Singapore-based global port operator PSA International Pte Ltd, in partnership with private equity firm Gateway Partners Ltd, will acquire a controlling stake in Distribution Logistics Infrastructure Pvt Ltd (DLI) from Infrastructure India Plc (IIP) for $125 million. IIP is an AIM-listed closed-end investment firm focussed on infrastructure.
The deal will help PSA, a unit of Singapore’s sovereign wealth fund Temasek, have greater control over the container supply chain in the hinterland.
Headquartered in Bengaluru and Gurugram with a presence in central, northern and southern India, DLI provides a broad range of logistics services such as rail freight, trucking, handling, customs clearing and bonded warehousing. It has terminals in Nagpur, Bengaluru, Palwal (NCR) and Chennai.
DLI, which holds a licence from the Railways to run container trains pan India, is fully owned by IIP.
IIP and PSA confirmed the deal, which is subject to approvals from the Indian Railways and lenders including Bank of Baroda and Punjab National Bank.
PSA International, one of the earliest global firms to invest in port terminals in India when it was opened to private funds in the late 1990s, currently runs facilities at Chennai Port Trust, VO Chidambaranar Port Trust, Kolkata Port Trust, Jawaharlal Nehru Port Trust (all Central government-owned ports) and Kakinada port (a private port). These terminals have a market share of about 15 per cent of India’s container market.
“It will be interesting to look at the hinterland,” Tan Chong Meng, Group CEO of PSA International, had told during a visit here in February to open the new container terminal at JNPT.
“The train will be the driver on how fast we grow. With India developing as a consuming powerhouse, inland is not a bad idea. With today’s technology, presence in the hinterland, in the key hubs, may also be meaningful so that we can serve customers at more points,” Meng had said.
PSA International will acquire DLI through PSA India Intermodal Pte Ltd, a subsidiary. The acquisition will be done in two stages. First, PSA-Gateway will buy a 24 per cent equity in DLI India (DLII), the Mauritius-based parent company of DLI, for $50 million.
It will also subscribe to 7,500 convertible preference shares (CPS) in DLII, investing $75 million in multiple tranches at a price of $10,000 a piece. per DLII CPS.
In both the investments, PSA’s share will be 70 per cent.
PSA-Gateway has also conditionally agreed to subscribe for an additional $10 million of DLII CPS in the event of DLI’s construction and project cost overruns.
On conversion of the DLII CPS, IIP’s stake in DLI will be reduced to a minimum of 20 per cent and a maximum of 49 per cent.
However, on conversion of the DLII CPS following the occurrence of a default under any of the transaction documents, Infrastructure India Plc’s interest in DLI could be reduced to zero.
DLI will utilise the funds for the construction and completion of integrated logistics parks in Palwal, Nagpur and Anekal (Bengaluru) as well as the container freight station-linked free trade warehousing zone in Chennai.