Company’s performance will remain good in coming quarters: HK Joshi, CMD, Shipping Corporation of India

HK Joshi, CMD, Shipping Corporation of India Ltd, talks about the September quarter results, the revenue from the bulk carrier, tanker and liner, proposed demerger of non-core assets among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: Company has moved from loss to profit in the September quarter. Tell us about the highlights of this quarter and what helped the company to move into the profit zone from a loss?

A: Thanks to Zee Media for providing an opportunity to the management to take our voice to the people with respect to the company’s wonderful performance. The performance of this quarter is better than last year. But if compared with the previous quarter then there is fall because of the pandemic effect and the tanker, which performed well in the previous quarter has turned stable in this quarter because the demand for floating storage has started liquidating now and this resulted in the fall in the company’s performance when compared with the first quarter but if seen in respect of 2019 than the company’s performance has been an outstanding one. It has been better not only in this quarter but if you have a look at the last four quarters than the company has consecutively reported a profit of more than Rs 100 crore. At the same time, if you have a look on the half-yearly result of the year – because you can see the company's half-yearly performance after the second quarter – then the company has posted a profit of more than Rs 449 crore, which is the company’s highest half-yearly profit in a decade. This shows that the company has posted great performance in all the quarters despite COVID was there. Going forward, we expect that the company’s performance will continue to be a good one.

Q: We have seen a rise in bulk carrier revenue but the tanker and liner revenue was down. Run us through the highlights and what do the current freight rates indicate?

A: You are absolutely right about the tanker. The tanker market has fallen completely from what we saw in the months of March, April and May have fallen because of two reasons (i) freight rates have fallen sharply because of the demand and supply relationship. Currently, there is too much congestion in cargo they are not being discharged and vessels are blocked because crude prices are very low, due to which the tanker market has almost flattened out and we are seeing it in the performance of the tankers, where a decline of 40% is visible in our results. The revenue of liners has been almost stable as compared to the first quarter and the loss has been in double-digit at around Rs 30 crore. Bulk has shown a lot of growth because the market indices are going very well at this time, primarily because China’s activity has increased a lot. In July 2020, we have seen that the import of iron ore has gone up by almost 12%. And, if you have a look on the results of the last seven months then around 113-million-ton imports were made in July, which is a record high and if you have a look on the cumulative imports of iron ore from China then it stands at 660 million tons. So the demand for iron ore has increased a lot due to an increase in the manufacturing and industrial activities of China. China’s manufacturing activity has picked up due to which we are seeing an increase in the steel production of China, while it has decreased by almost 17% year-on-year in the rest of the world. But China’s production has been 62% in the global steel output, which is 8% more than in 2019. There steel output performance stood at 54% in 2019, which has gone up to 62% now. Also, Soyabean imports show that the US exports to China is at an all-time high and it has broken the record of 2017-18. There is a jump of almost 86% between exports of soyabean from the US towards China. All these activities have had an impact on the indices and it is visible in the bulk segment in which in August 2019, we have crossed a target of 4000 BDI and this time we have reached a mark of almost 3000 BDI in July, So in this, you are seeing an increase in the market indices basically because of the industrial and the manufacturing activity due to a pick-up in China.

Q: Update us on the proposed demerger of the non-core assets and how will it work? Also, tell us about the value ascribed for your landholding and other non-core assets?

A: Indian government has plans to make strategic disinvestment of its entire 63.75% shares along with this they will also give out management control of the company. For this, they want to pursue this transaction in two parts ways. They want to take the core assets in the transaction. As far as non-core assets of the company are considered, like real estate, land and other properties, they consider it as non-core and do not want it to be a part of the transaction and that’s why we will have to separate it and demerge. Possibly you are aware that working actively, the company has floated the expression of interest (EoI) and it will like to engage a consultant for the purpose who can guide us in the process so that both activities runs parallel. Being pro-active, the company has floated EoI to make sure that the government’s disinvestment process and demerger process runs together. So, we are very proactive

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Q: Can you provide a timeline for completion of the entire process of disinvestment and demerger? Do you think that it will be completed in this financial year?
A: I can just provide my personal opinion on this that I can’t provide of television because you know that it is a process of government of India and the company’s management is not doing it and it is not aware of it. But as you want to know about the core asset then at this point of time it stands around Rs 8,500 crore. It is the value of our 59 ships on the asset side.