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Chennai Container Terminal Private Limited

Instrument Amount Rating Action Rs Crore March 2014 Non Fund Based Limits 60.0 [ICRA]A1 reaffirmed

ICRA has reaffirmed the short rating assigned to the Rs. 60.0 crore non fund based bank facilities of Container Terminal Private Limited (“CCTL” / “the Company”)* at [ICRA]A1 (pronounced ICRA A one).

The rating reaffirmation considers the strong parentage of CCTL, with DP World Limited (DPW), one of the largest terminal operators in the world, being the ultimate parent company of CCTL; CCTL’s leading market position in as the operator of the first container terminal in Chennai and the long term favourable demand prospects for container trade services at the . While the financial profile of the company is healthy, the company’s revenues and profitability have witnessed moderation in the last 18 months. Drop in throughput levels were due to the rising competition, sluggishness in container traffic with economic slowdown, and road congestions; while the profits were affected by the underutilization of capacity and lower absorption of fixed costs. However, the capitalisation and coverage indicators of the company remain strong with major portion of bank loans getting pre-closed.

The rating, however, remains constrained by the pending litigations against the Company; bottlenecks in the support infrastructure at the port and limited flexibility of the company in determining tariffs, which is set by the Tariff Authority for Major (TAMP). The last TAMP ruling in May 2011, had effected a 35% reduction in tariffs at the terminal; however, the company has obtained a stay from the over the tariff cut and continues to operate at the previous scale of rates (approved by TAMP in July 2008). Additionally, the Company has also obtained a stay over a High Court ruling in January 2014, which had set aside a favourable ruling of Arbitral Tribunal, in an ongoing dispute between the Company and Chennai Port Trust (“ChPT”) regarding non achievement of required traffic in “non-transhipment” containers. Any adverse outcome on the above litigations is likely to have a detrimental impact on the Company’s credit profile and will remain key rating sensitivities.

Company Profile Chennai Container Terminal Private Limited (CCTL) was incorporated as a Special Purpose Vehicle on September 12, 2000 by the consortium of M/s P&O Australia Ports Pty Limited, M/s Jakari Express Private Limited, M/s Meherji Cassinath Limited and M/s Chettinad Logistics Private Limited. The consortium of four entities represented the promoters of CCTL. The Board of Trustees of the Chennai Port Trust (ChPT) and CCTL entered into a license agreement dated August 9, 2001 for development, operation and management of the container terminal on a Build, Operate and Transfer (BOT) basis for a period of 30 years expiring in August 2031. Formally, the terminal commenced its operations on 30th November 2001. In 2006, DP World, one of the world’s largest container terminal operators, acquired P&O Steamship Navigation Company, UK thereby acquiring the 75% stake held by it. In 2008, DP World acquired the balance stake held by other consortium members effectively controlling 100% stake in CCTL.

DP World operates more than 60 terminals across six continents. DP World is the world's third largest container terminal operator by capacity and throughput. In 2013 DPW handled 55 million TEUs across all its operational terminals with a global capacity of almost 70 million TEU. DP World is listed on the London Stock Exchange and NASDAQ Dubai. 80% of its shares are owned indirectly by the Government of Dubai through ultimate majority shareholder Dubai World, a holding company for a portfolio of businesses and projects for the Dubai government. DP World Limited is currently rated Baa3 with stable outlook by Moody’s. March 2014

* For complete rating scale and definitions, please refer ICRA’s website (www.icra.in) or other ICRA Rating Publications

For further details, please contact: Analyst Contacts: Mr. K. Ravichandran, (Tel. No. +91-44-45964301) [email protected]

Relationship Contacts Mr. L. Shiva Kumar, (Tel. No. +91-22-61796393) [email protected]

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