The Great Eastern Shipping Company Limited (500620) Earnings Call Transcript
November 10, 2025
Earnings Call Speaker Segments
Thank you. Could you make me the presenter, please? Yes. Thank you. Yes. Good afternoon, everyone, and welcome to the results presentation for Q2 and H1 FY '26. Thank you for joining us. Standard disclaimers apply. I take it you've had a chance to go through our numbers. These are the highlights. We have a net profit of INR 581 crores on a consolidated basis. Our NAV has moved up by about INR 60 from the last quarter, and we have declared another interim dividend of INR 7.20. I won't go too much into the results themselves, but let's go to the normalized highlights. So our profit is more or less the same on a stand-alone basis as what it was in the previous quarter, that's Q1 FY '26. It's significantly lower than in Q2 FY '25, which is a corresponding quarter. A couple of impacts, significant profit on sale in the previous year and a drop in the capacity corresponding to the sale of those ships. And that's one of the reasons for the -- significant reasons for the profits coming down. Also, we've had slightly lower rates than we had in the last -- in the corresponding quarter of last year. The offshore business continued to contribute to the profitability. The vessels are all fixed at very good levels. We have most of the vessels fixed. 4 vessels continue to operate on short-term contracts and have also had a good run this year. Let's go to -- this is the movement in the stand-alone net asset value. We were -- in March '20, we were at INR 450 per share. We are now up more than 2.5x over the last 5.5 years. And just to remind you where the change in the net asset value comes, it is not just notional change in the market value of the vessels. There is a change in the market value, but the accretion since a year ago has come -- or rather, it stayed at the same level as a year ago. The cash profit contribution has been INR 165. And while the fleet value has dropped, this drop in the fleet value is, again, partly due to some sale of vessels and partly due to drop in the value of tankers. So we are more or less at the same level as we were a year ago. Similar story for the consolidated, we have INR 200 crores of cash profit, of which INR 28 crores has been paid out, but we've had a drop in the fleet value. We have most of our tankers operating in the spot market. Our LPG carriers are fully fixed and the dry bulk as well is operating mainly in the spot market. Jackup rigs are more or less covered -- have a lot of their days covered for the rest of the financial year. And vessels are, as I mentioned, a lot of them are on long-term contracts. We have $186 million effectively of debt. This is the repayment schedule for that. We can't prepay these because these are all the NCDs which are -- which have been floated and which are listed. So we are not able to prepay them. But wherever loans could be prepaid, we have prepaid those because we don't want to have the negative carry of having debt. Looking at the fleet profile, currently at 41 vessels. However, we have committed for sale 2 of our 20-year-old tankers. One is a crude carrier Jag Lok and the other is the product tanker Jag Pooja. Both of which will be delivered in this quarter. We have also purchased our first Ultramax bulk carrier, which will be delivered by Q4 FY '26. So we will be at -- with the commitments, we will be at 40 vessels. There is no change in the offshore fleet. Coming to the shipping markets, markets have been somewhat similar. So Suezmaxes have been slightly higher, and this is -- I'm talking about the market averages. Suezmaxes have been slightly higher than they were in the previous year, while product tankers, MRs have been significantly lower. We saw very strong Q1 in FY '25, which then tapered off towards the end of the first half. And that -- so the levels have remained about the same since this time last year. So you can see this line, which is the yellow line and then the red line after that, it's in a very narrow range around the $20,000 mark. I won't go into all of these details. But basically, the big factor in influencing the crude tanker flows is the OPEC -- unwinding of the OPEC production cuts. And that's resulted in demand for crude tankers because there's more commodity coming into the market. Along with that, we also have some new Brazilian supply coming into the market. So these resulted in significant demand increase for crude tankers. Also on the consumption side, China has been doing stock building and adding to their oil inventories, while the fleet did not grow compared to the previous year. Product tankers product trade also has been growing, and there's been strong diesel cracks in the Western markets, which have been supporting some of the flows. There have been a lot of disruption to Russian supplies of products because of refinery outages caused by drone attacks. So that market has been facing some uncertainty and some substitution has been happening of Russian supply. Asset prices have been stable for crude tankers. MR product tankers have been up slightly. They