Acquisition will bolster the Dubai government owned firm’s container logistics play

Global port operator D P World Ltd will close the deal on July 1 to buy three units of Dubai-based Transworld Group promoted by Indian businessman Ramesh Ramakrishnan, ten months after it was announced in August last year.

The acquisition will help the Dubai government owned firm bolster its Indian and global logistics play as part of a strategy to transform from a pure play container terminal operator into an integrated supply chain solutions provider.

The transaction was cleared by the Competition Commission of India on June 7.

D P World’s majority-owned subsidiary Unifeeder ISC FZCO has acquired 100 per cent of Avana Logistek Limited (including its subsidiary Avana Global FZCO) and Transworld Feeders Private Ltd (the containerized Indian coastal and EXIM feeder shipping operations of Mumbai-listed Shreyas Shipping & Logistics Ltd, excluding its container vessels and bulk ship operations).

The deal also includes the indirect acquisition of 100 per cent of Transworld Shipping Agencies Private Ltd (TSAPL) following Unifeeder’s acquisition of Transworld Feeders FZCO which holds 100 per cent of Transworld Shipping Agencies.

Container feedering (short sea shipping) and inland logistics are at the heart of D P World’s diversification strategy to provide end to end solutions to customers.

Transworld Feeders FZCO and Avana Global FZCO are independent feeder and NVOCC (Non-Vessel Owning Common Carriers) operators, offering container feedering services and regional trade solutions connecting a wide range of ports in the Middle East, Indian Subcontinent and the Far East.

The hub port at Jebel Ali (UAE) run by D P World plays a pivotal role for a large part of these services.

Transworld Feeders Pvt Ltd and Avana Logistek Limited have a comprehensive coverage of all main ports, terminals and inland destinations in India. Avana Logistek also provides first mile and last mile delivery solutions within the Indian domestic market. Both are market leaders in providing logistic solutions to cargo owners, traders, forwarders and shipping lines.

As a feeder operator with a volume of as much as 1.2 million twenty-foot equivalent units (TEUs) a year, Transworld fits fell into D P World’s strategy, said a shipping industry expert.

D P World has invested $1.2 billion in India since 1997 and is currently the only foreign port operator running six terminals at Mundra, Jawaharlal Nehru Port Trust (2 terminals), Chennai, Cochin and Vizag with a combined capacity of over 6 million TEUs accounting for a market share of about 30 per cent of India’s annual container volumes shipped through its ports.

D P World has also set up Hindustan Infralog Private Limited (HIPL), a joint venture with India’s National Investment and Infrastructure Fund Ltd (NIIF) to invest as much as US$ 3 billion of equity to acquire assets and develop projects in ports, terminals, logistics, transportation and related sectors.

In 2018, the JV acquired multi-modal logistics firm Continental Warehousing Corporation (Nhava Seva) Ltd (CWCNSL) and followed it up by acquiring KRIBCHO Infrastructure Limited (KRIL), an integrated multi-modal logistics operator in 2019.

Following the deal, Shreyas Shipping will be left with the container ship owning division and bulk cargo ship operations.

Shreyas Shipping, the Indian flagged vessel owning unit of Transworld Group, has struck a long-term container ship chartering arrangement with Transworld Feeders with a tenure significantly longer than the typical market standard.

This will also enable Shreyas to indirectly participate in the upside of the growth in the coastal trade market as its charter pay-outs will be performance linked to the earnings of Transworld Feeders. Given the significantly higher volumes handled by Unifeeder and its access to a global network through its parent DP World, it is expected that the businesses will benefit from revenue growth and cost synergies.

Shreyas will also have a ‘Right of First Refusal’ provision which will ensure it is “never unfairly disadvantaged”. The framework chartering agreement with Unifeeder is also non-exclusive, which means that Shreyas reserves the right to charter vessels to third parties who can offer terms more beneficial to the fleet owner.

“Post-transaction, Shreyas will charter vessels to Unifeeder which is a bigger and more creditworthy customer for the long-term. Unifeeder’s expertise and scale, combined with DP World’s extensive network, will bring earnings stability to Shreyas while at the same time retaining the potential to share in the future growth of Indian coastal trade,” V K Singh, Managing Director, Shreyas Shipping told BusinessLine last September.

Source: The Hindu Business Line