FIIs cast the anchor in shipping firms

Expectations of firm freight rates and stronger financials are adding to the sheen.

Indian shipping companies are sailing merrily. In the past quarter, foreign institutional investors (FIIs) have upped their stake in most shipping companies.

Expectations of firm freight rates and stronger financials is attracting investors towards shipping stocks, a dealer said. A weakening rupee also benefits shipping companies which earn their revenues in dollars.

Leading listed shipping companies have seen an increase in FII take in September -

G E Shipping (up 4.22 per cent), Varun Shipping up 2.63 per cent), Essar Shipping (up 1.73 per cent).

Bharti Shipyard which provides engineering services to shipping companies has also seen an increase in FII stake by 183 per cent. Some notable exceptions were Mumbai-based Mercator Lines and government-owned Shipping Corporation of India.

FII stake in the former was down 1.18 per cent even as the company increased the FII limit to 49 per cent from 24 per cent recently.

Managing director of Varun Shipping, Yudhishthir Khatau, said the market dynamics cannot under estimate domestic shipping companies.

"Domestic shipping companies are registering excellent profits and the freight rates are also on the upward cycle. While sectors such as steel and textiles suffered recession for several years, shipping industry never faced such a situation," Khatau said. Khatau felt that re-rating of the shipping stocks were necessary, given the improving fundamentals of the shipping business.

"Shipping being a global business, all international shipping companies are quoted at a premium to net asset value (NAV) while all Indian Shipping companies are quoted at a discount to the NAV", said an analyst from a leading broking firm. NAV is determined by compounding all market value of all assets along with cash available in books by deducting debt.

Shipping stocks have done fairly well in the past quarter. Bharati Shipyard has been the biggest gainer with its stock prices surging 88 per cent.

Varun Shipping is up 71 per cent while G E Shipping has climbed up 52 per cent. Penny stock Sciendia Steam Navigation and SKS Shipping have been the biggest losers. South east Asia Marine Engineering was also in the red. Shipping companies are expected to post better second quarter numbers, analysts said.