On the opportunities & growth scope:
The government has been playing significant role in boosting the maritime sector and has taken several measures to promote operational efficiency of ports through mechanization, draft deepening and faster turnaround of vessels. The focus on logistics through Bharatmala, Sagarmala and Railways seeks to improve connectivity that is much needed for a growing economy. This will have a direct impact on the port and logistics sector, decreasing the logistics cost and making Indian exports more competitive. This will ensure enhanced cargo requirement and thus boost port traffic and sectorial growth.
Cargo traffic volumes at non-major ports have been growing at a CAGR of over 10 percent. Under the Sagarmala programme, the overall traffic volumes across both major and non-major ports are expected to grow by at least 8 per cent in the medium term.
Essar’s Ports business, which operates four terminals on the east and west coasts of India, has registered a 17.4 per cent growth in cargo volumes in Quarter I of FY2019-20 with a throughput of 13.5 million tonnes (MT).
Uniqueness in the Port operations:
Essar Ports is a leading private port terminal developer and operator in India with current capacity of 110 MTPA, which is roughly 5 per cent of India’s overall ports capacity. We operate four terminals in India – Hazira and Salaya (both in Gujarat) on the west coast, and Visakhapatnam (Andhra Pradesh) and Paradip (Odisha) on the east coast. We have invested extensively in building world-class mechanized terminals which has translated to some of the best vessel turnaround times in the Indian ports sector, giving the business and our customers a competitive edge.
Our mechanized facilities across India include: Screw type ship unloaders (one of the highest rated in India), Grab type ship unloaders, Ship Loaders (highest capacity in India), Wagon Tipplers (Twin & Rotary), Stackers, Reclaimers, Stacker cum Reclaimers, Integrated conveying systems spanning ~50 km, State-of–the-art IT systems that ensure round-the-clock uptime and monitoring of our systems and last but not the least Firefighting and dust suppression systems. Our aim is to continue investing in the expansion of our capacity and adopt higher mechanization to enable even faster turnaround of vessels.
On the Demand Drivers:
Essar Ports has commenced the current year in a spectacular way with a huge boost in numbers. It has registered a 17.4 per cent growth in cargo volumes in QI of FY2019-20 (as compared to the same period last year), with a throughput of 13.5 million tonnes (MT). Beating the industry target, and in line with the growth we have achieved in the past two years, we expect to grow at more than 15 per cent. The key drivers that helped Essar Ports consolidate its position in the sector include enhanced capacity utilization of anchor customers, capacity expansion at our terminals and considerable increase in third-party cargo. Essar Ports’ growth has been driven by a 105.6 per cent increase in third-party cargo in Q1 of FY20, compared to the same period in the previous financial year. Our third-party share of cargo has increased from five percent at one point to over 25 percent today. We plan to increase this to 50 percent in the next 3-5 years. Some of the other factors contributing to the growth and stable cash flows for the company are the balanced cargo mix and our long-term cargo handling agreements with anchor customers. Our current focus is on consolidating our existing operations and ensuring higher cargo handling numbers.
About the Way Forward:
In the coming years, we expect the sector to grow at a much faster rate. This expectation stems from the emerging trends in the sector that include rising demand for moving bulk cargoes, need for coastal movement of cargo, and the government’s push to the sector to help achieve a faster GDP growth. With focus on India becoming a USD 5 trillion economy in the near future, Essar Ports is well placed to enable the pace of business for its customers.
With investments in our four strategically located projects at Hazira, Visakhapatnam, Salaya and Paradip completed and all terminals now operational, we are eyeing at further expanding our customer base. The focus is now on increasing revenue, diversifying cargo base, optimizing costs and improving our operational and financial performance.