had gone down quite a lot between July, September last year and June this year, and now they have started recovering a little bit. The order book has been picking up. So we now have a crude order book of about 13%, while the product tanker order book is at 18%. In recent times, we have seen sanctions on Rosneft and LUKOIL, the 2 largest Russian oil producers and exporters. And that's likely to have -- it's already starting to have some impact. So we have seen a flurry of fixings out of U.S. and out of South America to possibly meet the shortfall, which can be caused by this. We've also had a lot of ships getting sanctioned. So we have between 10% and 15% of the tanker fleet currently under sanctions. So some of those vessels are having some difficulty trading. So the current crude tanker market has shown significant tightening, especially for the VLCC and Suezmax sectors. Dry bulk were more or less the same as last year, slightly lower, but not too different. And let's look at those reasons. While they were better than -- while they were slightly lower than the previous year, they were better than they were in the first half of calendar '25. Iron ore trade has been growing. While coal dropped in Q1, it's been recovering. Chinese production declined marginally. The highlight really was the grain trade, and this is a tariff impact. China ramped up its soybean exports from South America in advance of the grain season from the U.S. because of the tariffs continuing on U.S. trade into China. And therefore, we had some front-ended grain trade, which normally does not happen. So -- and that helped the Panamax Kamsarmax market mainly. Bauxite, of course, trades strong. China's import appetite stays very strong. So that was up 14% year-on-year. Bulker asset prices are also firmer during the quarter. The order book still is around 10% to 11%, not a very high number. Looking at LPG, this is another commodity that was potentially affected by worries on counter tariffs by China because there was a 10% tariff on LPG from the U.S. And therefore, the trade got a little disrupted. So U.S. LPG had to find other buyers, while the Chinese had to import from elsewhere from the Middle East. This made the trade a little bit less efficient, which saw rates spiking a little bit, again, not to the highs we have seen in the past, which is above $100,000, but going at least above $60,000 a day on occasion. Now this is reversing. We are seeing potentially that there could be more cargoes going to China. The order book stays very elevated at 29%. While asset prices corrected marginally, this is from very, very high levels. Looking at fleet supply, I've already mentioned what the order book is. So we have 29% for LPG. We have 18% for products, 13% for crude tankers and under 11% for dry bulk. Scrapping, again, as one would expect with such strong markets, scrapping is extremely low. Looking at asset price movements, both sectors of tankers have seen an uptick. Bulk carriers also have seen an uptick in the last few months, while LPG is more or less where it was, maybe marginally down. But again, you don't get too many transactions here for assessing. Looking at grad ship, this is the picture which has been in place for many, many years. This is a global supply of rigs and OSVs. There are many old rigs, which rigs and offshore vessels, which are in the fleet, which we expect will need to be removed from the fleet sometime. Against that, there is very little on order. And you can see we are looking at about 2.5% order book to fleet ratio. Coming to the repricing of the vessels. We have the green bar, which is the vessels to be repriced in the second half of FY '26. Of these 4 are the most capable vessels. These are the large anchor handlers and the 2 MPSSVs, which we have consciously operated on short-term contracts internationally to maximize their revenues, while the other vessels, which are more India suitable are fixed into longer-term charters in India. So these vessels will have to be repriced every few months. So that's 4 of them, and we have one of our PSVs coming off contract in this period as well. We have a rig -- we have 3 of our rigs working currently. The fourth rig is going to go into her short-term contract. She's just being mobilized for her short-term contract off the coast of India. That should hopefully go on hire by end of November. That's a 7-month contract. However, one of the rigs, which is working has -- is on a 4-month contract, which ends in February. So we will need to reprice -- find the work for that rig. Again, we have another rig coming up in H1 FY '27, and we have a third rig coming up in H2 FY '27, which is around January 2027. Apart from that, we have some vessels coming off from time to time. Coming to financials, and you've seen this, we are currently net cash of about $550 million. On a share price to consolidated NAV, we are at about $0.73. Thank you. That brings me to the end of the presentation, and we are happy to take questions.[ id="-1" name="Operator" /> [Operator Instructions] We'll take our first question from the line of Krishnaraj V from [ Acatus Investments ].
