Shipping Corp to raise $600 m overseas to fund fleet addition

Shipping Corporation of India (SCI) plans to spend around Rs3,768 crore on expansion in the current financial year. Around 80% of this capital expenditure, or about ¤3,000 crore ($600 million), is expected to be funded through debt raised overseas.
The state-owned shipping firm is also positive on the container segment despite a loss of Rs6.17 crore in the March quarter.
“The planned capital expenditure for this financial year is around Rs3,768 crore. We would be funding around 80% of this through external commercial borrowings,” said S Hajara, chairman and managing director, SCI. A significant amount of the capex would be utilised for fleet expansion.

SCI is likely to add around 17 vessels in this fiscal — six Handymax bulk carriers, two Supramax bulk carriers, eight anchor handling tugs and supply vessels and one platform supply vessel.

The company reported a loss of around ¤6.17 crore, with a pre-tax loss in its container segment at ¤18.32 crore.
Company officials attributed the loss in the container segment to “market cycles”.

“We witnessed a major fall in freight rates in the liner segment against a considerable increase in oil prices (bunker costs). However, we are positive that the freight rates will move up,” said B K  Mandal, director- finance, SCI.

On an annual basis, the company’s profit grew 50.53% to Rs567.35 crore in fiscal 2011 from Rs376.91 crore in fiscal 2010.
“The quarterly loss for shipping companies is in line with expectations. We expect the next two-three quarters to remain distressed,” said an analyst from a domestic brokerage firm.
On the planned capex, he said, “It is a good proposition as it is a good time to expand fleet while asset prices are low. I don’t see much issue for the company in its debt-raising plans,” he said.
SCI has a long-term plan of fleet expansion of $1.6 billion up to 2015-16 for 31 vessels on order with a total capacity of 2.02 million deadweight tonnage.

According to company officials, around 30% of this planned $1.6 billion has already been utilised. On SCI’s plans to pick up a stake in on a private shipyard, Hajara said the proposal is under consideration.  He said the company remained committed towards expanding in non-traditional segments to become an end-to-end maritime  player.  “However, diversification becomes a little tough when things are not very good in your own core sector,” he said.