19-03-2018

DP World-NIIF venture buys Continental Warehousing

Global port operator DP World Ltd in partnership with India’s National Investment and Infrastructure Fund Ltd (NIIF) has acquired multi-modal logistics firm Continental Warehousing Corporation (Nhava Sheva) Ltd (CWCNSL).

This deal will help the Dubai government-owned firm enter into related logistics segments complementing its core business and boost volumes.

The deal is the first by Hindustan Infralog Private Ltd (HIPL), a joint venture set up by DP World and NIIF to invest $3 billion of equity to acquire assets and develop projects in ports, terminals, logistics, transportation and related sectors.

The acquisition cost is less than 5 per cent of DP World’s net asset value of $10,799.6 million during the first half of 2017, DP World said in a statement.

The deal will help DP World gain access to CWCNSL’s warehouses, four container freight stations (CFS), three rail-linked inland container depots (ICD), private freight terminals (PFT) and other integrated logistics solutions. CWCNSL’s logistics network is spread across key strategic locations such as Nhava Sheva (Mumbai), Chennai, Tuticorin, Panipat, Ahmedabad, Hyderabad, Indore, Kakinada and Visakhapatnam covering over 400 acres capable of handling more than 660,000 twenty-foot equivalent units (TEUs) a year.

CWCNSL’s wholly owned unit Delex Cargo India Private Ltd provides door-to-door logistics solutions including freight forwarding and third-party logistics.

The firm is building two more rail-linked ICDs/PFTs in Bengaluru and Chennai.

Buyout plan

The DP World-NIIF JV will buy 90 per cent stake in CWCNSL including 35 per cent stake from the promoter Reddy family. It also bought the 40 per cent stake held by private equity firm Warburg Pincus LLC, 5 per cent held by The Abraaj Group and 9.73 per cent held by International Finance Corporation — the private lending arm of the World Bank.

The acquisition of CWCNSL will further enhance DP World’s presence in the entire logistics value chain in India. The current operations of CWCNSL are highly complementary to the Group’s existing business in terms of the business model and geographic footprint providing significant new revenue opportunities over the long term, the company said.

DP World, the largest listed global port operator, has invested $1.2 billion in India since 1997 and is currently the only foreign port operator running six terminals at Mundra, Jawaharlal Nehru Port Trust, Chennai, Kochi and Vizag with a combined capacity of over 6 million TEUs accounting for a market share of about 30 per cent of India’s annual container volumes shipped through its ports.

With growth in the container cargo handled at India’s ports remaining subdued due to a decade of weak global trade and more capacities coming on stream adding to the volume pressure, logistics industry officials reckon that the fight for cargo is being played out in the hinterland.

Sultan Ahmed Bin Sulayem, Group Chairman and CEO of DP World, acknowledged this during a visit to Mumbai last month when he said that India needed more cargo and fewer ports.

‘Complementary growth’

“As a global trade enabler, we aim to grow in complementary sectors of the global supply chain, which includes inland container terminals, freight corridors and logistics infrastructure. The acquisition of Continental Warehousing Corporation provides us with a scalable platform to accelerate growth in the rapidly evolving logistics sector in India,” Ahmed Bin Sulayem said in a statement on Sunday while announcing the acquisition.

Jawaharlal Nehru Port Trust is building four dry ports in its hinterland at Jalna, Wardha, Nashik and Sangli to aggregate cargo.

“The acquisition expands DP World’s logistics wide reach and help capitalise on its port terminals and license to run container trains. There are lot of challenges for foreign entities to get into CFS/ICD and PFT business,” said an industry official.

The acquisition cost is less than 5 per cent of DP World’s net asset value of $10,799.6 million during the first half of 2017, DP World said in a statement.

Source: The Hindu Business Line

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