Mumbai: State-run Shipping Corp. of India Ltd (SCI) has deferred plans to diversify into shipbuilding and managing container terminals at ports as a downturn in the global shipping industry puts pressure on the company’s revenue and margins.

Rough seas: S. Hajara, chairman and managing director, SCI. Photo: Mint

The company has decided to go slow on new ship purchases, Hajara said.

“The board of the company has reviewed the ship acquisition programme and is looking at the current market conditions," he said. “The board has advised caution in acquiring new ships and said that we should go ahead with ship purchases only when we are confident that it will benefit the company both in the short and long term."

SCI had plans to order 26 more ships to reach the target of acquiring 62 vessels in a five-year plan that will end in March. “The entire 26 vessels will not get ordered this year," Hajara said. In the current year, the firm will end up ordering only 10 ships.

The firm reported a loss of about 5 crore in the first quarter.

SCI had invited proposals as it sought to pick up a minority stake in an Indian shipbuilding yard and received offers from four. But no decision has been taken yet. It had plans to float a mega-shipyard along with a few other public sector undertakings, construct inland depots, and enter port terminal management.

“In any case, we have not committed huge sums for these diversification projects. We have plans to pick up only minority stakes in shipyard business or port management,’’ Hajara said. A financial consultant said rival groups Mercator Lines Ltd and Great Eastern Shipping Co. Ltd have diversified into coal mines and offshore segment.

“Shipping Corp. is a classic case of locking an elephant in a room. The typical lethargy of public sector undertakings has pulled Shipping Corp. down from diversifying. Freight rates are falling and Shipping Corp. is going ahead and acquiring vessels. It kept quiet when vessel prices were down in 2008,’’ he said, requesting anonymity.

SCI could have easily diversified into dredging, but failed to do so, he said.

SCI finance director B.K. Mandal said the company has plans to raise $100-200 million (Rs 490-980 crore) from the market during the current fiscal to pay for ships already ordered at global and local yards.

“We will shortly tap the market for debt at attractive interest rates," he said. “Foreign banks would be able to give us money at lower interest rates, though rates are hardening."

Union shipping secretary K. Mohandas said the shipping ministry that controls SCI has not directed the company to stop vessel acquisitions. “SCI will be going ahead with acquisitions taking into account the market conditions and their financial position," he said.

SCI, he added, was not in any financial distress. “The company’s fundamentals are strong; there is absolutely no cause for any concern regarding the finances of SCI," he added.