Gujarat Pipavav Port Indian Port Operator | Gujarat Pipavav Port Developer | Gujarat Pipavav Port National Stock Exchange

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The company mopped up Rs 500 crore from the public issue. The IPO was in the price band of Rs 42-48 per share and after closing, the issue price was fixed at Rs 46 per share.The issue opened on August 23 and closed on August 26. It was subscribed 19.94 times.Gujarat Pipavav Port is the developer and operator of APM Terminals Pipavav, which has multi-cargo and multi-user operations. The company is mainly engaged in providing port handling and marine services for container, bulk and LPG cargo and is promoted by APM Terminals, which owns 57.9 per cent equity interest in the company.

Gujarat Pipavav operates APM Terminals Pipavav, which is India’s first private sector port, and has multi cargo and multi user operations. APM Pipavav is located in the Saurashtra region in Gujarat, and is an all weather port. It provides port handling and marine services for container cargo, bulk cargo, and LPG cargo. It commenced cargo handling operations in 1996, and container handling services in 1998. Their capacity is to handle up to 0.60 million TEUs of container cargo, and approximately 5 million tonnes of bulk cargo per year.

The thing that jumps at you when you look at the income statement of Gujarat Pipavav is the huge interest expense. In 2009, they had revenues of Rs. 2,244.98 million, and borrowing cost of Rs. 1,156.78 million, which is about 51.5% of its revenues!No wonder then that the company has not turned a net profit in any of its past five years (for which I saw numbers in the prospectus). The company states that Rs. 3 billion raised from this IPO will be used for prepayment of loans, which forms the bulk of its utilization from the IPO proceeds.

There is outstanding debt of Rs. 10,749.53 outstanding as on June 30 2010, so about 28% of that is being pre-paid by the company, and this should reduce the interest payment by a similar ratio.The cash flow statement shows that the company had negative operating cash flows for the past 3 years, but had a positive operating cash flow for 2007, 2006 and 2005.The company has a book value of Rs. 9.78 as on December 2009, and here is how it stacks up against Mundra Port which it has listed down as its competitor in its prospectus.

Mundra Ports traded for about Rs. 800 last Friday, so you can make a rough comparison based on price to book value from there. Keep in mind though that Mundra is much bigger than Gujarat Pipavav in terms of absolute size.Interestingly enough the company has a Traffic Guarantee Agreement with the Indian Railways and has not been able to meet the minimum guaranteed traffic and as a result has had to pay Rs. 1076 million in 2008, Rs. 306 million in 2009, and Rs. 54 million in 2010 to them. As you can see these numbers are coming down, and very soon the company could generate enough traffic to bring this number down to 0.

So two big bleeders for the company – borrowing costs and guarantee payments are likely to come down in the future. In fact, CRISIL expects the gearing of the company to come down from 4.7x in Sep 2009 to 0.9x in CY 2012. So, the company could be looking at an improved profitability in the coming years.This has been an interesting IPO to look at, and these were some points that I found interesting about the company.


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