signed a MoU with Maruti –Suzuki India to board 2, 00,000 cars per annum,
also port has entered in to agreement with Adani Power & TATA power
importing coal for their new power plant each having a capacity of 2600MW
& 2000 MW

Tariff Advantage:

Mundra port is not classified as a “Major Port” and is therefore not


governed by TAMP (which regulates and fixes various port-related tariffs for
major port). Since Mundra port falls out of the ambit of TAMP, it can set its
tariffs and changes in accordance with the market rates. Thus as a result the
profitability of the port is not constrained by the TAMP rates further MPSEZ
is a private enterprise where 100 percent of the revenue goes to the company
unlike other government operated ports (With regards to JNPT 50 percent of
revenue is shared with the government).

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Expanding Capacities:

MPSEZL plans to handle cargo volume of 50 million tonnes by 2010


from the present 19.8 million tonnes. Long term development plans include
waterfront for an additional 14 Berths Basin, which can handle Cape-size
vessels. Approximately 15,665 acres of land is available with the port. Its
portfolio of land area includes approximately 4,000 meters of undeveloped
waterfront land, which can be utilized to expand port operations.

Presently ~22 percent of containerized cargo moves by rail, CONCOR


was the only container train operator in India. The Indian Railway’s than
permitted private agencies to run container train operations for Category I and
Category II routes. The licence fees for Category I and Category II are Rs 50
crore and Rs10 crore respectively. Adani Logistics have obtained License for
container train operations on Category-1 routes (JNPT/Mumbai ports to the
National Capital region and consequently all over India). Adani Logistics
proposes to procure 20 rakes for which orders have been placed with
suppliers. Under the Joint Venture MPSEZ will hold 50% in Adani Logistics

The current name plate capacity at the port is estimated at 75mn MT


(20mn MT bulk, 30mn MT container and 25mn MT crude). Although
maximum throughput at the current product mix is estimated at 55mn MT
Given that the forecasted cargo traffic will reach 47mn MT in FY10E, a
further expansion of port capacity is expected in FY11.

SEZ land currently under possession is 18,480 acres and an additional


13,873 acres is still being acquired. Total notified area for the multi-product
SEZ stands at 6753 acres. According to the management, more than 1000
acres of land have been already allocated to co-developers and industrial units.

The bulk cargo facility includes multipurpose terminal I berth and


Terminal II berth which is fully operational from March, 2007. Terminal I
comprises of four cargo berths and one barge berth capable of handling four
bulk cargo vessels simultaneously. The Terminal II comprises of four berths
used for bulk cargo. MPSEZ uses a mechanized system for handling cargo.

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MPSEZ has a storage capacity of more than 800000 square meters in the back
up area at Mundra port.

The bulk liquid tank is comprised of 81 tanks with a combined


capacity of 342000 kilolitres to store various liquid. The container cargo
operates through container terminal 1 and Container Terminal 2. The container
Terminal 1 is sub-commissioned to MICT and the terminal is designed to
handle direct berthing of large vessels with capacity of up to 8000 TEU’s.
Terminal 1 is designed to handle approximately 1.25 million TEU’s per year.
In August, 2007 the construction of Container terminal II was completed with
a 450 meters of berth length and an additional 181 meters of berth length is
expected to be constructed. Terminal II can handle ~ 1.25 million TEU’s per
year.

Solid Cargo Port Terminal is under sub-concession by Petronet LNG


Limited (30 year concession, starting 2005). Cargo profile comprises of coal,
cement/clinker, fertilizers, food grains, steel products, iron ore and other
minerals etc.MPSEZ intends to acquire 74 percent stake in Joint Venture. The
port Terminal has a total capacity of 15 million tones (Jetty with two berth of
260 mts and 180 mts, with Mechanized cargo handling system).The Port
terminal is Strategically located in Highly Industrialized Zone (Baroda –
Mumbai).

