Poor retail response blamed for Indian ports’ fundraising fiasco

Against the combined tax-free bonds issue size of INR35bn ($638m), the actual subscription stood at only INR1.95bn, or less than 6% of the offered amount.

A senior port official said, on condition of anonymity, that, if the Shipping Ministry had not issued a directive to five public sector ports – Kandla, Paradip, Visakhapatnam, New Mangalore and Mumbai – to subscribe to the bonds, the actual subscription levels would have been far lower.

India’s top container port, Jawaharlal Nehru Port Trust (JNPT), was keen to raise INR20bn to fund its plans of dredging the Mumbai harbour channel to allow larger ships to come to the port. However, the actual subscription was a mere INR413m.

JNPT had, a year earlier, failed to convince the Finance Ministry to allow it to raise INR15bn in bonds for the same project; it had been told to fund the dredging through internal accruals.

In the case of the country’s only corporatised port Ennore, which was looking to fund its expansion plans, the actual subscription was just INR947m against the issue size of INR10bn.

Similarly, Dredging Corporation of India (DCI) had floated tax-free bonds to raise INR5bn, but the actual subscription stood at a sorry INR588m.

Indian Shipping Minister G K Vasan, who had to provide these figures in a written reply to Parliament, squarely blamed “weak market sentiments and low coupon rates” for the muted response to the tax-free bond issues.

One of the three disappointed companies now plans to raise funds via a different route. After its dismal performance in raising funds through the sale of tax-free bonds, DCI plans to raise foreign debt. It will hit the international market soon to raise around INR4bn ($73m) through Euro-denominated loans.

The funds will be used to finance the purchase of a 5,500 cu m trailing suction hopper dredger, for which the company has already placed an order with Dutch shipyard IHC Hollard Merwede BW.

The DCI Dredge XX is the second vessel from a series of three (the other two being the DCI Dredge XIX and DCI Dredge XXI) and will be built under dual class (Lloyd's Register and Indian Register of Shipping).

IHC Merwede has previously supplied ten vessels to DCI, having been selected as supplier due to its efficiency and reliability in delivering previous orders on time.

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