MUMBAI: JSW Infrastructure Ltd has agreed to buy a 70.37 percent stake at Rs 95.61 a share in Mumbai-listed multimodal logistics company Navkar Corporation Ltd in an all-cash deal for Rs 1,012.70 crores, helping India’s second biggest private port operator venture into the logistics and other valued added services for last mile connectivity to back its port business.The acquisition price has been finalised at a discount to Navkar Corporation’s closing share price of Rs 113.55 a share on the National Stock Exchange and Rs 113.50 a share on the Bombay Stock Exchange on Thursday.

JSW Infrastructure said in a regulatory filing that the mandatory open offer in Navkar Corporation per the SEBI take-over code will be made at Rs 105.32 a share for the balance 26 percent stake from public shareholders, translating into Rs 412.16 crores. Navkar Corporation reported revenue of Rs 453.14 crores in FY24.

The acquisition, done through JSW Port Logistics Pvt Ltd, a wholly owned subsidiary of JSW Infrastructure, is subject to regulatory approvals from the Ministry of Railways and completion of conditions precedent.

The acquisition aligns with the Company’s strategy to pursue value-accretive organic and inorganic opportunities in the port and related infrastructure sector, JSW Infrastructure said in a statement.

“The acquisition will result in the Company’s foray into logistics and other value-added services. It will facilitate the business to offer improved port connectivity and streamlined supply chain solutions to its customers,” JSW Infrastructure said.

“The acquisition also marks a first step towards the Company’s long-term vision of building and scaling an efficient pan-India logistics network for last-mile connectivity. Further, it complements the growth strategy of increasing the Company’s share of port-related container cargo driven by India’s strong economic fundamentals,” it added.

Navkar Corporation run three Container Freight Stations (CFS) in Panvel, on the Mumbai-Pune highway, some 25 kms from Jawaharlal Nehru Port, India’s second busiest container gateway. Two of them in Ajivali village have capacity of 25,000 twenty-foot equivalent units (TEUs) and 65,000 TEUs, respectively. The third located in Somatane village has a capacity to accommodate 4,25,000 TEUs. The Somatane facility also consists of a Private Freight Terminal (PFT) having two railway sidings.

A CFS is an off-dock facility licensed by the Customs Department to help de-congest a port by shifting containerised cargo and for carrying out Customs-related activities outside the port area. The company also holds a Category 1 Container Train Operator (CTO) permit from the Indian Railways to run services on a pan-India basis for domestic and export-import (EXIM) trade. It has a fleet of owned and leased railway rakes for EXIM and multimodal logistics business.

Navkar Corporation also runs an inland container depot (ICD) spread over 150 acres in the ceramic manufacturing hub of Morbi Gujarat, along with a rail terminal which is recognized by the Indian Railways as a PFT under the Gati Shakti Scheme.

While a CFS is located closer to the port, an ICD operates in the hinterland, and both offer similar services.

From being monopolies till a few years ago, some 34 CFS’s serving J N Port have become a shadow of their former self after the Customs Department allowed importers to nominate a CFS of their choice to shift the containers upon landing at the port for de-stuffing or onward journey to customers premises. Earlier, the shipping lines were nominating the CFS to which the container was to be sent.

“As a result, the CFS business has become highly competitive, and the rates have plunged; they have become one fifth to one tenth of what they were before. Because the moment the shipping lines lose their power to nominate a CFS of their choice, the margins of CFSs also gets reduced. Earlier, for nominating a CFS, the lines used to collect as much as Rs 15,000 from the CFS for a container. Once they are a captive client, when the client importer comes with a container/s, the CFS used to add his margin and collect Rs20-30,000 a container. Now, when open competition is allowed, because the importer, even a small importer can choose his CFS, the rates have plummeted and the CFSs are charging some Rs 4,000 for a container,” said a CFS operator at J N Port.

The CFS operators in J N Port area have also been hit by the direct port delivery (DPD) scheme introduced by the government a few years ago. Under the DPD scheme, import containers are delivered directly to pre-approved clients at the port itself instead of waiting in a CFS located outside for clearance, which reduces the cargo dwell time and cost for shippers.

“Besides, Navkar Corporation does not have any natural advantage enjoyed by other CFS operators such as Maersk, Allcargo, Ameya and Continental. These entities have got some natural advantage as they are from the clearing industry, the custom broking industry and have fundamental strength of control of cargo because they have freight forwarding service, shipping service, and even port terminals business under their fold. So, downstream it is very easy for them; they can offer rates which nobody can beat, and they can cross subsidise each service,” the CFS operator said.

“Navkar Corporation doesn’t have any of that advantage; it’s a pure play CFS/ICD and train operations business without the leverage as a shipping line, forwarder or terminal operator. In the long run, when open competition is there, I think Navkar Corporation is very wise in selling the business because the golden days of CFS’s are long gone. It is still a good business; it is still to a large extend cash and carry business. So, it’s not surprising at all that Navkar Corporation has decided to exit. The land parcel that it holds is a huge advantage (it costs about Rs 10 crores per acre in that area) and the most important thing is that one of the CFSs it runs in the J N Port area has got a rail line. In the Dronagiri node, anything that is close to the port but outside Dronagiri node, is considered a good asset,” he added.

A port industry source said that JSW Infrastructure is buying Navkar Corporation for strategic reasons.

“JSW Infrastructure is diversifying into the logistics business. The JSW Group is well entrenched in the steel business, it could make Navkar’s facilities as a huge base for steel exports, apart from handling general cargo and all. But, for the Group’s own steel business that’s a huge base from where it could consolidate the cargo, do the custom clearance, and ship it out,” the port industry source said.

The acquisition of Navkar Corporation will give JSW Infrastructure access to a second container train operator’s permit, which it may sell.

Last year, JSW Infrastructure ventured into the container train operations business by acquiring the container train operator license of Sical Multimodal and Rail Transport Ltd from Pristine Logistics & Infraprojects Pvt Ltd.

Sical Multimodal and Rail Transport Ltd, the rail logistics wing of Chennai-based Sical Logistics Ltd, holds a Category I license from the Indian Railways, to ply container trains throughout the Indian Railways network in both the export-import and domestic segments.

The container train operator license of Sical Multimodal and Rail Transport was transferred to Pristine Logistics & Infraprojects Pvt Ltd after it acquired Sical Logistics Ltd under India’s bankruptcy law.