The crude oil facility at Mundra port is currently focused on one single
point mooring terminal (SPM). The SPM is operated through a long term
agreement with IOCL. The SPM can handle large crude carriers of 360000
deadweight tonnage (DWT) and an overall capacity of 25 million tones per
year

MPSEZ has received approval to develop a multi-product SEZ at


Mundra and the surrounding areas making it one of the first ports based multi-
product SEZ in India. The company has received notification from the GOI
aggregating 2658 hectares. With the merger of ACL and MSEZ with MPSEZ,
the company now has ~ 15665 acres of land and 16688 acres of additional
land are at various stages of being transferred.

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Double stacking on trains to aid container traffic growth - the Bhildi
and Luni gauge conversion is to be completed by Jan 2009. This will enable
double stacking of container trains leaving from Mundra to Bathinda and will
also reduce transit time vis-à-vis Mumbai to Batinda.

MPSEZ has signed the port service agreement with coastal Gujarat
Power ltd in April, 2007 for Construction of terminal for handling coal &
other cargo in the vicinity of power projects at Mundra Port This Terminal will
predominantly handle coal for Tata’s 4000 MW thermal UMPP Project The
terminal has a Capacity of 30 MT, with provisions for expansion. Terminal
comprises of Jetty with an approach road with a depth of approx 22 meters.
The terminal will be capable of berthing 2 vessels simultaneously with a
capacity of 220,000 DWT (Cape Size). The terminal will have an Elaborate
Ship Un loader, Conveyor System at berth and stacker reclaimer at yard for
mechanical handling. The Commercial operation of the firm is targeted to
commission by January 2011.

MPSEZ will hold 50 percent stake in ICPL a company involved in the


business of Inland Container Depots. ICPL’s project will involve in
development of ~ 14 inland container depots to handle international and
domestic trade. The initial phase of development has created a network of ICD
including seven in the northern hinterland of upper west coast ports of India

ICPL, a wholly owned subsidiary for ICD (Inland Container Depots)


operations, has acquired 600 acres of land in 14 locations. The construction of
its 1st depot at PATIL has been completed and notification was received in
April 2008. Considering the current investment phase and execution delays,
we expect significant revenue contribution only from FY10.

ALL (Adani Logistics Ltd), a wholly owned subsidiary for container


train operations has 2 rakes under operation and an additional 4 have already
commenced operation from June 2008. The management intends to increase
the total number of rakes to 20 by FY09.

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Milestones

2009 January ADANI Auto Terminal Commences Terminal Operation.


2009 January Maruti Suzuki’s A-star sails to Europe from Mundra Port.
2008 February Port Services Agreement signed with Maruti Suzuki India
Ltd. for handling car exports.
2007 November MPSEZ equity shares listed at National Stock Exchange
(NSE) and Bombay Stock Exchange (BSE)
2007 October Initaila Public Offer (IPO) for 40,250,000 equity shares of
Rs. 10 each of Mudra Port and Special Economic zone Ltd.
offered to public and employees with price band Rs. 400 –
Rs. 440
2007 August Container Terminal II trial run operations commenced
2007 April Port Services Agreement signed with Tata Power promoted
power generation company for handling imported coal
cargo
2007 March Two additioal berths for bulk cargo Operation commissioned
at Terminal II
2006 July Name of the company changed from Gujarat Adani Port Ltd.
to Mundra Port and Special Economic Zone Limited
(MPSEZ) to reflect the nature of business.
2006 April Merger of Mundra Special Economic Zone Ltd. and Adani
Chemicals Limited with Gujarat Adani Port Ltd.
2006 June Double stack container train operation commenced.
2006 May Two Additional berths for bulk cargo handling at Terminal II
operational.
2006 April Notification issued for Special Economic Zone (SEZ) at
Mundra
2005 December SPM becomes operational
2005 June Merger of Adani Port Limited (with effect from April 1,
2003) with Gujarat Adani Port Ltd.
2004 April Shareholders agreement with Kutch Railway Company
Limited for Gandhidham – Palanpur gauge conversion.
2003 July Container Terminal I became operational
2003 January Sub-concession agreement signed for a container terminal
2002 November Agreement signed with Indian Railways for integrating
Mundra-Adipur railway line with the national rail network.
2002 October Agreements signed with Indian Oil Corporation (IOC) for
setting up Single Piont Mooring (SPM) Facility and Crude
Oil Handling at Mundra

