Port & Information Technology Sector Update

By Author: Vamsi Krishna
Total Articles: 27
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India has 12 major ports and 186 non-major ports, with cargo handling capacity of 744 Million Tonne Per Annum (MTPA) and 483 MTPA, respectively. A major port is a port notified by the Central Government through Major Ports Act, 1963. Major port’s tariff fixation is regulated by the Tariff Authority of Major Ports (TAMP). Non-major ports come under the purview of the respective state governments where they are located and are regulated by their departments. In FY12, all 12 major ports on an average operated at 75% utilization, with Mumbai, JNPT and Vizag operating at more than 100% capacity. The capacity constraints at some of the major ports would be addressed by proposed capacity addition at those ports. The Government of India (GOI) has allowed private sector participation in major ports through public private partnership (PPP) to expand capacity and implement latest technology with better management. FDI up to 100% under automatic route is permitted for construction and maintenance of ports and harbours.

Capex Plan in Port Sector:

During FY12, 3 PPP projects were awarded at an estimated cost of INR 7,977.58 ...
... crore for capacity addition of 79.32 MMTPA in major ports. This includes construction of berths and terminals, mechanization of existing berths etc. During the 11th Five Year Plan (2007-2012), 27 PPP projects with an estimated cost of INR 17144.60 crore for capacity addition of 219.1 MTPA were awarded. As per the Union Ministry of Shipping’s Maritime Agenda 2010-2020, investment in major ports and non major ports is estimated to be INR 1,09,000 crore and INR 1,68,000 crore, respectively.

New Draft Guideline is Positive for Future PPP Projects:

In a recent development, the Union Ministry of Shipping, in its draft guidelines, has proposed partial deregulation of tariffs for prospective projects at major ports. Presently, TAMP fixes tariffs at all major ports (except the Ennore Port). The move is likely to increase investment in ports on PPP basis, as existing regulated tariffs by TAMP were seen as a deterrent for private sector participation. In FY13, less than 20 of the total 40 planned port projects were bid out owing to the uncertainty in port tariffs. For port projects that would be awarded next fiscal year, the developers may be able to fix market-linked tariffs. The tariffs can be higher than that recommended by TAMP. The change in regulation would not be applicable to current PPP projects, but it is positive in the longer run, as it would boost investments in the port sector.

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Information Technology Sector Update

For the past 15 years, the story of Indian IT sector has been one of a radical shift in market share from MNCs like IBM, HP, EDS (now part of HP), Capgemini and Accenture to India-based outsourcing companies like Infosys, TCS, Wipro, HCL Tech, Cognizant and others. Though this trend has been on a decline of late, it still provides a comfortable 25%-30% cost savings, led by the labour arbitrage. While the overall IT services market has posted a 10-year CAGR of just ~1%, Indian software services revenues have grown at CAGR of 21%, largely driven by the Top 5 Indian IT vendors (incl. Cognizant). Mid-sized IT vendors, too are joining the bandwagon and have contributed to the growth of Indian IT-BPO services exports in a meaningful way.

As per Nasscom, the Indian IT-BPO sector comprises of 5000+ service providers across verticals and service lines. While large integrated players (revenues of USD1bn+) contributed to 55% of total IT-BPO export revenues in FY13, mid-sized IT-BPO players (revenues of USD 100mn- USD1bn) are not far away with a contribution of 40% to total export revenues.

Going forward, we expect Indian IT exports revenues to grow by 12-14% in FY14, adding ~US$9 bln to the existing pool of US$76 bln.

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Author Bio

Ritish Kumar is a finance enthusiast and a keen observer of the Indian share market. In this series of articles, he talks about investing in stock market and staying profitable. Click hereto see a snapshot of the Port and Shipping Sector, Click hereto read more about the Port and Shipping Industry & Click here to see all stocks from the Port and Shipping Sector.