International investment company 3i Group Plc. is set to buy 24% equity for Rs994 crore at Krishnapatnam Port Co. Ltd, or KPCL, which will develop and operate a seaport on the eastern coast.
The UK-based private equity firm has secured approval from India's Foreign Investment Promotion Board, or FIPB, on 30 September to invest in KPCL, and the proposal now will have to be cleared by the cabinet committee of economic affairs, or CCEA, since the amount involved is above Rs600 crore, said a shipping ministry official with knowledge of the decision. He did not want to be named ahead of a formal approval from CCEA.
KPCL's port project in Nellore district of Andhra Pradesh is expected to handle 100 million tonnes of cargo every year through an all-weather, deepwater harbour.
3i Group has also sought FIPB approval to invest another Rs803 crore in KPCL, as well as a separate investment of Rs141 crore, the ministry official said. The port project is estimated to cost about Rs10,000 crore.
In August, Chinta Visweswar Rao, chairman of Hyderabad-based CVR Group, which controls KPCL, had told Mint that the port operator would sign an agreement with 3i after it "obtained clearance from FIPB."
A public relations firm for 3i in India said the fund would not comment on any deal until it was completed. An FIPB official declined comment.
In April, 3i Group set up a $1.2 billion (Rs5,844 crore at prevailing exchange rates) India infrastructure fund and said at the time that it would look at close to 10 investments. It has already invested $227 million in Adani Power Pvt. Ltd and $101 million in engineering and construction firm Soma Enterprises Ltd.
If approved by CCEA, the KPCL investment will be 3i's second port deal in India after its investment in Mundra Port and Special Economic Zone Ltd, or MPSEZ, a company promoted by the Adani Group to develop and operate the deep-water Mundra port and special economic zone in Gujarat on India’s western coast.
While KPCL is unlisted, MPSEZ went public in November last year.
In November 2006, 3i Group invested $44.4 million for a 10% stake in construction firm Navayuga Engineering Co. Ltd, the flagship of the CVR Group, formerly known as the Navayuga group.
India's ports are projected to increase cargo handling capacity to 1,855 million tonnes (mt) by 2012 from about 758mt now, with an investment of about Rs1 trillion, as foreign trade expands. Private firms are expected to invest at least 65%, or Rs65,532 crore of this amount, according to the shipping ministry.
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