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2002 May Agreements signed with Guru Govind Singh Refineries Ltd.
(GGSRL) for Crude Oil handling at Mundra
2001 October Mundra – Adipur Private railway line completed and trial
runs commenced
2001 February Concession Agreement signed with GMB for developing,
operating and maintaining a port at Mundra
1999 October Multipurpose Berths 3 and 4 at trerminal I became
operational
1998 October Multipurpose Berths 1 and 2 at Terminal I became
operational
1998 May Gujarat Adani Port Ltd. incorportaed, a joint sector company
promoted by Adani Port Limited and Gujarat Port
Infrastructure Development Company Ltd.
1994 January Approval obtained from Gujarat Maritime Board (GMB) for
setting up captive jetty at Mundra

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Investments Rationale:

Growing Financials (from FY07 to FY08):

 Net sales increased by 41% from 5.8 INR bl to 8.7 INR bl led by
growing EXIM in the country & back up by hinterland connectivity
also due to strategic location & improved operating efficiency, which
fetches traffic from Mumbai, Kandla & JNPT.

 Improvement in EBIT margin from 40% to 60% for port operations


was led by a better cargo mix and productivity gains. The contribution
from high margin cargo (crude and container) to overall traffic
increased from 48% in FY07 to 53% in FY08. Also EBITDA margin
grew by 20% from 68 to 81%.

 Capex has increased by 140% from 5.7 to 13.7 INR bl which signifies
strong investments

 Equity capital has diluted by 11%, but company has given an


indication that there will be no further Equity dilution. Where as
management can raise funds through more debt as there is sufficient
headroom to raise more debt since company’s Net-worth is 26.17 INR
bl & its present debt 20.68 INR bl

 PAT grew by 12% from 1.8 INR bl to 2.1 INR bl (197% CAGR from
FY04-FY08). Whereas PBT shows a robust growth trend it grew by
108% YoY from 1.7 to 6.3 INR bl (221% CAGR from FY04-FY08

 EPS grew by 7% from 5.19 to 5.51 which again indicating improving


earning for company

 Upfront premium income from the lease of land to SEZ units for the
year stood at Rs 828mn (Rs 309.8mn pertaining to premium income
for agreements was signed prior to FY08). Against the 150 acres that
were leased to SEZ units in FY08, I have forecasted 300 acres & 750
acres for FY09E & FY10E respectively. Expected earning for FY10E
depends heavily on the income from SEZ operations (~55%
contribution).

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 Market Cap grew by 59% from 139.25 INR bl to 221.54 INR bl which
signifies better liquidity in Market

Due to economies of Scale Company’s operating expenses has decline by 6%


from 1.94 to 1.83 INR bl, whereas it’s financial cost increased by 71%, but
PBT grew by 108% which subdue interest expenses

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Current ratio increased by 44% from 2.42 to 3.49, Acid test ratio
increased by 45% from 2.37 to 3.44, Cash ratio up by 735% from 0.28 to 2.32,
Debt to Equity & Debt ratio has fell by 54 & 30% respectively. Whereas
Interest coverage ratio has improved marginally by 16% from 3.77 to 4.37

Growth driven by Cargo:

T otal cargo volumes grew by 56% CAGR from 11.8 MMT to 28.8 MMT
from FY06 to FY08. I expect cargo volumes to register ~40% CAGR
over FY08-10E, mainly led by better cargo throughput at new terminals.

