Source: ET Bureau
Dubai government-owned port operator DP World Ltd is said to buy Distribution Logistics Infrastructure Pvt Ltd and its group companies (DLI India) from Infrastructure India Plc (IIP) after the Alternative Investment Market (AIM) London-listed fund scrapped an earlier agreement with Pristine Malwa Logistics Park Pvt Ltd (Pristine Malwa) to sell the rail logistics company, multiple sources said.
“Infrastructure India Plc is in discussions with a third party and has received preliminary terms for the sale of DLI,” the AIM quoted infrastructure fund that invests directly into assets in India, said in a 15 April regulatory filing, without naming the “third party”.
These discussions are ongoing, although there can be no guarantee that these will lead to definitive agreements for the sale of DLI, it said.
Multiple sources with knowledge of the talks told ET Infra that DP World had undertaken due diligence of the financially stressed DLI for a potential acquisition.
In the 15 April regulatory filing, IIP said that a loan recall notice was received by Distribution Logistics Infrastructure India Ltd on 12 April from lenders to DLI’s project debt.
Distribution Logistics Infrastructure India, IIP’s largest holding in India, owes some Rs700 crores to lenders led by Bank of Baroda.
A loan recall notice in India, IIP said, is a precursor for the lenders to DLI to invoke Insolvency and Bankruptcy Code if DLI presents no satisfactory response to the notice within two weeks from the date of issue.
DLI was granted a grace period for debt servicing by its lenders until February 2024 and DLI management has been in discussion with the lenders on settlement of dues.
On 15 February 2024, IIP said in a regulatory filing that it “will not be proceeding with the conditional sale of the Group’s interest in 99.99% of Distribution Logistics Infrastructure Pvt Ltd to Pristine Malwa Logistics Park Private Limited, announced on 6 September 2023”.
Some key areas of the conditional share purchase and shareholders’ agreement were subject to final agreement, which could not be reached in a manner satisfactory to the IIP Board, in the best interests of IIP shareholders, and potentially materially undervalued DLI in the Board’s view, IIP said.
“Consequently, Distribution Logistics Infrastructure Limited (Mauritius), IIP’s wholly owned subsidiary, has issued a termination notice to Pristine Malwa. Neither Pristine Malwa nor DLI had fulfilled all conditions precedent, and the long stop date (31 March 2024) has expired without a mutually agreed extension,” it said.
Pristine Malwa has termed the termination of the deal as “unilateral” and challenged it in the Delhi High Court, where the matter was heard last week.
Once a loan account becomes a non-performing asset (NPA), the lenders have to follow a transparent process, bankers said.
“The right method is that, now since the loan account has become NPA, and if the lenders want to sell/recover the loan, the best way is to opt for the Swiss Challenge route or call an expression of interest for the bankrupt company under IBC. Whatever method the lenders adopt should be a transparent one,” a banker said.
DLI is a supply chain transportation and container infrastructure company headquartered in Bangalore and Gurgaon with presence in central, northern and southern India. DLI provides a range of logistics services including rail freight, trucking, handling, customs clearing and bonded warehousing with terminals located in the strategic locations of Nagpur, Bangalore, Palwal (in the National Capital Region) and Chennai.
DLI owns Integrated Logistics Park (ILP) cum Private Freight Terminals (PFTs) in Nagpur and Bangalore, with one more ILP under construction in Palwal region of NCR. It also owns 120 acres of land in Chennai besides holding a warehouse facility in Hassan, Karnataka.
DLI is also a Category 1 container train operator license holder owning ten rakes currently deployed in its Nagpur facility.
IIP said that operations of DLI were “muted due to liquidity constraints and the focus on due diligence”. Operations at Nagpur terminal remained steady although domestic volumes were impacted by the limited working capital funding.
In 2018, D P World and National Investment and Infrastructure Fund (NIIF), India’s sovereign wealth fund, formed a joint venture named Hindustan Infralog Pvt Ltd (HIPL), seeking to invest as much as $3 billion in rail logistics, multi-modal logistics parks, container freight stations, economic zones, cold chain infrastructure and contract logistics to create an integrated logistics platform.
Since its inception, HIPL has made substantial investments.
In May 2019, Hindustan Infralog acquired a 76 per cent stake in KRIBCHO Infrastructure Limited (KRIL), an integrated multi-modal logistics firm earlier promoted by fertiliser making cooperative society Krishak Bharti Cooperative Limited (KRIBHCO).
In March 2018, Hindustan Infralog acquired Continental Warehousing Corporation (Nhava Seva) Ltd (CWCNSL), also a multi-modal logistics operator, to help the Dubai government-owned firm enter related logistics segments complementing its core business of port terminals and boost volumes.
In October 2018, the D P World-NIIF JV won a tender to develop and operate a Free Trade Warehousing Zone (FTWZ) on 18 hectares at India’s largest state-owned container gateway – Jawaharlal Nehru Port Authority (JNPA)- for $78 million.
D P World has invested some $1.2 billion in India since 1997 and is currently the only foreign port operator running five terminals at strategic growth locations in Mundra, Jawaharlal Nehru port, Chennai and Cochin. These terminals manage more than 5 million twenty-foot equivalent units (TEUs) a year, accounting for a market share of over 20 percent of India’s annual container volumes shipped through its ports.
In June 2022, NIIF invested Rs2,250 crores ($300 million) for a 22.5 percent stake in Hindustan Ports Pvt Ltd (HPPL), a wholly owned unit of DP World.
The investment is NIIF Master Fund’s single largest investment yet, NIIF said at the time, adding that its investment under the partnership will reach Rs3,500 crore ($500 million).
