BackShipping Corp. restarts ship purchases after a four-year hiatus
Shipping Corp. has agreed to buy a second-hand oil exploration support vessel for about $15 million
PremiumBengaluru: State-owned Shipping Corp. of India Ltd (SCI) has agreed to buy a second-hand oil exploration support vessel for about $15 million—it’s first in four years—as the firm restarts ship purchases frozen by three years of losses.
The ship, Greatship Ragini, is a 2013-built remotely operated vessel (ROV), currently owned by Greatship Global Offshore Services Pte Ltd, a Singapore-based unit of Greatship (India) Ltd, which in turn is a wholly owned subsidiary of The Great Eastern Shipping Co. Ltd, India’s biggest private ocean carrier.
The Great Eastern Shipping Co. announced the sale of the vessel in a notice to the Mumbai stock exchange on 12 April, without disclosing the name of the buyer.
B.B. Sinha, chairman and managing director of SCI, confirmed that the company had bought the vessel, which will join its fleet by December.
Mumbai-based SCI, India’s biggest ocean carrier, turned around in 2014-15 with a net profit of ₹ 200.93 crore. It is expected to declare its earnings for 2015-16 sometime in May.
SCI had reported overall losses in the fiscal years 2012, 2013 and 2014— ₹ 428.2 crore, ₹ 114.3 crore and ₹ 274.66 crore respectively.
SCI is also studying offers received in response to a tender for buying 1-2 second-hand anchor handling tug cum supply vessels (AHTSVs) and one platform supply vessel (PSV), K. Devadas, director-technical and offshore services at SCI, said.
Since April 2013, SCI has cancelled orders to build 12 new ships. This allowed the company to conserve cash.
“Shipping Corp. needs to redeploy ₹ 330.65 crore of refund money received from shipyards on order cancellations which were originally part of the proceeds of the follow-on public offer in November 2010. This money can only be used for buying ships because that was one of the purposes of the follow-on public offer," Devadas said.
The company is also discussing a potential contract with Cochin Shipyard Ltd, also state-owned, for building three new AHTSVs. The shipbuilding contract will be finalized after the government issues guidelines for implementing a financial assistance scheme for local shipyards that was approved by the cabinet in December 2015.
SCI’s shopping list also includes two new Suezmax tankers (so called because they can navigate the Suez Canal fully loaded), each with a cargo carrying capacity of around 150,000 dead weight tonnes (dwt). The company has budgeted ₹ 844 crore for the two tankers.
A global tender for the two tankers will be issued after securing board approval for the purchase, Devadas said, adding that it was a good time to buy ships given the general drop in global asset prices.
The planned acquisition is part of a larger plan to increase share of Indian flagships and provide reliable transportation services to domestic oil companies, he added.
SCI plans to raise funds for the acquisition on the back of long-term charter contracts of as long as five years signed between local ship owners and state-run oil firms under a policy that mandates state-owned oil, steel, coal and fertilizer companies use Indian registered ships to move at least half of their annual cargo.
The policy is being drafted to help Indian fleet owners get assured business at a time when the global shipping industry is battling low freight rates amidst a supply glut and falling commodity prices.
SCI’s oil fleet comprises 16 crude oil tankers, 14 petroleum product tankers, two liquefied petroleum gas (LPG) carriers and four very large crude carriers. It also runs four AHTSVs and three PSVs used to support offshore oil exploration activities.
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