Specifically crude cargo grew by CAGR 742% from 0.1 MMT (FY06)
to 7.1 MMT (FY08) & container traffic grew at CAGR 54% from 3.6 MMT
(FY06) to 8.5 MMT (FY08), which led to higher profit margin.

Traffic at port 1,624 vessels called at port which is 43% more than a year
back (1,138)

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From above graphs it is very much clear that traffic at port has shown
CAGR 55% from FY06-FY08 & stands on 29 MMT in FY08 with 7th rank

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among all ports. More specifically the traffic of Crude & Container has gone
up which led to high profit margin.

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From the chart below it is clear that for FY08 most of the revenue
came from SEZ business & next to that crude contribute 17% & 12%
contributed from container cargo handling. With the growing containerization
this contribution will further improve.

Macro Economic Factors:

 Indian Ports growing at a CAGR of 11% for last 5 years FY08 Total
cargo handled ~ 649 MMT (Major Port 464 MMT & Minor Port 185
MMT) YOY growths 11.9%

 Only two privately owned fully operational landlord ports: Mundra &
Pipav combine Cargo handled 32.9 MMT which is 18% of cargo
handled by Minor Ports

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 Current Capacity of Indian Ports is 765 MMT which currently
operating at 85%, still shortfall of 150 MMT. According to Planning
Commission Report capacity addition of 1575 MMT by 2012

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Two Stage Valuation Model for MUNDRA PORT SEZ:

I chose two stage valuation model for the valuation of Mundra Port
SEZ, assuming the firm as a growing entity. The port presently in high growth
& will be in high growth stage for next 10 years. But after 10 years Mundra
may not be able to continue the same growth rate, because of competition &
privatization of other Govt. ports & hence based on these assumptions, 10
years hence the company may experience stable growth rate

Current Inputs
Current EBIT INR 4,717,080,000.00
Current Depreciation INR 1,022,870,000.00
Current Tax Rate 42.17%
Current Revenues INR 8,170,230,000.00
Capital Invested (Book Value) INR 51,358,792,000.00
High Growth Period
Length of high-growth period (n) 10
Reinvestment Rate (as % of
EBIT(1-t)) 71%
Growth rate during period (g) 83%
Cost of Equity during period 50%
After-tax Cost of Debt 17%
Debt Ratio (D / (D + E)) 44%
Stable Growth Period
Growth rate in steady state 5.73%
Return on equity in stable
growth 8%
Reinvestment Rate in Stable
growth 10%
Cost of Equity in steady state 50%
After-tax Cost of Debt 17%
Debt Ratio (D / (D + E)) 44.10%

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Output
Enterprise Value INR 251,582,328,990.58
EV/EBIT 53.33
EV/EBITDA 43.83
EV/EBIT(1-t) 92.22
EV/Sales 30.79
EV/Capital Invested 4.90
Equity Value INR 230,902,128,990.58
Equity Value Per Share INR 607.64

From this valuation model the present equity value per share comes
as INR 607.64

Financial Overview of MUNDRA PORT SEZ: Figures in INR (Figures in


bracket indicate negative value)

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Balance Sheet of MUNDRA PORT SEZ:

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Profit & Loss A/C for MUNDRA PORT SEZ:

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FINDINGS
&
SUGGESTIONS

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FINDINGS & SUGGESTIONS

 India's fast-accelerating trade will create huge opportunities in port


infrastructure. Traffic in all ports is estimated to increase at a CAGR of
11.1 per cent - from 469 MT in FY07 to 1008.95 MT in FY12.

 The Planning Commission states that major ports need to add a 546 MT
capacity during FY07 also during period of 2011-12, taking the total
capacity to 1,002 MT from 456 MT in FY06.

 The total required investment in major ports during 2007-12 is estimated


to be INR bl 689, INR bl 129 towards container terminals; INR bl 129
towards berths for petroleum oil and lubricants; INR bl 129 towards other
cargo berths and INR bl 86 for capital dredging.

 A major proportion of investment, INR bl 368.68 (over 50 per cent of the


total), is expected to come from public-private participation.

