GE Shipping's offshore biz demerger plan sinks

Great Eastern Shipping Company has called off the proposed demerger of its offshore business into Great Offshore Ltd (GOL).

The company said it would come out with a new restructuring model in two months to ensure creation of more value for its shareholders.

The company said it decided not to proceed with the demerger as the conditions for arriving at the effective date (August 2) were not fulfilled within the stipulated time of six months after the Bombay High Court approved the scheme.

KM Sheth, executive chairman of the company, said, "I would like to put on record the immense support and concurrence received from all the contracting counter parties, both in the government and in the private sector, especially ONGC, which has been of immense value for business restructuring."

"In the long-term interest of the shareholders, the company will also examine new possibilities, in due course, for restructuring its business in a manner which will achieve maximisation of value accretion for the shareholders, and if necessary, approach them," the company said in press release.

Analysts said the failure of the demerger would be a setback to short-term investors who had built huge positions.

"However, long-term and medium- term investors should not worry. The development would not affect the company's valuation. In addition, shipping companies post better results in the second quarter," said Vikram Suryavamshi, research analyst, Karvy Stock Broking.

Its offshore division contributes 20 per cent and 15 per cent to GE Shipping's topline and bottomline, respectively.

Suryavamshi said the offshore entity, post-demerger, would not have had a strong balance sheet and, therefore, would have found it difficult to sustain long-term growth.