Liberalising the land leasing policy, the Union Cabinet on Wednesday slashed the railways’ land licensing fee for certain usages to 1.5% from 6% earlier. Moreover, the lease period has also been extended to up to 35 years from the current five years. This development is believed to be in line with NITI Aayog’s recommendation to keep the railway land leasing fee for containers below 3%.
Experts say that this decision will speed up the sale of the Centre’s stake in the Container Corporation of India (Concor), as it makes the deal more lucrative for players. The government currently holds a 54.80% stake in the company and is likely to sell a 30.8% stake. With this, it will relinquish management control in the PSU. It might retain the remaining 24% stake.
A majority of Concor’s terminals are rail linked, with rail being the primary carrier for haulage. Rail prices are competitive over long distances and the price advantage can be passed on to clients, allowing for flexible and competitive pricing. In addition, the rail link plays a major role in decongesting ports and the road corridors that lead to these ports.
“Rationalising the railway land lease policy will accelerate investment in the sector and reverse the decades-long modal shift to the road. It will bring in higher quality infrastructure to steadily reduce India’s logistics costs and make our manufacturers more competitive globally,” said Ajit Pai, strategy lead partner, Government and Public Sector, EY India.
Earlier last year, Karan Adani, the CEO of Adani Ports and Special Economic Zone Ltd said that the company is aggressively building up a war chest of debt and cash to acquire Container Corporation of India Ltd.
“In our view, Concor is a strategic acquisition and we believe that by fundraising without stretching the balance sheet, we should easily be able to execute the acquisition,” Adani said during an earnings call on August 03, 2021.
Adani Ports and SEZ is India’s largest private port operator and it has synergies with Concor as the latter owns inland ports across the country in addition to providing rail transport for containers that are critical for port operations
The shares of the divestment-bound (Concor) company reached a fresh 52-week high of ₹ 766.70 apiece on Wednesday. Jefferies has a buy call on the company’s shares with a target price of ₹ 850 apiece. This translates to an upside of 10.86% as compared to the current share price.
The ministry is working on a detailed proposal and it will be sent to the Cabinet for approval. Then the government can issue an expression of interest for Concor. The Centre has budgeted ₹65,000 crores from divestment proceeds for FY23. It expects to raise ₹ 8,000 crores from Concor’s divestment.
Written by Simran Bafna
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