Mumbai: Attracted by a global shipping boom, C. Sivasankaran, chairman of the Sterling Group, has ventured into the shipping business by acquiring the Norwegian shipping firm JB Ugland Shipping A/S in a deal worth about $300 million (around Rs1,200 crore).
Vessel shortage: A ship near the Jawaharlal Nehru Port in Mumbai. Global shipbuilding facilities are fully booked till 2010.
The acquisition was made by Siva Ventures Ltd, the flagship company of the Sterling Group, which has interests in telecommunications, media, biofuels, wind energy and real estate.
Sivasankaran is a non-resident Indian. The purchase comes at a time when there is a huge demand for shipping raw materials across the world’s oceans to India and China.
“The shipping industry will increasingly revolve around the broader Asian commodities story,” Sivasankaran said.
“The demand for bulk shipping from and into India is likely to see explosive growth on the back of increased raw material demand for the new power and oil refining projects coming up in India, a large number of which are based on imported raw materials.”
“This is a very strategic move for (our) group... and is one of the biggest acquisitions that we have made so far. We are betting big on the freight business,” said Srinivasan Vaidyanathan, chief executive of Sterling.
JB Ugland has a fleet of 46 owned and rented ships, including tankers, chemical carriers and bulk carriers. The fleet includes nine bulk carriers and 25 petroleum product, chemical and LPG carriers under construction at various global yards, which will be delivered over the next three years.
Sivasankaran has taken the acquisition route to enter the shipping business rather than ordering new ships, which is a time consuming process given the fact that global shipbuilding facilities are fully booked till 2010. This gives Sterling access to shipping assets that are already in operation.
“Old ships are ready for sailing and can earn freight rates right from Day 1. Whereas, new ships will be available only in 2011-12. By that time, you lose a shipping cycle,” notes an official at Pipavav Shipyard Ltd.
Indian shipowners such as Shipping Corp. of India Ltd, Great Eastern Shipping Co. Ltd and Mercator Lines Ltd are buying new dry bulk cargo carriers to tap the growing demand for such ships.