Plans to use Rs 3,000-cr cash reserve for acquiring assets.
Great Eastern (GE) Shipping, India’s largest private sector shipping company, once again plans to acquire ships. This, after selling no less than 15 ships, as well as cancelling orders for three new ships in the last 18 months.
Prices for very large crude carriers (VLCCs) and capesize bulk carriers have already dropped by 30 per cent to $100 million (about Rs 460 crore) and by 40 per cent to $56 million (about Rs 250 crore) respectively, in the last two years. The correction in prices for five-year-old ships have been much sharper at 40 per cent to $80 million (about Rs 370 crore) and by 63 per cent $55 million (about Rs 250 crore), respectively, in the same period.
“With the overhang of new deliveries from yards this year, we expect one more round of correction in asset prices,” said a company executive on condition of anonymity.
| BACK IN ACTION | ||
| Jan 2008 | Jan 2010 | |
| Very large crude carriers | ||
| 5-year-old | 135 | 80 |
| Newly-built | 146 | 100 |
| Capesize bulk carriers | ||
| 5-year-old | 150 | 55 |
| Newly-built | 97 | 56 |
| (Figures in $ million) | ||
According to an estimate provided by the company in 2010, new ships that will form 24.6 per cent of the world’s present capacity for dry bulk carriers is due for delivery from yards. This is going to put pressure on assets’ prices in both the second-hand market as well as the primary market, as some orders for new ships may be cancelled by buyers. Similarly, 13 per cent of the present fleet for crude tankers and 11.6 per cent of the present capacity of product tankers are due for delivery this year.
“We would be opportunistic to buy out more ships as the price further corrects,” the source added. The company has a cash reserve of Rs 3,000 crore, which it plans to use for the acquisition of assets. It expects the first second-hand ship — a product tanker — to join its fleet in the present quarter. The last time a second-hand ship had been added to the company’s fleet was 24 months ago.
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“Asset prices are close to bottom now and it makes sense for companies to build assets for the next upturn in the shipping cycle,” said Jehangir Adi Master, a shipping industry analyst with ICICI Securities, a Mumbai-based brokerage.
GE Shipping has a fleet of 37 vessels at present, down from a peak of 49 about 18 months ago. These 37 vessels include four new long-range product tankers that joined the fleet between October 2008, and May 2009. The company’s present order book consists of seven vessels — five dry bulk carriers and two Suezmax tankers — to be delivered in 2011 and 2012.
The stock of the company gained 6.6 per cent at Rs 322.3 a share at close of Monday’s trade on the Bombay Stock Exchange (BSE). Sensex, the BSE’s benchmark index, lost 0.08 per cent to settle at 17,526.71.
ABG, Bharati Shipyard hit upper circuit limits
ABG Shipyard and Bharati Shipyard, the two largest private ship builders, gained 20 per cent on the BSE, hitting their upper circuits on the exchange. Both the companies were locked in a takeover battle for Great Offshore till last month. Stock of ABG closed at Rs 260.25 a share, while that of Bharati closed at Rs 296.40.