Yes. My question is not for the current quarter results, but largely on financing. I wanted to better understand the benefits of converting the INR debentures into synthetic fixed rate USD loans. And the reason I was drawn to this analysis was that broadly, we know that the INR debentures are fixed costing around 8.5%. And the synthetic USD loans come at I reckon around 6%. But if I take the amortized cost of rupee depreciation on the principal until now, the INR 300 crores that you were carrying until end of March '25 and about 3.4% depreciation of the rupee for this fiscal, it adds to about 3.8% to 4% with still about 4 years to go. And then there is an increase in the rupee equivalent of the interest expense, which is about from about 25% or about 1.5% on the 6% at the midpoint of this typically 10-year term. So all in all, it appears to me that this synthetic conversion gives you an all-in finance cost of about 11.3% to 11.5% versus 8.5% if you just left it in the -- without doing the conversions. And of course, there'll be bank charges. So I just want to understand how you think about this and what are the benefits you get?
Yes. So a couple of things, and thanks for that question. It's an interesting one. So a couple of things. One is, fundamentally, we are trying to create a match between our currency of our assets and inflows and the liabilities. So we're trying to create a dollar liability, which offsets the dollar assets which are on our balance sheet. Our ships are dollar assets, which earn dollar revenues. So one is we are trying to match that. So our fundamental position is that we want to borrow dollars rather than rupees because we don't want that currency mismatch. We try not to take that view. But coming to the specific case of our current debentures that we have. So you're right about the approximate Indian coupon -- Indian rupee coupon, it's about 8.5%. The issue is with the swap rate for the dollars. We do these debentures when we can get a better rate by doing these synthetic structures to get the dollar debt than by doing straight dollar debt. So effectively, our rate -- fixed rate in dollars on these is less than 4%. It's about 3.5%, okay? So if we look at it and the standard depreciation over a long period of time is approximately 3% of rupee versus dollar. So we've got a 5% spread in the interest cost, but -- and where you could lose 3% due to depreciation. So you're better off by 2%. However, that is not our objective -- it's not our objective to save interest cost. We are not taking a view on whether the rupee is going to depreciate faster than 3% or slower than 3%. We are just doing it as part of managing our risk because we have dollar inflows and dollar assets, and we are funding the dollar assets with a dollar liability. For information we're up by 2% to 3% in the dollar.
Sorry. So essentially, if the spread is very attractive enough, that's when you go for these structures. Otherwise, you don't. That's my key takeaway.
It's -- no, no, no. Sorry, I didn't mean to put that. It is -- the spread so happened. It so happened that the spread was very attractive. However, when we compare the NCD, it is our intention to swap into dollars. And the only comparison that we do is if I do a straight dollar loan, I get effectively benchmark whatever, LIBOR, SOFR plus some spread in a dollar loan, can I get below that cost by doing an NCD and swapping it into dollars that's all we are looking at, not whether it's better to keep it in rupees or swap into dollars.
Okay. I principally, I understand that. I mean, of course, I do recall a similar exercise that you had done just after the GFC when I think you had about INR 2,500-odd and then I know the hedging loss reserves were sitting at about INR 1,000 crores in FY '16. So that makes me wonder whether the benefits are worth the expenses. And obviously, it's a principal call. But right now, as we sit right now versus an Indian debt, just as an academic exercise, are we better off or worse off if you know?
