Garware Offshore plans $110 mn buys

Garware Offshore plans $110 mn buys

Mumbai: Shipping services firm Garware Offshore will invest up to $110 million over 18 months to acquire two large platform support vessels and will look to raise funds for this in the next 3-6 months, a senior official told Reuters on Thursday.

“The offshore market is looking robust and demand is also good with oil prices hovering more than $100 and there is a lot of exploration activity," Sandeep Akolkar, president of finance, said in an interview.

“But there is always a lag between the increase in the oil price and the charter rates. So we should see that in the next tenders," he said.

Oil’s rallies have been fuelled recently by geopolitical supply worries and expectations the dollar will stay under pressure.

On Thursday, US crude for June fell four cents to $112.72 a barrel by 1018 GMT, after earlier touching the highest in 30 months of $113.70 a barrel.

Brent crude futures fell 1 cent to $125.12 a barrel.

Earlier this month, Garware Offshore won a contract worth Rs399 million for a three-year period with an international exploration and production company.

At present, Garware has a fleet of 13 vessels working in India, South America, Europe, West Asia and the Far East.

It is looking to raise funds via debt as well as equity and about 70-75% of the capex will be funded via debt, probably from foreign banks.

The deliveries will take between one and one-and-a-half years but the firm hopes to sign the contracts for the vessels after May this year, Akolkar said.

The new vessels will be utilised by its Netherlands-based subsidiary, he said.

Earlier, the company reported a 76% fall in consolidated March quarter net profit to Rs15.5 million as one of its vessels functioned only for a part of the quarter in the spot market.

Sales fell to 50.94 crore from 57.29 crore a year ago.

Reacting to the earnings, the company’s shares fell 3.7%. The stock closed down 2.73% at Rs132 in a weak Mumbai market.

This vessel had to return to the shipyard to be modified for a long-term contract with Petrobras of Brazil, Akolkar said.

The full effect from the contract will be reflected from the second quarter of this fiscal, he said.

“Our strategy has always been to deploy the assets on term charter. We may be termed as a conservative company but that pays off in the long run."

Garware Offshore gets most of its revenue from long-term charters, Akolkar said.

As a result of the recent contract wins, he expects the company’s FY12 consolidated revenue to increase to 220-240 crore.

The firm closed the year with sales of 199 crore.