Mumbai: A.P. Moller-Maersk has offered to invest up to $5 billion in India to expand its local operations, but about $2 billion of this is contingent upon the shipping and logistics major getting an extension of its 30-year concession for the Pipavav port in Gujarat that expires in September 2028.
A similarly large chunk of the proposed $5 billion investment is contingent upon the company winning a bid to develop a container terminal at the upcoming Vadhavan Port near Mumbai.
The company did not disclose the timeline over which this capital will be invested.
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The investment in Pipavav is proposed to go towards expanding the capacity of the port by increasing its draft—the depth of the waters—so that it can handle larger sea vessels, and to build new berths and bigger yards, so that it can handle more cargo.
But the investment will only happen if the Gujarat government extends the concession given to Gujarat Pipavav Port Ltd, the listed company that operates the port.
“We will have to get a certainty of whether we will stay or not, because the paybacks of these will be measured in decades,” said Keith Svendsen, chief executive officer (CEO) of APM Terminals, an independent unit of Maersk. It owns a 44.01% stake in the listed company which has a market capitalization of just over ₹6,000 crore.
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The company has been negotiating with the Gujarat government for an extension of its concession for a long time, Svendsen said, adding that the company is confident of receiving one.
“We actually invested 100 million two years ago in an LPG facility (at Pipavav), which you could say is a bit of a risk, given we don’t know whether we stay. So that will tell you something about our confidence,” he said on Friday.
However, in case the company does not receive an extension in its concession, it puts at risk the future of the listed company Gujarat Pipavav Port Ltd.
“If the [concession] is not continuing, then there’s no company. But we want to continue to invest. And if you judge by the shareholders of the company, it seems that they have confidence that that (extension of concession) will happen,” Svendsen said.
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Shares of Gujarat Pipavav Port Ltd closed at ₹125 on the BSE on Friday after losing 3.4% value amid a market-wide investor selloff. The shares have lost nearly a third since the beginning of the year compared to a 7% fall in benchmark Sensex over the same period.
At the upcoming deep seaport at Vadhavan in the Palghar district of Maharashtra, Maersk is hopeful of winning the competitive bid to develop a container terminal.
“We would love to be one of the anchor tenants in this project to develop and build, not only the infrastructure, but also the human capital that is needed to run world class infrastructure,” said Svendsen.
The logistics company will also invest in expanding its landside infrastructure in India, he said. He was speaking at the naming ceremony of Albert Maersk, the shipping company’s 11th dual-fuel methanol vessel which was making its maiden voyage to India.
The new ship is part of a series of 18 large dual-fuel methanol vessels that are scheduled to enter Maersk’s fleet between 2024 and 2025. Maersk aims to be net-zero on greenhouse gas emissions by 2040.
