Shipping Corporation to buy LPG vessels

Shipping Corporation of India, which is returning to profits after three consecutive years of losses, is reviving its ship acquisition plans, though in a small way.

It is planning to buy one or two LPG ships, besides placing orders for some smaller offshore vessels this year, at a cost of ₹800 crore, which will be its first vessel acquisition in over three years.

Consecutive loss-making India’s largest ship owner had to shelve its buying plans all these years due to financial losses, tepid freight market and high asset prices. Its losses for the last three fiscals were ₹275 crore, ₹114 crore, ₹428 crore respectively.

“We are looking for second hand LPG vessels, which we would like to induct in our fleet by December 2015. Also, we will place orders for some new offshore vessels, each costing about $22 million, with Cochin shipyard this year,” AK Gupta, CMD of the company, said.

Funding proportion The acquisition will be funded through equity of ₹300 crore and debt of ₹500 crore. “We will be using our FPO proceeds of ₹315 crore for the equity,” he told BusinessLine on the sidelines of an event here today.

SCI seems to have dropped its earlier idea of exiting the loss-making container shipping business. Instead, it is now trying to deploy its container vessels for carrying coastal cargo, an area in which it is still strong.

“We have five container vessels and this segment is a huge challenge for us. We are now trying to see how to deploy these large vessels for coastal shipping,” Gupta said.

High competition and weak economics of scale had led to this segment posting operational losses for the last four years.

SCI’s plans to pick up momentum in the LNG shipping segment through an alliance with GAIL, which is planning to buy nine huge LNG carriers for $7 billion (₹42,000 crore), received a setback, with the GAIL tender not evoking any response from foreign ship builders. SCI was supposed to have operated the tankers, with an option to pick up a 26 per cent stake.

No response After postponing the deadline three times, GAIL scrapped the tender last month. Foreign shipyards did not show interest as it had a condition that three of the nine vessels should be built in Indian yards, which do not have the required capabilities.

Gupta is of the opinion that the condition should be there, although it is a “huge challenge” for Indian yards to make LNG vessels. “It is now or never for Indian yards,” he said.

SCI, which operates three LNG tankers for Petronet, will receive its fourth one later this year.