We are better off by about 2%. So what happens is -- and I just need to close [Technical Difficulty] on whether we -- so we can -- if we take the first point and the first principle that we will borrow in dollars, we will always have some MTM loss sitting in our books because -- if based on a regular depreciation of the rupee because that has to come into the P&L in any case when it depreciates. You don't have a corresponding revaluation of the asset of the ship that you purchased. And that's why we do this normalized results slide because we are trying to strip out that saying that that's not something that you need to take into account.
Okay. Got it. Okay. I mean every time I want to feel excited that the rupee has depreciated, I have to bring it back because of this. But anyway, go ahead.
We are a net dollar long company because our debt will always be significantly lower than the value of the assets or the -- and the dollar balances put together. So in fact, INR 30 of our last quarter improvement in NAV has come from the depreciation of the rupee. [ id="-1" name="Operator" /> We'll take our next question from the line of Harsh C., an individual investor.
Shiv, can you go to the slide on normalized financials?
Yes, sure.
Yes. I'm just looking at the...
You want the P&L, right?
That was done and there was -- are there some changes in...
No, no, I think there was an error in the titles of the columns.
Okay. Because some of the consolidated figures were some around INR 2,700 crores. So I just wanted to understand what are the changes...
Sorry, it is INR 2,700 crores, right? For H1?
No, for Q2 in the filing, it is mentioned as...
No, no, that's right. So the columns got interchanged. So you will see that the Q2 was showing a higher number than H1 because the column heads were interchanged.
Okay. And just one thing on the NAV slide, I just wanted to understand, given the asset prices have largely remained same, why do we see a decrease in the fleet value?
You'll see a decrease in the fleet value when we sell ships. So when that goes from the ship into profit on sale, then you'll see a decrease in the fleet value. Are you referring to where the bridge that we did for the NAV?
Yes, yes, that one. Because largely from the last quarter, the prices have remained same or, in fact, improved, but we see a decrease in the fleet value.
No, this is not from the last quarter. This is from a year ago. This is from September.
So basically it's like the entire year's changes.
That's correct. And July, September '24 was when product tanker prices were pretty high, and it came off a lot by June this year.
Understood. And also, there would be some amount of natural decrease because of the aging of fleet.
That is correct. That's correct. Yes, absolutely right. So in this quarter, actually, we've had an improvement of INR 60 or so in the NAV, where the fleet value is more or less the same, a very marginal difference. But the INR 60 is broken up into INR 30 approximately of cash earnings. INR 30 of depreciation, rupee depreciation impact. [ id="-1" name="Operator" /> We'll take our next question from the line of Amit Khetan from Laburnum Capital.
So I had a couple of questions on capital allocation. So if I look at -- we have some INR 7,000 crores in net cash. And even at the current rate of paying dividends, we are accruing at something like INR 2,000 crores per annum, right? And add to that, we have like significant debt capacity and one could argue that some moderate level of debt is even good for the business. Now if I look at our cash flow statement, we've deployed some INR 5,500 crores over the last decade on a net basis. And this includes a period of 2016 to '18 when we were quite active in buying vessels, right? So my question is, first, how confident are we that we can deploy this scale of capital when markets are weak? And second, is there a limit to this cash accumulation because where we take a call that we have more than sufficient capital to which we can intelligently deploy and therefore, it makes sense to largely dividend it out. Would love to get your thoughts on how the management and the Board thinks about this.
Yes. Thanks, Amit. I've got Rahul here with me, and he will take that question.
