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Leading Indian bulk terminal operator, Essar Ports, recorded its highest ever quarterly operating revenues in the first quarter of the 2015 financial year, ending June 2014. The Rs 431.6 crore (US$ 71.9 million) revenues were up 5% compared with the equivalent months of the previous financial year. Net profits of Rs 92.2 (US$ 15.4 million) were down 9%, however, against the same period of the year before.
”This is a good, solid set of results, which I am happy with, if not overjoyed, as the infrastructure sector does not always deliver an even performance,” says Essar Ports’ chief executive and managing director, Rajiv Agarwal.” We have a lot of port projects in the pipeline that should be completed in the next two years, so I am expecting to see very good levels of growth in the following quarters. There is certainly a lot more to come from Essar Ports.”
Mr Agarwal reveals that the company will take over an existing iron ore terminal at Vizag port this September. He says, “This is an operational terminal that needs significant modernisation and upgrading, which will take about two years to complete. However operations will continue while we do this work, so taking on this facility will have an immediate impact on revenues and cargo volumes.”
The company is also setting up a dry bulk terminal at Salaya, which will have a 20 million tonnes a year capacity, and this is due to start operations in the autumn of 2015. Furthermore the company is planning to expand capacity at its existing Hazira port facility by 20 million tonnes a year, a project that should be completed by the end of next year, and is developing an 18 million tonnes a year capacity coal terminal at Paradip, which should come on line by the end of 2016.
These investments will not only expand Essar Port’s handling capacity, but will also significantly realign the business. Currently most of Essar Ports’s cargo volume is derived from other Essar group businesses. Once the investment in Salaya, Hazira, Vizag and Paradip has been completed, Mr Agarwal estimates that 75% of cargo volume will come from third parties. “We are very focussed on diversifying our customer base,” says Mr Agarwal “Increasing the third party cargo share will be a very positive development for the company, strengthening long term stability and reducing over-dependence on Essar group activity.”
Currently Essar Port has three operational terminals at Hazira, Vadinar and Paradip. Cargo handled at these facilities totalled 13.75 million tonnes in the three months to the end of June, up 6% compared with the preceding quarter. Current capacity is around 104 million tonnes a year, which will rise to 194 million tonnes over the next few years.
The focus of Essar Ports is likely to remain within India, although it is currently looking at developing a 20 million tonnes a year coal terminal in Mozambique. “New opportunities in India and overseas will be evaluated as they arise,” says Mr Agarwal, “But the priority is to deliver existing projects first before taking on fresh ones.”
Mr Agarwal is upbeat about prospects not only for Essar Ports but the Indian ports sector generally. “We have been through challenges over the past few years due to the economic downturn, and also because of the length of time required to get the necessary environmental and other clearances to proceed with port projects. Now the economy is improving and the time taken to get clearances is getting shorter. So we are moving in the right direction,” he says.
That is not to say all is rosy in the Indian ports sector. Mr Agarwal highlights the negative impact of tariff restrictions imposed on terminals in the country’s major ports, the limited drafts available at many facilities and the need for improved connectivity with inland destinations as challenges that have to be overcome. He says, “The Government is listening to our concerns and there are some signs it is taking steps as to address them.”
Indian’s economic potential is huge, and over the next decade significant further growth is forecast. “This will benefit the ports sector as the country will need additional capacity to allow the economy to develop,” he says. “Essar Ports is well placed to deliver that extra capacity and so we are confident the investments we are making will deliver very positive results in the years to come.”
