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Andhra Pradesh Cabinet gives final nod for stake sale in Gangavaram Port

Monday, 09 Aug 2021

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The Andhra Pradesh Cabinet, led by Chief Minister YS Jagan Mohan Reddy, has approved the sale of the state government’s 10.4 percent stake in Gangavaram Port (GPL) to Adani Ports and Special Economic Zone (APSEZ) in a deal valued at Rs 120 a share, translating into a consideration of Rs 645.10 crore.

The Cabinet also backed APSEZ’s proposal to allow the merger of GPL with APSEZ. After the merger, APSEZ will form a new special purpose company to run the port for the balance period of the concession ending in 2059.

The Cabinet signed off on the recommendations made by a six-member Empowered Group of Secretaries formed to oversee the stake-sale per a previous Cabinet decision on 4 May 2021.

APSEZ approached the state government with a proposal to buy its 5,37,31,700 shares (10.4 percent stake) at Rs 120 a share.

The move followed the acquisition of 31.5 percent stake from Windy Lakeside Investment (an affiliate of US private equity firm Warburg Pincus) and the 58.1 percent stake held by DVS Raju and family, the promoters of Gangavaram Port, both for Rs 120 per share.

The recommendations of SBI Caps may also be examined by the committee to arrive at a specific share value of the government stake proposed to be transferred to APSEZ.

The Andhra Pradesh government held the 10.4 percent stake, not by putting cash but in lieu of the 1,800 acre of land that was acquired for the port in 2003 and transferred to the port developer, which at the time was valued at Rs 54 crore.

At current market rate, the value of this land is said to be more than Rs 3,000 crore, implying that the value of the stake could be much higher than the Rs 120 per share that APSEZ paid the other two shareholders.

Windy Lakeside Investment has already been issued shares in APSEZ as consideration for the shares it sold in Gangavaram Port to APSEZ. DVS Raju and family will also be issued shares in APSEZ for the shares it sold in GPL.

The purchase of the Andhra Pradesh government stake will make Gangavaram Port fully owned by APSEZ. The total price for the acquisition will be Rs 6,203.10 crore.

GPL, located next to the Centre-owned Visakhapatnam Port Trust, is the second-largest non-major port in Andhra Pradesh with a capacity of 64 million tonne.

Gangavaram is a deep-water port capable of handling fully laden super cape size vessels. Currently, GPL operates nine berths and has freehold land of about 1,800 acre. With a master plan capacity for 250 million tonne with 31 berths, GPL has sufficient headroom to support future growth.