The fair value of the fund's investment has come down to £0.8 million against its total investment of £2.9 million till date since 2008, a value erosion of about 70%
While stories abound of private equity funds making profits in multiples, here is an example of an investor burning its finger in the country's infrastructure space.
Eredene Capital of UK has failed to find buyer for its 50% stake in Apeejay Infra Logistics after suffering significant value erosion and has sold back the stake to partner Apeejay Shipping.
While Eredene has not disclosed the value at which the deal was struck, it is believed to have happened at significant loss to its original investments made in Apeejay Infra that has developed two logistics parks at Haldia and Kalinganagar.
The fund disclosed in last September that the fair value of its investment in the projects providing integrated services for multi-modal logistics with customs bonded facilities, has come down to £0.8 million against its total investment of £2.9 million till date since 2008, a value erosion of about 70%.
Following this, Eredene started looking to divest its stake after it realised both the logistics parks were likely to take considerable time to scale up and reach profitability.
While the diminution in the value of Eredene's investment in the container freight stations is symptomatic of poor prospects of Haldia port and overall slowdown affecting Kalinganagar operations, Apeejay Shipping, belonging to the diversified Apeejay Surrendra Group, is hopeful of a revival.
"We see value and despite the current economic challenge, a bright future ahead for AILPL (Apeejay Infralogistics Private Limited) due to the business being a core sector service. Haldia Logistics park is in a port city and with improvement in economy, we are already seeing export-import volumes picking up. Kalinganagar is a steel hub with multi-billion dollar already invested and under investment, our project is the only ICD (inland container depot) thus has seen a start up advantage. The eastern region generally lags India growth by few quarters and we are seeing a pick-up in business. Haldia is seeing an increase in volume again after withdrawal of restriction from port authorities and we are bullish about it," a spokesperson of the group told dna.
Sign of turnaround comes after years of significant cash burn in Haldia due to lack of volumes, high operating costs and debt servicing obligations while Kalinganagar saw slow pick up of operations.
"Both projects have a strong client base and are fully geared to ensure their need to secure speed to market with no risk of delays," the Apeejay official said highlighting the brighter side.
It is not the first time Eredene has burnt its investment in India's infrastructure.
In 2010, Eredene, as part of a consortium of Grup Maritim, OHL and Lanco, had won a 30-years concession to build and operate a container terminal at Ennore Port putting in £0.9 million as part of its share.
But within two years, all the consortium partners exited the project in 2012, an event which triggered Eredene significantly downsizing its India office.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}