Sula Shipping and Logistics Pvt. Ltd is in advanced talks with global private equity (PE) investors to raise as much as $150 million (around Rs.910 crore) to fund its business plans.

"We are looking at raising $150 million in two quick tranches and are looking for smart capital with an investment horizon of five-seven years, with assured base returns, plus upside," said Rajesh Mehrotra, chairman and chief executive of Sula Shipping. "We are close to signing three large projects and we need capital for them. The smallest project has capex of $50 million, even if we get two projects, our capital expenditure requirement right away is Rs.600 crore."

New Delhi-based Coral Bay Advisors Pvt. Ltd is advising Sula on the transaction.
Sula Shipping, founded in 2011, brings cargo from deep waters and then trans-ships it into shallow waters through smaller ships, which helps clients save costs by as much 15-20%, said Mehrotra.

India has 13 major ports (those owned by the Union government) and 187 non-major ports (those owned by the states) of which 48 are functional. Only a few of these ports have deep waters, where large cargo ships can dock. Due to the lack of deep waters in many ports, large bulk carriers and tankers cannot bring cargo to the shores.

Mehrotra did not disclose the size of the stake to be sold.
"Currently, we have a base requirement of trans-shipping about 3 million tonnes (mt) of cargo yearly and we see it double to 6 million in two to three years," Mehrotra said, adding that the company will enter the Middle Eastern and African markets over the next two years.
Samir Khurana, director at Coral Bay Advisors, said the fund-raising plans are in the context of Sula's line-up of projects for the next two-three years.

He said Sula Shipping is in talks with a few very large global investors. "They (PE investors) are considering the company's pipeline and how the business is expected to look like in two-three years. We are in advanced stages of talks with two PE investors and discussions are expected to reach a logical end in three-four weeks," Khurana said. He declined to name the PE firms considering the investment opportunity.

Khurana said there is interest from strategic investors also. "We are currently more keen on getting a long-term financial partner," he said.
Experts say the Indian port infrastructure lacks efficiency, be it for linkages or depth of water, and a customized service that saves costs and ensures prompt delivery is attractive for both clients and investors.

Between April 2013 and January 2014, major ports in India handled 460.1 mt of cargo traffic, according to data from the Centre for Monitoring Indian Economy, based on estimates of the Indian Ports Association. This reflects a 1.4% rise from the corresponding period a year ago, when 453.8 mt of cargo was carried.

On 24 February, India Ratings and Research Pvt. Ltd assigned a stable outlook to the country¡¯s logistics sector for fiscal year 2015, citing a strong likelihood of moderate growth in the sector despite the economic slowdown.

Last year, PE funds Zephyr Peacock India and Singapore-based Credence Partners invested $17 million in 20Cube Logistics Pvt. Ltd for a significant minority stake. Everstone Capital invested Rs.220 crore in New Delhi-based Transpole Logistics.

"The sector has huge scope for investments as India is a major hub for imports and exports, and although due to the current economic scenario the sector is not in a good shape, in the medium and long term, cargo handling and services companies have great potential," said Vishwas Udgirkar, a senior director at consulting firm Deloitte Touche Tohmatsu India Pvt. Ltd. In the past, the ports sector has not received much private investment compared with other sectors because of its peculiar problems, including the absence of an efficient public-private partnership model, Udgirkar said.