Talks between TPG Capital and Puducherry-based Karaikal Port for a significant stake sale in the deep-water port have fallen through owing to a lack of consensus on deal valuations, three people familiar with the matter said.
Karaikal Port, a subsidiary of infrastructure firm MARG, is located on the southeast coast of India. Private equity investors-Standard Chartered, Jacob Ballas India, IDFC and Ascent Capital Advisors-have so far invested US$110.72 million in the port and hold a 49 percent stake, reported The Times of India.
The rest is held by the debt-ridden promoter group MARG.
"The talks between TPG and the shareholders of Karaikal Port have been suspended for the last few weeks," said a person with direct knowledge of the development.
US giant TPG was open to buying a minority as well as a majority stake in the port. The deal could have attracted as much as $162 million in capital, and made way for one of the world's biggest private equity firms to enter India's port business.
"There are issues over high valuations. They (TPG) want to factor in the risks and price the asset lower than what the promoter and current PE investors are asking for," said another person involved in the deal.
Karaikal Port currently has debt of more than $260 million on its books. Cargo volumes have not grown as much as expected by shareholders. They were expecting oil, petroleum, fertiliser and container cargo to help cargo volumes soar. But these failed to meet expectations due to a weak economy.
India Ratings downgraded Karaikal Port's loans in March last year to "IND C", which means the port is at a very high risk of defaulting on in its loans.
One more banker familiar with the matter said the port has started doing road shows in Europe, the US and Middle East to raise capital. The port has the capacity to handle 21 million metric tonnes of cargo per year. It hopes to achieve a capacity of 47 million metric tonnes by 2018.
The port has completed phase 1 and 2 of development, while the third and final phase of development is underway.
The total project cost is about $651 million.
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