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DP World-NIIF platform makes debut with $400 million Continental Warehousing buy

Earlier this January, NIIF, India’s first sovereign wealth fund and DP World had announced the creation of an investment platform Hindustan Infralog to invest .

, ET Bureau|
Mar 18, 2018, 12.19 PM IST
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The platform that piped PSA International of Singapore, the world’s largest port operator and Macquarie, is buying 90% of the company while the Indian promoters will retain a 10% share.
Dubai’s port operator DP World along with The National Investment and Infrastructure Fund (NIIF) is buying Continental Warehousing Corp (Nhava Seva), one of the largest companies in the logistics sector in India for $400 million from its PE investors.

Earlier this January, NIIF, India’s first sovereign wealth fund and DP World had announced the creation of an investment platform Hindustan Infralog to invest up to $3 billion in ports, terminals, transportation and logistics businesses in India. The Continental acquisition will be the first investment of the platform.

The platform that piped PSA International of Singapore, the world’s largest port operator and Macquarie is buying 90% of the company while the Indian promoters will retain a 10% share, said officials in the know.

Private Equity firms Warburg Pincus, Abraaj and IFC Washington together own 60% of the company, with the former being the single-largest shareholder at 40.4%. Abraaj and IFC own 20% while the remaining 40% is held by N Amrutesh Reddy, executive director and promoter.

Continental Warehousing, the flagship company of Chennai-based NDR Group, owns and operates cargohandling facilities such as container freight stations (CFS), multimodal cargo handling terminals (MMTs) and private freight stations. It also provides express cargo and third-party logistics services.

Barclays, Citi and Deutsche Bank were the advisors in the transaction.

ET was the first to report about this impending transaction in its September 23rd edition.

Continental had received regulatory approval for an initial public offering (IPO) in December last year. However, it has opted to look for a strategic buyer instead, said one of the people cited above.

Established in 1997, Continental is one of the country’s largest container warehousing firms. It owns and operates container freight stations (CFS), inland container depots (ICDs) and private freight terminals across the country. It currently has 10 facilities comprising four CFS, including ones in Chennai, Tuticorin and Mumbai, one multimodal cargo handling terminal in Hyderabad with two planned in Ahmedabad and Panipat, and three ICDs.

Continental reported total revenue of Rs 709.3 crore for FY16, up 18.2% from the year before. Net profit stood at Rs 94.86 crore, while ebitda was Rs 105 crore. In FY17, the company clocked around Rs 90 crore EBITDA on a Rs 750-crore top line.

Having invested $100 million in 2011, Warburg will make a significant return on an exit at the valuation mentioned above would give Warburg Pincus a return of nearly three times. Abraaj got the stake when it acquired private equity firm Aureos Capital in 2012. IFC is a recent investor, having pumped in $65 million through a mix of debt and equity in 2015.

With ecommerce booming, the government’s focus on road and infrastructure development and the goods and services tax being rolled out, the logistics sector is primed for foreign investment. Earlier this year, Canada Pension Plan Investment Board (CPPIB), which manages about $218 billion, said it will invest about $500 million in a joint venture with Mumbai-based IndoSpace Industrial & Logistics Parks to acquire logistics facilities in India.

Container volumes at major Indian ports’ grew 18% YoY in Feb ’18 (+8% during April -Feb ’18) while Indian Railway’s EXIM volumes too registered strong double-digit growth for seventh consecutive month indicating continued recovery in growth for container train operators, said Achal Lohade and Manish Agrawal, analysts at JM Securities.

DP World was an early entrant into India having deployed about $1.2 billion thus far, it operates six terminals and has a 30% market share. At its last investor meet, the company committed a further $1-billion investment in India for both organic and inorganic growth opportunities.

The formation of NIIF-DP World partnership follows the memorandum of understanding signed in May 2017 and the visit to India by Sheikh Mohammed bin Zayed al Nahyan, crown prince of Abu Dhabi, and Sultan Ahmed bin Sulayem, chairman and CEO of DP World Group, in February 2016.

According to bin Sulayem, the expertise of DP World in building logistics infrastructure, together with the NIIF’s local knowledge and government partnership, will be the right combination to take advantage of the significant growth opportunities in India.

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