Essar Ports cranks capacity machine into high gear

Essar Ports, India’s second-largest private port company, is back from Citi India Investor Conference. Here are some key takeaways.

With a capacity of 88 million tonnes per annum (mtpa) , the firm is in a capacity overdrive. By FY14, the company will be adding 70 mtpa at Salaya, Paradip and Hazira. The ports primarily cater to bulk cargo requirements – coal, iron ore, POL – for the group’s expansion plans. It has two operational ports at Vadinar (58 mtpa) and Hazira (30 mtpa).

[caption id=“attachment_22911” align=“alignleft” width=“380” caption=“Essar Ports has a clear visibility of revenues for its proposed expansion. Amit Dave/Reuters”]  [/caption]

For the current financial year, the company is lining up a capex of Rs 2,100 crore. The management expects a revenue of Rs 1,200 crore with EBIDTA margins of 71-75% and net profit of Rs 150-175 crore. Once the ports are commissioned, Essar Ports intends to get the debt refinanced at lower interest rates.

More from Investing

MSMEs are breaking the traditional convention. Look who’s funding them Scale-up your startup without an investor! Here’s how

UCO Bank has refinanced the company’s Hazira port, which has a provision of for repayment of principal after the first three years, thus helping Essar Ports reinvest the cash flow towards equity contribution for the expansion.

Essar Ports has a clear visibility of revenues for its proposed expansion. Essar Oil is ramping up its capacity to 18 mtpa in FY12 and 20 mtpa in FY13. Essar Power is setting up a 3,100-mw imported coal-based power plant in Salaya. Likewise, Essar Steel has scaled up its capacity at Hazira to 9.6 mtpa. Of its proposed 158 mtpa capacity, the company has 75 mtpa cargo tied up with these three group companies on a take or pay basis.

Merchant rates have been trending up over the last year. The company plans to raise its third party cargo to 40% of its overall volumes on the completion of capacity expansion. Tankage facilities at Vadinar are firmly on course and the company is in talks with traders for stepping up third party cargo. But forest clearances are pending at Salaya and Paradip which are expected to be commissioned by March 2013.