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After three years of losses, Shipping Corporation of India Chairman and Managing Director Arun Kumar Gupta managed to bring the country’s largest shipping firm into profit. In an interview with Aditi Divekar, he reveals his austerity plans, possibility of exiting the container business and the challenge of debt servicing
SCI was in losses for three consecutive years. It is only in the last four quarters that the firm has seen profits. Could you tell us how did you managed to change the picture despite a rough business climate and falling freight?
Market forces were beyond out control. So, we had to do something in the organisation to stay afloat. We decided to focus on prudent cost control without compromising safety and quality. Some shipbuilding orders were also judiciously cancelled.
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Austerity was introduced at all levels in the organisation. These small, but safe, steps were taken by the management to effect the turnaround.
With the company churning profits, will we see an announcement of dividends for this financial year (2014-15), after a dry spell of three years?
It is still premature to say anything. I am concerned about the shareholders but dividends depend on how much profit we make in 2014-15.
Debt continues to be a big concern. How do you plan to service debt in such a hostile business environment?
Debt servicing is indeed a big challenge but we are managing with whatever cash we are generating. As on March 31, our debt stood at around Rs 6,750 crore. The annual outgo for this is approximately Rs 1,200 crore. The overall situation is still precarious. However, we are determined to maintain our credit rating in the market.
Of the total revenue stream, your container division has not shown much improvement. It has been in losses frequently. How do you plan to go ahead with this segment?
Any business should give a 10-12 per cent return. But this segment (containers) has usually given single-digit returns, and has also been in losses. Container is a retail business and we are too small a player in this segment. Economies of scale cannot be ignored. We have been constantly adjusting our strategies to minimise our losses in this segment.
Neither are you happy with the performance of the container segment, nor do you plan to invest more in it. Do you plan to exit the segment?
This is not a lucrative business. We all are very concerned. We have taken some small but tangible steps to improve the profitability of the liner division. We would like to see if that gives us the desired results. We must bear in mind that everything in shipping is very depressed at present. Hence, all decisions have to be well thought out. Exiting a business is not easy and will come at a cost. Management is constantly reviewing the pros and cons. We will give this segment another five to six months.
The tanker segment has been making up for losses in dry bulk division. What is your outlook on revenue for FY16? How do you plan to keep the revenue stream assured despite the falling freight rates?
FY16 will not see any remarkable increase in revenues since we do not anticipate any improvement in the market fundamentals. There may be a marginal gain. At present, whatever the tanker segment is earning, the bulk segment is taking it away. We foresee that the depressed situation in the bulk segment will continue for at least two years. Tankers, on the other hand, are currently doing well, specially the very large crude carrier (VLCC) segment. However, it is a very unpredictable market and much depends on the crude oil prices. We have a diversified fleet that will help us keep the revenues hedged.
You will be retiring in December this year. Are you satisfied with the company’s position? Do you think you have achieved whatever you have planned?
There are several unfinished tasks, and December is still far.
When I took over in January last year, my primary target was to turn the company around. I have been able to do that with the help of my colleagues. This momentum should continue. Giving dividends to the shareholders is on the top of my wish list. A lot still needs to be done but my tenure was short — only two years. I am satisfied.
