Interviews

SDCL has invested in four projects with a total equity investment of Rs 2.05 billion

November 2019
- Dilip Kumar Gupta, Managing Director,Sagarmala Development Company Ltd

Incorporated in 2016,the Sagarmala Development Company Ltd (SDCL), which is under the administrative control of the Ministry of Shipping, focuses on providing equity investments for projects across road, rail, logistics and port infrastructure as part of the Sagarmala programme. In the past few months, Dilip Kumar Gupta, Managing Director, SDCL, has led several initiatives in making equity investments in a railway line project in Andhra Pradesh, road connectivity projects to Haldia and Visakhapatnam ports and in India Ports Global for operations in Chabahar. Gupta shares more on the development, focus areas and vision of the programme with SHRIYAL SETHUMADHAVAN.

Please tell us the aim of forming SDCL and the steps taken thus far.
The aim of forming SDCL is to fund port and coastal-based infrastructure projects through equity under the SPV framework. SDCL will make equity investment in projects identified under the four pillars of Sagarmala: Port development or modernisation, port connectivity, port-led industrialisation and coastal community development.So far, SDCL has invested in four projectswith a total equity investment of Rs 2.05 billion: Krishnapatnam Railway Company, rail-over-bridge projects in Vizag and Haldia port, and India Ports Global (a 100per cent subsidiary of SDCL)for Chabahar Port.

What have been the achievements in terms of providing equity investments for projects across road, rail, logistics and port infrastructure?
As explained above, SDCL has invested in three port connectivity projects including both rail and road projects. These projects have been undertaken to provide smooth evacuation of cargo from gateway ports and reduce the congestion on rail and road networks.

Phase 1 of the Krishnapatnam Rail Company project involves a single railway line between Venkatachalam and Obulavaripalle, while Phase2 comprises a double railway line between Krishnapatnam port and Venkatachalam. The railway line is about 70 km shorter than the existing railway line and thereby reduces total logistic costs. Both phases of the project have been completed and commercial operation of the railway line started in June 2019. Similarly, to reduce road congestion and facilitate smooth evacuation of cargo, SDCL has invested in rail-over-bridge projects in Visakhapatnam and Haldia ports.

Apart from the above, SDCL has invested in India Ports Global—the project will provide accessibility to the Afghanistan and Central Asia market through Iran’s eastern border. Investment in Chabahar port gives India a sea-land access route into Afghanistan and Central Asia though Iran’s eastern borders.

Are there any other projects where the company is investing? What are the parameters considered by SDCL prior to making investments?
In addition to the above investments, around 40-45 projects are under evaluation. Prior to making investments, SDCL’s in-house project management consultants minutely examine the financial details along with traffic data of the project.A project will be taken up for investment only if it falls under Sagarmala’s scope (according to the four pillars defined above) and found to be financially viable after detailed financial due diligence. Thereafter, legal due diligence is carried out and, after the approval of the board, SDCL invests in the project.

There are few projects under consideration that will facilitate coastal movement in the country. SDCL is currently carrying out project development activities with various stakeholders. Upon completion of these, the company may invest in the projects subject to fulfilment of our benchmark.

In your current role of providing equity support for project SPVs, what is the biggest challenged you have faced?
One of the major challenges in infrastructure projects is land acquisition. But with the assistance from both the Centre and the state governments, the process has now smoothened. Sometimes, resentments on environmental issues come up but efforts are made tomaintain a balance between development and natural resources. Moreover, environmental challenges are not hurdles as sustainable development is the need of the hour.

Please share the various funding windows made available for projects.
SDCL has received an authorised capital of Rs 10 billionfrom the government. This is the initial authorised capital, which can be increased as per the requirements of SDCL. In addition, the company has been allowed to consider obtaining financial support from bilateral and multilateral agencies to raise additional equity.In most cases, projects have been identified by project proponents such as major ports, non-major ports and state maritime agencies for funding through SDCL. Project proponents will send the project proposal for consideration.After initial assessment based on the stipulated benchmark, the project will be considered for further evaluation as detailed above.

To create world-class port infrastructure in India, do you plan to work in collaboration with foreign players?
Several foreign investors are looking forward to work with SDCL.One of the leading ports of Europe, Port of Rotterdam (PoR), has signed a non-disclosure agreement (NDA) with us. SDCL and PoR are working together to identify projects where both can put in equity funds and partner to take the projects forward. More clarity will emerge as we move forward.

Tell us about SDCL’s focus on railway infrastructure and warehousing.
Several projects are under consideration for making investments in multimodal logistics parks (MMLP).These projects are at various stages of development. Investment will be done only after detailed assessment.SDCL aims to build logistic infrastructure in the SPV framework to facilitate boththe transportandstorage of goods in a cost-effective, efficient and environmentally sustainable manner through a suitable multimodal mix.