So that's a good question that you have posed. And as you can imagine, we do our own internal assessment of that. So of course, our fleet has aged over this period of time, considering we have not significantly invested in new ships. Of course, we continue to follow a switch strategy, which we did mention in the past that we would not like to ideally drop below this 40-odd ships. And therefore, in this quarter, we have actually bought a few ships, sold some of the older ships, and that does take in a certain amount of capital. Looking in the future, let's say, even if the markets don't come off for some time, we will still continue to do the switch strategy. Of course, every time we continue -- we evaluate such a deal, we do look at how the spreads work. The spread, meaning selling an older ship and buying a newer ship and whether it makes sense or not. But assuming it does, we've got ships aging in the next couple of calendar years, and that will take in a certain amount of capital. The second -- but a large part of the capital, like you mentioned, is being kept aside as of now for more favorable prices. And we have done historical calculations and assessments of how liquid the shipping market is in both the secondhand as well as in new building. Of course, in 2016 to '18, the business was smaller. The last few years has been very profitable, and therefore, the amount of cash we have, the amount of debt we can raise has significantly increased. So the potential CapEx we can do in the future has also increased. In 2016 to '18, we solely focused on the secondhand market. But in the newbuilding market, you can absorb a significant amount of money. So just to give you an example, today, if you build a Suezmax tanker, right, it costs about $80 million to build. So if you place an order for 2, 3 or 4 of those, it will absorb a significant amount of money. Now do the yards have that kind of capability? They easily do. We have seen companies much larger than ourselves being able to deploy much larger amounts of capital. So we do keep this in mind. And as long as we believe that we can invest this intelligently in the future, we believe that it is worth holding on to the cash.
Fair enough. Have we considered -- I know you've talked about this in the past where we've looked at the container segment. Has there been any progress there in terms of new segments that we are looking at?
So in the container segment, we do watch it closely. We don't cover it here because, of course, we're not invested in it, but I can just give you a very brief overview. So our decision to hold back on the sector has, as of now has been all right. So there are 2 things. The nature of the container business is different from the tanker business because in the tanker business or the dry bulk LPG business, we deal directly with the end customer. So, for example, an ExxonMobil, Reliance, Chevron, companies like that. In the lining business, what we would do is ideally we would be tonnage providers. So you would buy a container ship, you would give it to the likes of Maersk and Maersk has the responsibility to fill up the ship with container boxes, which means Maersk charges a box rate, right, per box to the end customer. So there's an in-between layer. Now the rates, the box rates have significantly come off over the last few years. As you may be aware, the container market had probably a once-in-a-lifetime kind of boom over the last few years. But those rates have come off significantly. The order books are very strong in the container space. And we expect -- and it's very difficult to call these markets and know when all these things will happen. But we do expect that there can be a correction in the freight rates that a tonnage provider could earn in the future, along with the asset values of those ships. And if we get those opportunities, we would seriously look at the container space as well. Also, just for your knowledge, ships in the container business does absorb a lot of capital.
Got it. Got it. Just a last follow-up to the capital allocation. Now when the markets turn weak, given that we would be looking at multiple vessels at the same time and each transaction, my guess is takes a few months to close. Do we have the team in place to sort of -- for an increased level of activity should that happen?
Yes. So again, that's a very good question to ask. Of course, we have also again done our assessment to know that when we do need to act quick, do we have the capability to act quick, both in evaluation and being able to take over a significant number of ships. So again, to draw to your example of 2016 to '18, at that time, we were about 30 ships, and we scaled up to 50 ships. And had we -- we have our own internal discipline of the amount of leverage we needed to take. At that point in time, we were capped out on what we believe would be the investable surplus that we wish to deploy at that time. But had it been that we had more money available, we could have executed more [Technical Difficulty]. We could have gone up to 55, 60. That's a bit of speculation, but I'm quite confident we could have executed it from an operational angle, and that's a doubling of the size, right? So now today, of course, we're starting off on a bigger base. And therefore, if you're unable to execute that, then that would be after waiting for so long, that will be unforgivable. So clearly, we have -- we keep that in mind and we've prepared ourselves for that eventuality.
Got it. So we have the bandwidth for that?
Yes, of course. [ id="-1" name="Operator" /> Next question is from the line of Rajakumar Vaidyanathan from RK Invest.
