3i India Infrastructure Fund yesterday announced it will pay $161 million for a minority stake in Indian port operator, Krishnapatnam Port Company (KPC).
KPC has been awarded a 30-year concession (extendable to 50 years) from the government of Andhra Pradesh, one of India's leading states, to develop the Krishnapatnam port. KPC will be upgrading the existing minor port on a build-operate-share-transfer basis. Krishnapatnam is the first of the state-owned minor ports to be awarded to a private party for development and private operations. The first phase commenced operations in July 2008.
Krishnapatnam is a deep-water, all-weather port located in the Nellore District of Andhra Pradesh, 180 kilometres from Chennai. It is being equipped to handle containers, bulk cargo like coal and iron ore, break bulk cargo like granite, petrochemicals and project cargos.
As with other infrastructure areas, the port sector in India is forecast to grow quite strongly as it is currently capacity constrained. India's Planning Commission estimates that traffic at Indian ports will grow to 1.225 billion tonnes by 2014 from 700 million tonnes in 2007 and reckons that the country requires around $20 billion of investments in ports over the next five years.
The sponsor of KPC is Hyderabad-based CVR Group whose flagship concern is Navayuga Engineering. Since 1986 Navayuga has built expertise across ports and other marine works, roads and bridges, power units, lift irrigation and modern mass transit systems.
3i is a private equity firm with investments across Europe, North America and Asia. In March 2008, the firm raised $1.2 billion for the 3i India Infrastructure Fund, exceeding a $1 billion target. The fund obtained commitments from limited partners in 10 countries. 3i Infrastructure Limited, the FTSE 250 infrastructure investment company, and 3i are the largest investors and have each committed $250 million to the fund.
The India Infrastructure Fund is targeting around 10 investments. It has already deployed $227 million in Adani Power, a developer of power plants across India, and made a $101 million investment in Soma Enterprise, an infrastructure developer focused on build-operate-transfer projects.