P. MANOJ
Steel pipe-maker Jindal Saw Ltd plans to acquire Freightstar Pvt. Ltd, the India-based container train operating unit of Dubai's ETA Group, for 1 billion to 1.5 billion rupees, as a shakeout continues in the sector, according to two persons familiar with the deal, reports Mint from Bangalore.
Freightstar has a licence to run container trains on all routes across India.
The transaction documents are being signed and the deal is expected to be announced in the next few days, one of them, an executive at Freightstar, said on condition of anonymity.
The acquisition will help Jindal Saw become India's only multi-modal logistics firm to have its own inland cargo terminals, operating container trains and ships.
Freightstar is among the 16 companies that were granted licenses by the Railway Ministry to run container trains on Indian Railway's tracks after the government privatized container freight train operations in 2006, ending the monopoly of Container Corporation of India Ltd. Freightstar has a licence to run container trains on all routes across India. It currently operates 11 trains both on the domestic as well as the export-import routes.
The company, also, is constructing inland cargo terminals at Nagpur and the National Capital Region.
These assets have been, or are being built with an investment of about 3 billion rupees, of which the equity portion would be about 1 billion rupees, and the balance would be raised from the capital markets, the Freightstar executive said.
Ernst & Young India Pvt. Ltd is advising Freightstar on the transaction.
"The ETA Group feels that because of the recession in Dubai they need to concentrate on their core business," the Freightstar executive said. "Therefore, it is exiting the container train business in India."
The purchase provided "tremendous synergy for Jindal Saw," he said.
Indresh Batra, managing director of Jindal Saw, could not be reached for comments. But Mr. Batra told Reuters in an interview last week that Jindal Saw was in talks to acquire a logistics firm that runs container trains and owns inland cargo terminals at key locations, without naming the company.
"The acquisition will provide the last mile of connectivity and enhance the synergy required to operate bulk movement of cargo along the coast," said a spokesperson for Jindal Saw on Tuesday, adding that the firm was consolidating its operations.
Jindal Saw runs a fleet of eight ships that haul bulk and break-bulk cargo on domestic routes. These ships are operated under Jindal Vector, the brand name for Jindal Waterways Ltd, the short-sea and river transport unit of Jindal Saw.
The company's purchase of Freightstar continues the trend of the past two years of investments and stakes in the freight business.
In April 2009, India Value Fund acquired a majority stake in Innovative B2B Logistics Solutions Ltd (Inlogistics), another licensed container train operator, for about 2 billion rupees.
In November that year, Blackstone Group LP, the world's biggest buyout firm, bought a 37.3% stake in Gateway Rail Freight Ltd, the container-train operating unit of Mumbai-listed container logistics firm Gateway Distriparks Ltd, for 3 billion rupees.
In November 2010, Cafe Coffee Day's V.G. Siddhartha acquired a 15% stake in Chennai-based logistics company Sical Logistics Ltd for 2 billion rupees. The deal gave Mr. Siddhartha access to Sical Multimodal and Rail Transport Ltd, which has a licence to run container trains.
Courtesy: Mint, Bangalore
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