Amit Mitra

Varada Bhat

Virendra Pandit

Hyderabad/ Mumbai/ Ahmedabad, Nov. 27

The $59-billion debt woes of global conglomerate Dubai World, which sent tremors across the financial world that is just recovering from last year's recession, is unlikely to impact the operations of Dubai Ports (DP) World in India, but may cause a slowdown in the terminal operator's expansion plans.

Dubai World owns about 80 per cent stake in DP World, which handles about 45 per cent of the country's total container traffic of 8 million TEUs through the five terminals it fully or partly owns.

Although Dubai World has said that DP World will be excluded from its debt-standstill talks and restructuring, analysts feel that the parent's debt liabilities could cast a shadow on the terminal operator's source of financing. The parent could also be compelled to dip into the resources of DP World, the fifth largest port operator in the world and considered the best asset of the conglomerate, to lighten its debt burden, according to an analyst.

Even Moody's Investors Service and Standard & Poor's downgraded the debt of various Dubai Government-related entities, including DP World, following the announcement of Dubai World's restructuring.

When contacted, a senior official of DP World India, however, said investments and the construction of new terminals “will be as per plans”.

Mr Ganesh Raj, Senior Vice-President and Managing Director (Sub-Continent), DP World, said the investment plans of DP World were a “different thing altogether.” The debt reorganisation is taking place not in DP World but in another flagship firm, Nakheel,” he told Business Line from Mundra Port where his company operates a terminal.

DP World in a statement said: “The Government of Dubai has confirmed that DP World and its debt are not included in the restructuring process for Dubai World announced earlier.”

DP World's $500-million investment plans for India, rolled out in 2007, includes setting up two dry ports or inland cargo depots (ICDs) at Vadodara and Ahmedabad at an investment of $60 million.

It is also expanding the Nhava Sheva International Container Terminal at JNPT from the current 1.5 million TEUs to two million TEUs at a cost of $80 million, while the Vizag terminal, in which it has a 26 per cent stake, is being ramped up from 100,000 TEUs to 500,000 TEUs.

Its major project is the Vallarpadam terminal, which will be the country's first trans-shipment hub with a deep draft facility that can accommodate vessels up to 13,000 TEUs. The port operator had committed to spend about Rs 3,000 crore with plans to have a 3.5 million TEU capacity terminal in three years, complete with road and rail connectivity.

However, as the first phase of the project of one million TEU is nearing completion and is expected to be operational by March 2010, Dubai World's current woes may not come in the way, but the medium-term expansion plans may be impacted.

Another project that could be impacted is the 600,000 TEU terminal at Kulpi in West Bengal, for which it is yet to get the necessary Government clearances. DP World's plans to expand its rail container business may also move on a slower track in the wake of its parent's debt burden.

It has plans to invest some Rs 100 crore in the next fiscal to extend its rail container services to the Kochi-Chennai-Visakhapatnam sector.

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