STRIKING THE RIGHT CHORDS - Essar | Creating Value

STRIKING THE RIGHT CHORDS

Essar Ports, the second largest private port player in India, aims to continue consolidate its position with expansions and other strategic investments.

www.transreporter.com

Feb 13th, 2019

Capacity expansion and increase in third-party cargo handling has helped Essar Ports Ltd consolidate its position in the sector. In an interview with TransREporters, Rajiv Agarwal, CEO and MD, Essar Ports Ltd said that the company is focused on completion of ongoing projects within timelines and budget besides improvement in profitability.

Essar Ports is aiming to increase its total port handling capacity to 110 million tonnes this year through its four terminals. What’s your roadmap to achieve this? How much of contribution will Salaya terminal have in it?

Till date we have made investments in the development of Port Terminal facilities in excess of $1.6 billion in India. We have recently completed investment across Salaya Terminal (20 MMTPA), Vizag Terminal (24 MMTPA) and are in process of expanding the Hazira Terminal by another 1,100 meter with mechanization. Presently, the overall port capacity is 95 MMTPA. Post completion of the Hazira expansion, the overall Port capacity will increase to 110 MTPA. We expect the contribution in terms of revenue from Salaya to increase to $100 Million over next three to four years.

Our key strategic objectives include completion of ongoing projects within timelines and budget, increase in share of third party cargo to more than 40 per cent of the total cargo handling portfolio with increase in overall cargo handling at the existing port facilities. The overall objective is to improve profitability and return on capital employed.

The company expanded its Vizag operations, and also plans to invest 4.5billion in Hazira terminal as well $500million in Mozambique. Do you see it as an opportunity to establish yourself as a major player in South East Asia?

Essar Ports is one of the leading private port terminal operators in India with current operational capacity of 95 MMTPA with four state-of-the-art port terminals at strategic locations on both the east and west coasts of India. We have a balanced cargo mix and our assets are backed by long term concession agreements with take or pay contracts ensuring stable cash flows to the company. The expansions undertaken in Vizag and Hazira are in line with the overall plan to enhance capacity to cater to the enhanced traffic.

 The company has seen 11 per cent increase in overall cargo handling this year, which is quite significant given the sluggish port trade. What, according to you, contributed towards the growth? How much of it translated into revenue?

We expect to continually improve our operational performance with faster turnaround times at our terminals through our sustained investment in state-of-the art technology. The strategic location, deep draft facilities with superior cargo handling capabilities help us to further the national goal of port-led development and overall reduction in logistics cost.

Over the past two years we have witnessed 34 per cent annualised growth in traffic, 33 per cent annualised growth in Captive Cargo traffic and 43 per cent annualised growth in third party cargo. We attribute the significant growth in cargo handling to rising demand for coal and iron ore in the country primarily on account of our anchor customers and boost in traffic on account of the recently commissioned facilities in Vizag and Salaya.

For Essar Ports, mineral loading especially iron ore and coal has been significant. Moving forward, do you wish to remain majorly into handling minerals or are you looking to diversify?

Our facilities are capable of handling dry bulk cargo by way of export as well as import. While majority of cargo handled comprises of coal and iron ore we also have facilities that cater to variety of other dry bulk cargo like limestone, dolomite, bauxite, fertiliser, gypsum etc. and finished steel cargo like coils, plates, pipes and other over dimensional cargo. We expect that these commodities will continue to dominate the market growth and we are ideally positioned to enjoy the same. The company presently does 20 per cent third party cargo, which is expected to reach to 40 per cent in the coming years.

Essar Ports ran through some rough patches. How did the company manage to keep its sheen?

We have been witnessing steady growth in cargo movement via sea route in India. From FY07 to FY17, the traffic at Indian Ports had grown at a CAGR of 5.7 per cent. While the Major Port traffic increased at a CAGR of 3.40 per cent and the non-major ports traffic had grown at a CAGR of 10.10 per cent. The non-major port market share has increased from 28.60 per cent in FY07 to 42.80 per cent in FY17.

Our capacity expansion at various terminals and increase in third-party cargo handling has helped us in consolidating our business. For FY18 alone we have seen cargo growth of 19 per cent over FY 17 with third party business growing by more than 43 per cent. Our focus has been to enable customers enjoy economies of scale by handling larger parcel sizes with shorter turnaround times through our state of the art eco-friendly Port Terminal facilities.

What are the major projects undertaken by Essar Ports?

Some of the facilities include:

  • 35 MMTPA multi-purpose and multi-commodity Port Terminal in Hazira
  • 24 MMTPA Iron Ore Terminal in Vizag Port, one of the biggest iron ore handling complexes in the country
  • 20 MMTPA Dry Bulk Terminal in Salaya, deep draft direct berthing facility of Saurashtra Region
  • 16 MMTPA Dry Bulk Terminal in Paradip Port, delivering one of the best operational parameters for iron ore handling in Paradip Port

In addition to above, the company had also developed and operated 58 MMTPA Liquid Terminal in Vadinar which catered to Essar Oil Refinery requirements. The same has been hived off along with Essar Oil as part of one of the biggest transactions in India in 2017.

How do you see the Sagarmala project lending a push to the ports industry?

Development of inland waterways and multiple terminals and commencement of cargo movement on the same by industries is a big boost to the initiative. Other initiatives like mechanization and modernisation of terminals, hinterland connectivity, push for coastal movement of cargo and Ro Ro terminals development not only paves way for overall logistics cost reduction making India more competitive and boost exports but also free up road and rail capacity for other uses.