So my question is to Shiv. On the FX line item. Sorry for a long question. So I see that the FX line item is appearing under 3 line items in P&L. There is an item E and F. And then there is also one on the other comprehensive income line where you're showing a gain of INR 54 crores to be reclassified to P&L at a later stage. So I would like to know what are all sitting -- the major buckets sitting in each of these categories. Because first one, you said you're repricing the loan, but that will not show up on the asset side because of the GAAP reasons. So the asset repricing is sitting off balance sheet, so you will only show the loss in P&L. That part I understood. So is that INR 59 crores that you are showing is that -- that is what you're referring to, the loss?
Yes, 1 minute. So let's look at this. You're referring to stand-alone results, right?
No, I'm looking at the consol.
Okay. Let's go through that. So let's go with -- there are 3 -- first is 4E.
Yes.
Okay. That is change in fair value of settlement of derivative contracts. That is a loss in this case. The derivative, which converts our rupee debt to dollar debt, which because the rupee has depreciated has now gone -- is now worse. The MTM is worse. The second one, which is F is the revaluation of our cash balances. Our cash balances are significant dollar cash balances. That's right. So those are the 2 items.
Yes. The third one?
Sorry, where is the third.
I'm looking 8C, items that will be reclassified to P&L.
Yes. This is, I think referring to our investment in subsidiaries -- in overseas subsidiaries, where that investment gets revalued because you invested in dollars, right? You have capital in certain dollars and that has got revalued.
This has got nothing to do with your cash flow hedges. It is not -- I thought the MTM.
No, no, no.
Future cash flow hedges are sitting here.
No, no. This has nothing to do with the cash flow because that gets classified to P&L immediately.
Okay. But how about the future hedges? I mean, the contracts that you have not fulfilled for which you have taken a forward?
You mean the -- sorry, when you do -- when you're talking about cash flow hedges, you're talking about general dollar sales?
Based on your future revenue you would have sold your...
No, no that's not there at all. So we do very little of dollar sales forward.
Shiv, sorry to labor on the same point. The reason for this question is in one of the, I think, previous calls when we saw the rupee depreciation, you mentioned that I don't expect to see a positive impact on the P&L because of the loan repricing. So net-net, we will be losing on the P&L, but actually factually we'll be gaining. But from a P&L standpoint, we'll be losing that's what you mentioned in one the calls.
No, that is absolutely correct. The reason why depreciation is a positive for our P&L currently is because we have more dollar current assets, which is mainly cash than dollar liabilities, which is the loans. So we have $180 million of loans and close to $400 million of cash. And that's why on a net basis, we are benefiting on $200 million. That is not a normal situation. Under normal circumstances, we would have $700 million or $800 million of debt, and this would have been the case 4 years ago. We would have had $700 million of dollar debt and maybe $300 million or $200 million of cash, which meant that if there was a depreciation, you would have had a negative impact on the P&L, which is also the comment that we put into our -- when we explain the normalized.
Okay. Got it. Yes. So whatever statement you mentioned earlier, it holds good, just subject to the cash holding.
That's correct. Got it.
So the second question is there has been an uptick on the VLCC crude carriers of late. So I just want to know if you can give any color. Is there a talk about floating storage back in? And is that what is driving the prices? And what is the current scenario? And also any color on the future as well?
So right now, the economics are not floating storage. You need to have a steep contango, especially at these VLCC rigs. When markets go up, you can put some reasons. Of course, the extent to which it has rallied whenever market goes up, you can't pinpoint ABC reason and say exactly this is why the market should be exactly at this level. Of course, it currently seems to be at a very strong level. But we did see that there were a lot of sanctions to Russian refineries and oil producers. And there's been a bit of a scramble for cargoes. When you go for -- and Shiv mentioned it earlier in the presentation, when you go for these Atlantic Basin crudes, like places like Brazil, Guyana or even from the Middle East because the Middle East has unwound some of the OPEC cuts, which they have. So the extra crude that countries like China and India would need to replace the Russian barrels would come from these nations. And in these nations, generally, they pick them up on VLCCs. While Russia -- main Russian exports have been on Aframaxes and Suezmaxes. So there's been a bit of a switch. Of course, the scramble for cargoes, along with extra sanctioning to not only the Russian crude producers, but also there have been additional sanctions on a bunch of vessels that have carried Russian cargoes, which has reduced some of the supply from the market, led to people wanting more -- needing ships from the international trading fleet. And so we saw a rebound in the rate, along with the fact that China has also been stocking up and that also added to the demand for ships.
