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Default makes bank take over Karaikal Port: Report

Indian Bank has become majority owner of Karaikal Port Pvt Ltd, the entity that runs the port located at Karaikal, after invoking the shares pledged with it by the original promoters, Chennai-based Marg Ltd, due to a default in loan repayments, a newspaper report said on February 15.

The report said a consortium of 12 banks, led by Indian Bank, had lent money to Marg Ltd for building the port and the outstanding loan was about Rs 1,800 crore – both principal and interest. The banks classified the loan as a non-performing asset (NPA) after Karaikal Port defaulted on repayment of the loan.

This is the first instance of a bank taking over majority ownership of a port citing repayment defaults as lenders go after stressed assets ahead of a March 2017 deadline set by the Reserve Bank of India (RBI) asking banks to clean up their books.

Apart from Indian Bank, the lending consortium included Allahabad Bank, Corporation Bank, Oriental Bank of Commerce, Punjab National Bank, Central Bank of India, Indian Overseas Bank, United Bank of India, Syndicate Bank, State Bank of Hyderabad and India Infrastructure Finance Co Ltd.

The report said that Indian Bank now holds 52.46% equity and 9.85% Compulsorily Convertible Preference Shares (CCPS) in Karaikal Port Pvt Ltd. Indian Bank cannot sell the shares to a third party due to a court order.

As per the report, Marg filed a petition against the invocation of the pledge by Indian Bank in the Madras High Court and obtained an interim order restraining Indian Bank from further sale/transfer of the equity shares and CCPS to third parties.

The petition is yet to be decided. The court, however, did not agree to a request from Marg to maintain the status of the shares prior to invocation by Indian Bank.

Karaikal Port, one of the 10 new private ports built in India over the last 15 years, started operations in June 2009 on a 30-year contract from the Puducherry government from two berths.

It added two coal loading berths and another berth to accommodate offshore oil exploration support vessels calling at the port in February 2012. The port loaded 4.89 million tons (mt) of cargo in the year ended March 2015, a decline of 21.5% from the 6.23 mt handled in the previous financial year.