GE Shipping to redeem preference shares early

The Great Eastern Shipping Company (GE Shipping), the largest private-sector shipping firm in the country, has decided to reedem its 7.5 crore cumulative preference shares early to take advantage of the prevailing low-interest rate regime. The preference shares carry a coupon rate of 10.5 per cent and a face value of Rs 10.

In its 2003-04 annual report, the company said, "About 5.5 crore shares shall be redeemed on July 21, 2004, and two crore shares on August 13, 2004."

The company is in the process of raising an unsecured loan not exceeding $70 million. Last year, when the company witnessed an unusual growth, GE Shipping raised $105.89 million through external commercial borrowings, Rs 215 crore of rupee loans, and Rs 95 crore in non-convertible debentures carrying a coupon rate of 6.05 per cent through private placement.

The company's tonnage in the financial year ended on March 31, 2004, increased by 87 per cent. Total tonnage rose to 2.47 million deadweight tonne (dwt) in 2003-04 from 1.31 million dwt in the previous year.

The company has 11 ships under construction and has committed capital expenditure of $270 million in new buildings.

Most of the company's new acquisitions have been in the energy sector, which it has identified as a focus area. The company's tanker fleet more than doubled to 2.19 million dwt in 2003-04 from 1 million dwt in the previous year.

GE Shipping embarked on its expansion programme after it pulled out of the race for buyinng a stake in Shipping Corporation of India (SCI). The company felt that it was losing out on other opportunities due to the preoccupation with the SCI divestment.

The company's fleet acquisition came at a time when the freight markets were booming. The Baltic Freight Index, a bellwether of the health of the dry-bulk markets, stood at 1,943 at the beginning of the financial year 2003-04 and finished at 4,822 on March 31, 2004 after touching a high of 5,681 in early February 2004.

Freight rates rose largely on the back of the economic boom in China, which posted a GDP growth of over 9 per cent in 2003 led by a 17 per cent rise in industrial production.