Mundra IPO running into trouble ?

The international port operator DP World of Dubai, which owns and operates a container terminal at Mundra through P&O Ports, has approached stock market regulator SEBI with a string of complaints against Mundra Port & SEZ.

The Adani-owned Mundra Port is currently in the market to raise around Rs 1,750 crore, the first initial public offer (IPO) by a local port company.

In a communication to SEBI, dated October 30,’07, DP World has alleged that the red-herring prospectus (RHP) has failed to make “adequate disclosures” to potential investors. In fact, the lead managers of the IPO had appended the draft red-herring prospectus (DRHP) with a few additional risk factors after DP World sent an earlier communication to Sebi on October 16, 2007.

The global co-ordinators and book running lead managers to the IPO are DSP Merrill Lynch, JM Financial and SSKI. The book running lead managers are Enam Securities, Kotak Mahindra, I-Sec and SBI Capital Markets.

The IPO, which opened on November 1, was already subscribed 4.7 times, based on the preliminary bidding data received from stock exchanges. The price band has been fixed between Rs 400 and 440 per equity share. The IPO will close on November 7, 2007. Mundra International Container Terminal (MICT), a P&O Ports terminal, is now owned by DP World, after the Dubai-based terminal giant bought over the UK-based P&O Ports in a $6-billion deal in 2005.

MICT has alleged, “The framework agreement precludes MPSEZ and its promoters from developing or investing in any other container terminal business anywhere in Gujarat for 10 years, till November 8, 2012.” “This has not been pointed out in the RHP,” it said.

Adani Port Infrastructure (APIPL) has entered into an MoU to acquire 100% in Dholera Port. “APIPL is a party to the framework agreement as is Gautam Adani (chairman of MPSEZ),” claims MICT.

“The RHP deliberately mentions the payment of $70 million for the second stage assets (phase II of the container terminal currently operated by the Adani company) without mentioning that these are the ‘mutually agreed terms’ between the parties. It would significantly affect the company’s valuation. Such a vital issue was never mentioned in DRHPs and has only been mentioned in passing in an unrelated part of the RHP concerning court proceedings,” alleges the MICT letter.

Top officials of MPSEZ told ET that DP World has fought a legal battle on these issues without any success. “The IPO managers can’t amend the prospectus if it’s not a reality,” said one official. After losing in Ahmedabad city civil court, MICT has now moved the high court.

MPSEZ further claimed that they had signed a non-compete clause with P&O Ports. “Now DP World took over P&O, without prior consent of Gujarat Maritime Board and the Adani group, making it a clear violation under the sub-concession agreement between us and P&O Ports,” said the official. As far as Dholera Port is concerned, he said Dholera Port & SEZ (DPSEZ) is a separate group company, and that the non-compete clause is not applicable.

Via ET