Okay. So how much of that benefit has come to us because I think we don't own any VLCCs, right?
No, we don't. But we own the Suezmaxes and Aframaxes and they have also strengthened. Of course, the VLCC saw a big jump. We don't have that. But all our crude tankers are in the spot market. So to the extent that Suezmaxes and Aframaxes are strengthened, we get all the benefit.
Okay. And do you expect this benefit to last for at least a couple of quarters, if not more?
We don't make a forecast on the rates because genuinely, you don't know which tractors will come to either pull up the market or pull down the market. So we'll refrain from that.
Okay. Yes. The last question is on the rigs part. So in the previous call, you mentioned that there will be a lumpy expenditure whenever the rigs go for a contract. So I just want to know, have you taken any hit in this quarter or the hit will come in the coming quarter because you mentioned a couple of your rigs are going to go for work in the Q3?
It will come in the coming quarters, the coming 2 quarters.
Okay. So there will be a hit on the bottom line or the bottom line will be taken care of?
Yes, there will be an extra amount of expenses to prepare the rigs for the new contracts.
Yes. No, my question is incrementally gain or you will not see that benefit in Q3, Q4?
Yes. So the initial period of any contract tends to be loaded with these expenditures. And then later on, it gets sort of free because it's only OpEx then. So we would not expect too much contribution from the rigs in this period in 6 months.
Okay. And sir, the last question. So on the forecast, you have mentioned for the rigs, the visibility is only 75% for Q3. Is there because in Q2 also, you mentioned the same 75%. So I mean, given that you already have a visibility of these rigs going into contract, why we have not changed the percentage?
That will be because those rigs will be off-hire for some time preparing for those contracts. So we don't count the off-hire time as part of the coverage. [ id="-1" name="Operator" /> We'll take our next question from Kirtan Mehta from Baroda BNP Paribas Mutual Fund. We take our next question from Karan Bhatelia from MAIQ Capital.
I'm sorry, I joined late, if I just repeating the question. Going through an article regarding U.S.-China trade, I've been seeing that there's been a massive drop in the container as well. So how does it affect...
The line has gone. Yes. So just on a very rough thing, the containers, of course, since we are not there, it doesn't affect us. The only 2 commodities which are really affected by the U.S.-China trade war are grains and LPG. So those are the only 2 commodities. We are not affected by what happens on the container front.
I get it, sir. But just to understand basically those containers are being transported via maybe Kamsarmax or whatever, some sort of...
No, those container ships are different from all our ships. We don't have any container ships. [ id="-1" name="Operator" /> [Operator Instructions]
I'll just read it out. So this is from Himanshu Upadhyay. The asset prices have increased in the last few months despite the charter rates not improving that much and on product and dry bulk carriers. Can you tell what is happening and why asset prices have moved up?
That's a good observation. So on crude, the charter rates have moved up. But -- and dry bulk also, I would say the charter rates have moved up in the last couple of months. Shiv mentioned that there's been some forward buying. So you can see some link between the asset prices and dry bulk. Of course, if you try to draw exact relationships of just to oversimplify it, rates have moved up 10%, asset value should move up exactly by 10%. That never happens in any market. But let's say, the broad direction has been upward for both. There is some positive expectation on dry bulk, mainly on the Capesize vessels, where we've seen the asset prices holding up much stronger than the subcapes, mainly because there are many more mines coming up in West Africa, both for iron ore and bauxite. On product tankers, yes, agree that we have seen the prices strengthen a bit despite the charter rates not moving up as much. There is a bit of a delink over there. But eventually, it is dependent on people's ability to procure vessels in the secondhand market. And sometimes the last few transactions set the price. While I'm not forecasting, it very much may be possible that maybe starting of next year, maybe some of that extra increase in the price comes off if the charter rates don't improve. Can we move on to the next question?
