Mundra Port and Sez Analysis

The Indian bourses have amazed the world by attaining new highs, but now the thrill has trickled down to the performance of companies who have made a historical debut at the bourses, staunchly vindicating the unpredictable moves of the equity markets.

Gone are the days, wherein an investor would be apprehensive about investing in a new sector based company, especially in the equity markets which are popular for its ups and downs. The change in investor behavior was witnessed in the phenomenal listing of the Ahmedabad-based Mundra Port and Special Economic Zone (MPSEZL). The company had offered its shares at Rs 440 per share during the IPO period and got listed on bourses at Rs 770; this works out to be a remarkable 75% gain and has left the investors smiling all the way to the trading accounts.

The kind of response, that was received by Mundra IPO was noteworthy taking into account that no other port in the country has ever sailed into the capital market, thus Mundra was the first one to tap the capital market via the IPO route and later get listed. The fact that the IPO of MPSEZL was over subscribed almost 116 times underlines the potential offered by the company and by the sector as a whole.

Let`s take a sneak preview at the business profile of the company.

MPSEZL is the developer and operator of the Mundra Port, one of the leading non-captive private sector ports in India based on volume of cargo during fiscal 2007. It is principally engaged in providing port services for bulk cargo, container cargo, crude oil cargo, and value added port services, including railway services. The company also got approval to develop multi-product SEZ on 2,658.2 hectares (approximately 6,568 acres) of land.


The company plans to use the IPO issue funds to construct and develop basic infrastructure and allied facilities in the proposed SEZ at Mundra; construct and develop a terminal for coal and other cargo at Mundra Port; contribute towards investment in Adani Petronet (Dahej) Port; contribute towards investment in Adani Logistics; and contribute towards investment in Inland Conware.

Strategically, the company is in a very competitive position. Mundra port is strategically placed with proximity to the northern inland regions of India which contribute around 55% of the India`s commodity trade. The port` s depth is deeper than other ports in the country to the extent that a 30-32 meter large vessel can easily come in. It also possess 15,000 acre in SEZ and is likely to increase it to another 15,000 acre. Keeping in mind the current demand for the port capacity and the above factors, the future looks optimistic.

Moreover, with the government looking at spending about USD 500 billion on infrastructure in India over the next five years and nearly double the rate of investment in the sector to 9% of gross domestic product, Mundra had all the reason to receive the witnessed response from investors.

Overall Port Sector

Indian port`s play a pivotal role in the country`s export-import. Nearly 90% of trade volume is routed through sea ports. While the 12 major ports which are regulated by the centre handle 70% of this volume, limitations in proper berthing, cargo handling and storage facilities have led to the emergence of privately owned ports.

The fact that unlike a number of public ports that were originally developed as need-based ports, these private ports have the benefit of being planned ports built with future commercial traffic in mind.

The government decision to privatize the ports is the hope that commercialization may improve the levels of efficiency, productivity and reduce the cost of maintaining a port.

Conclusion

Mundra Port and Special Economic Zone have opened the gates to a new untapped sector. Investors have expressed their confidence in the company with the shares of the company gaining 118%, with an intraday high of Rs 1150.00 on the bourses in the first day itself. It won`t be surprising to figure out that a lot of port players will be tapping the capital market on the heels of MPSEZL.