‘Capacity expansion, enhanced capacity utilisation of anchor customers & significant increase in third-party cargo handling has helped Essar Ports consolidate its position’
Jul 19th, 2019
The multi-cargo Essar Ports is one of the largest private sector port operators in India by capacity and throughput. With four operational terminals in India, it has plans to further expand capacities and customer base, improve operational and financial performance, and boost third-party cargo handling, says Mr Rajiv Agarwal, MD & CEO, Essar Ports Ltd, in an exclusive interaction with Exim India.
Please share an update on the business and operations of Essar Ports
Essar Ports has commenced the current financial year with a huge boost in numbers. It has registered a ~28 per cent growth in cargo volumes in Quarter I of 2019-20 with a throughput of ~13 million tonnes (MT).
Essar Ports’ growth has been driven by a 100 per cent increase in third-party cargo in Q1 of FY20, compared to the same period in the previous financial year. Cargo volumes from captive customers also grew by 11.3 per cent during this period.
We operate four strategically located terminals in India—Hazira (50 MT) and Salaya (20 MT) on the west coast (both in Gujarat), and one each in Visakhapatnam Port (24 MT; Andhra Pradesh) and Paradip Port (16 MT; Odisha) on the east coast. The current operational capacity of the port terminals in India is 110 MTPA. We specialise in handling bulk, break-bulk and general cargoes by way of both import and export.
What were the key factors that helped you in the past few years to become one of the largest port operators in India?
Capacity expansion, enhanced capacity utilisation of anchor customers and significant increase in third-party cargo handling has helped Essar Ports consolidate its position in the sector. Moreover, we have:
- A balanced cargo mix
- Terminals with long-term concessions or licence agreements with port authorities
- Long-term cargo handling agreements with anchor customers
These factors have helped ensure stable cash flows for the company.
How would you explain the critical milestones you have attained so far?
Our biggest milestones have been the commissioning of targeted cargo handling capacity at our four terminals. The recent ones have been in Salaya and Vizag, along with major expansion in Hazira. We have invested significantly in developing world class fully mechanised terminals. This has translated to some of the best vessel turnaround times in the Indian ports sector, giving the business, and our customers, a competitive edge. Now that we have completed our capital investments across our four ports, we have been notching up industry-best EBITDA margins.
What are the company’s expansion plans, both in India and elsewhere in the world? Which are the international markets that the company is currently present in and which it aims to expand into over the next few years?
All our terminals are scalable and come with the necessary infrastructure to double the capacity. Being one of the largest private port terminal developers and operators in India, we expect to grow at more than 20 per cent in the near future, beating industry benchmarks. Having said that, our focus currently is on consolidating our existing operations and ensuring higher cargo handling numbers.
How much of investment has been made in your port business so far? And what is the projection for the future?
Until date, we have invested over $ 1.5 billion (about Rs 11,000 crore) in the development of port and terminal facilities.
What kind of turnaround schedules are you maintaining at your ports?
All our terminals have deep draught to accommodate vessels upwards of 100,000 tonnes DWT. All the terminals are highly mechanised and equipped with the latest cargo handling equipment, thus ensuring most competitive vessel turnaround times in the Indian ports sector.
The Hazira terminal has four 2,500 TPH (tonnes per hour) ship unloaders, while the Paradip Port can load up to 5,000 TPH. But by far the fastest product loading can be done at our Visakhapatnam iron ore terminal, which is India’s largest iron ore handling complex, and has an 8,000 TPH loader. The Salaya terminal, on the other hand, has a ship loader of 1,500 TPH and 2 unloaders of 2,500 TPH capacity.
Essar Ports aims to increase third-party cargo from 21 per cent to 50 per cent by FY20. Can you update us on the progress?
We have already enhanced the share of our third-party cargo from five per cent at one point to over 25 per cent today. We plan to increase this consistently to 50 per cent over the next few years. Overall profitability contribution from third-party business is also expected to grow along similar lines. Volumes will remain robust since our anchor customers are expected to ramp up with enhanced capacity utilisations. That will mean additional cargo, which augurs well for the business and makes us upbeat about the growth in third-party cargo.
What are your thoughts on Green Ports?
We truly believe that Green Ports are the future of the industry, and the way forward for facilitating environmentally sustainable economic growth. It will significantly diminish harmful emissions that are damaging the health of the environment and of the residents who live nearby. At Essar Ports, we take pride in driving environment-friendly initiatives like developing deeper draughts and installing mechanised cargo handling systems.
Our Vizag terminal is particularly a case study, where we invested significantly in reducing the carbon footprint by undertaking many green initiatives, the most notable being the covering of the entire conveyor system. The revolutionary cold-fog system has been installed, and complete mechanised handling of cargo has been ensured, which has resulted in reduced emissions and zero spillage.
Hazira is emerging as a successful port in Gujarat. What are the infrastructure/technology augmentations planned at the facility?
The 50 MTPA Hazira port terminal is a world class facility. It is an all-weather deep draught port terminal capable of handling bulk, break-bulk, general cargo and finished steel products. The terminal is accessed through a ~8 km channel and periodic dredging is being undertaken. It has four 2,500 TPH ship unloaders (4th being commissioned in 2019 itself), which ensures excellent vessel turnaround times. We have expanded the berth infrastructure to 1,650 m waterfront, and will continue to invest in mechanisation to enable faster turnaround of vessels. Recently, we have also added a RoRo passenger ferry terminal at Hazira.
When it comes to your Indian ports, what would be the ratio between your captive business and third-party cargo?
As mentioned, about a fourth of our cargo today is third-party. We plan to increase this to 50 per cent in the next 3-5 years.
How much percentage of cargo is handled by Essar Ports of the total cargo in India?
The capacity of Essar Ports’ four terminals is roughly 5 per cent of India’s total ports capacity.
What are the future plans of the company?
Having completed our capacity expansion projects at Hazira, Visakhapatnam, Salaya and Paradip, we now look forward to expanding our customer base by providing world class facilities and turnaround times. So the focus is on improving our operational and financial performance even further. There is a significant line-up of projects (modular in nature) which will expand the capacities of our Hazira and Salaya terminals.
Could you share your thoughts on the growth potential for the ports sector (especially the private sector) in India over the next three to five years?
More than 60 per cent of Essar Ports’ capacity is in non-major ports. Traffic volumes at non-major ports have been growing at a CAGR of over ~10 per cent. In fact, overall traffic volumes across both Major and non-major ports are expected to grow by at least ~8 per cent in the medium term on the back of the Sagarmala programme. Beating the industry target, and in line with the growth we have achieved in the past 2 years, we expect Essar Ports to grow at more than 15 per cent.
In the coming years, we expect the sector to grow at a higher rate. This expectation is supported by the visible trends that are emerging in the sector, which includes increased demand for moving bulk cargoes, enhanced need for coastal movement of cargo, and the overall GDP growth forecasts.
Source: Exim India