 We believe that Indian Ports have been performing well from last decade
due to Policies adopted by the Government mainly due to Liberalization,
but still Indian Ports are way behind as compared to International
counterparts this is mainly due to Operational inefficiency &
Infrastructural inadequacy.

 Reason behind this is very apparent, that is scarcity of funds coming from
Government, now to overcome this problem Port’s organizational setup is
in transformation phase, from Public Service model to Landlord model
where in Private sector participation will play a crucial role & thus help
Indian Ports not only to match but to overtake International Ports &
becomes a strong contender to emerge as a Gateway Port & Transshipment
Hub for Asia Pacific.

 All these indicating towards a good investment opportunity in the Indian


Ports which we must welcome

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CONCLUSION

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CONCLUSION
 With Indian merchandise export and import registering healthy double
digit growth, the country’s port traffic’s growth momentum is expected
to continue and the traffic is estimated to reach 980 mn tonnes (at
CAGR of 12%) over 2011-12E.

 MPSEZ is one of the leading non-captive private sector ports in India,


providing services for various cargo categories. Along with
diversifying cargo, MPSEZ has access to rail, road, and pipeline
network across India, which has helped it tie up strategic arrangements
with customers and position itself as the preferred destination for
customers. The company’s SEZ development and future capacity
expansion plans are expected to keep it ahead of the industry.

 MPSEZ has shown a CAGR of 46% in the top line & 77% in the
bottom-line in the last 3 years (FY06- FY08). Mundra Port & SEZ has
a double advantage of an operator of a functioning port as well as a
developer of SEZ. EPS on post issue equity of Rs 400.68 crore is Rs
5.19 which now has reached to Rs 5.54 (2008/03) which signaling
improving earnings.

 MPSEZ competes primarily against Kandla port, Mumbai port, JNPT


and GMB managed ports. The key competitive advantage to MPSEZ is
its cost advantage because of the location of the port, good proximity,
connectivity and natural characteristics such as deep draft capable of
handling large vessels. Adding to advantage, its integrated business
model makes it advantageous over its competitors. Further MPSEZ is
a private enterprise where 100 percent of the revenue goes to the
company unlike other govt. operated ports.

 From valuation model I derived the equity value


per share at INR 607.41 from current financials
(FY08), whereas stock is trading at INR 570.75
(5/09/08) which seems to be attractive to bag it
while looking at its future growth prospectus.

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BIBLIOGRAPHY
1. 11th Five Year Plan 2007-12
http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v1/11th_vol1.p
df

2. A Report on Emerging Investment Opportunity in Port Development By DoS,


GoI
http://www.infrastructure.gov.in/pdf/brochure_ports.pdf

3. A Report on National Maritime Development Programme by DoS, GoI


http://shipping.nic.in/writereaddata/linkimages/NMDP2134686903.pdf

4. A Review by RBI on 2006-07 and Revised Estimates of National Income


2007-08
http://www.rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=9462#t1

5. Economic Survey 2006-2007


http://www.economywatch.com/budget/india-budget-2007/economic-survey-
2006-07.html

6. Foreign Trade EXIM Data


http://commerce.nic.in/ftpa/default.asp

7. Foreign Trade Policy 2004-09


http://dgftcom.nic.in/exim/2000/policy/contents.htm

8. India Container Potential Study - Final Report - May 2007


http://www.scribd.com/doc/3344762/India-Container-Potential-Study-Final-
Report-May
2007

9. International Maritime Organization (IMO)


http://www.imo.org/

10. Indian Port Association Port Development Plan- Volume 1


http://ipa.nic.in/Definitief%20Volume%201.pdf

11. Ministry of Petroleum & Natural Gas, GoI


http://petroleum.nic.in/petstat.pdf

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12. http://www.investmentcommission.in/ports.htm
13. www.pppinindia.com
14. www.portofmundra.com
15. www.nseindia.com
16. www.sebi.gov.in

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