Shreyas Shipping & Logistics does balancing act to curtail rising cost

Aims to double fleet size, venture into inland waterways space

In a bid to curtail its rising cost, Mumbai-based Shreyas Shipping & Logistics, the pioneer in domestic coastal container shipping, has chartered out five of its total 13 vessels, including one of the newly acquired multi-purpose (MPP) vessel.

"We have changed our strategy from operating vessels to chartering it out as cargo volumes have not grown on expected lines," said Capt V.K. Singh, managing director of the company. 

“This is ensuring fixed income with no related operating cost on Shreyas as the charterer takes the cost burden (of the vessel). This strategy is also ensuring that there is no idle capacity with us in any segment since the current cargo volume growth is making it difficult to keep all vessels deployed,” Singh said, but didn't divulge the cost curtailing percentage. 

The business mix of Shreyas Shipping includes domestic coastal container shipping along with feeder operator service in EXIM segment. Last year, the company entered a new segment of break bulk, which involves the movement of non-containerised cargo and acquired two MPP vessel. “Apart from chartering out our vessels (which are large sized), we are also chartering in vessels of smaller size to fit the cargo requirement we have.”

 

Chartering is an activity where a ship owner hires out the use of its vessel to a charterer. The contract between the parties is called a charterparty and there are types of charters depending upon requirement of the charterer.   For the last four years, Shreyas Shipping has been witnessing a steep rise in its costs, mainly in the domestic business, which has led to squeezing of its margins from time to time.

“We are also operating joint services with Shipping Corporation of India for its two container vessels,” said Singh. “The idea it to increase capacity without owning the vessel which is another way of keeping costs low,” he said.

Shreyas Shipping is the Indian flagged vessel owning unit of UAE-headquartered Transworld Group. Shreyas owns and operates 13 vessels with a total capacity of 23,143 TEUs. Despite a not-so-strong growth outlook for the next three years due to demand-supply mismatch between vessel supply and cargo growth, Shreyas Shipping aims to double its fleet size and also venture into newer business segments such as bulk segment and inland waterways. 

Port container volumes grew 6 per cent year-on-year in February and was up 8 per cent during April-February, said a JM Financial report. Major ports reported container cargo growth (in TEU terms) at 6 percent year-on-year in February, also up 8 percent in Apr-Feb led by JNPT, said the report. 

Increased supply of large size container vessels is expected to drag (vessel) prices in coming months, while bulk vessel prices are already beaten, said industry officials.

“We will go ahead to own more second hand vessels and take the fleet size to 25 both domestic coastal and EXIM put together. We also aim to get into bulk category, while inland waterways will be a natural extension of coastal shipping for us,” said Singh.

Shreyas Shipping plans to go for newly constructed barges and will be earmarking the order in FY20 to enter the business in FY21. "For barges needed for inland waterways, we plan to take funding in Indian market and are still to work on it. It would cost roughly Rs 100 crore for about 10 barges so we will have to look for right sourcing of funds,” said Singh.

All of Shreyas’ loans are in dollars and the company enjoys a healthy debt:equity ratio of 0.7. The company's earnings are a combination of rupee and dollar and the 45 per cent of its feeder business revenue which is in dollars cater the dollar-denominated loan entirely. Due to this, the company enjoys a natural hedge insulating itself from exchange rate fluctuations.

For the last three quarters, its standalone revenues have seen a marginal rise on sequential basis with April-December topline at Rs 465 crore, the operating profit in the period under review stood at Rs 56.05 crore when expenses were at Rs 445.42 crore.