What is the current outlook on dry bulk market with respect to coal and iron ore, has the market picked up in the rates? So again, I'm not going and getting into a forecast of the market, but I can just tell you roughly where we are today. The coal market has been a bit weak. But firstly, dry bulk rates move as a totality of all the dry bulk commodities. You've only focused on coal and iron ore. Iron ore, while there are months where it's strong months it's weak, overall coal and iron ore trades have been a bit weak. In iron ore, if you see the major demand area is China. You all may be reading in the news that the amount the government wants to spend on infrastructure is a bit topped out. We're also seeing the real estate market facing a lot of issues. Iron ore is also consumed in the export market. So when China is producing a variety of goods that are sold to America, Europe and other kind of countries. There is a consumption of steel and therefore, consumption of iron ore. All of the steel production in China has been down this year, even in the last couple of years by a few percentage points each year. However, the iron ore production in China sometimes remains weak, mainly because the iron -- content in that iron ore is on the lower side. So because the iron ore prices today are roughly on the lower side, sometimes steel mills find it more economical to import higher iron content or from countries like Australia and Brazil instead of using domestic ore. And then it's on the margin of whether they import a little bit more or import a little bit less. And that's kind of at least somewhat holding up the iron ore imports. Coal has been on the weaker side. We're seeing power generation increase in both India front at maybe just 2% or 2%, 3%. And renewable energy growth has been strong. Hydro power production has been decent. And because of that coal imports have been a bit weak. But we are seeing minor bulks, mainly driven by bauxite, fertilizer, other agriculture products holding up very well. And that's why we're seeing the strength in this dry bulk market despite the main 2 commodities actually being on the weaker side. I hope that's answered your question. If we could just move on to the next one, please. Yes, let's take one live question and then we'll go on. [ id="-1" name="Operator" /> We have a question from Harsh C, an individual investor.
Shiv, I'm just looking at the stand-alone cash flow statement and there's some INR 425 crores of loan to subsidiary. So I believe this is to GIL, correct?
That's correct.
And this is the -- some total of all the payment like all the debt has been retired from GIL or...
That's correct. So there is no other debt now in the group apart from the Great Eastern, apart from our end.
Understood. And just looking at the financing activity as well. And I mean, just comparing from the last H1, there was some INR 282 crores of dividend. And this year, it has come down to almost INR 180 crores. So any reason for that? And given that we are better off compared to last year from a cash availability point of view, the reason for this reduction in dividends?
We -- the profitability is lower in this year than in the previous year.
Rupees per share should not be so low.
That's right. Not really. So we had -- no, it is not lower. Let me just -- this might be that we did something as a final instead of an interim. So there was just a timing difference because last year we did a total of INR 424 crores. It can't be all -- but we will just see this.
Okay. But as a principle, ideally it should match or, in fact, improve, right?
No, the profits are not higher than the previous year. The profits are not higher than in the previous year. H1 was lower than the previous year.
Understood. But what's the management's thought process while declaring the dividend, the current quarter of profitability primarily?
Yes. One is to look at the current quarter of profitability, so current quarter or 6 months. In this case, because it's a quarterly dividend, current quarter of profitability. Yes, that's what we are looking at usually and whatever requirements are there. So then you decide the rate depending on how much we want to retain. [ id="-1" name="Operator" /> We have a question from Krishnaraj V from Acatus Investments.
Yes. I thought I'll just educate myself with another question. When I look at your business, it seems to me that for the classes of ship that you trade in, the supply side is more foreseeable than the demand side because you know the order book and you know the scrapping, et cetera. So if that is the case, one does see that scrapping has not been intense at all, although the order book as a percentage of fleet supply keeps growing. So it appears to me that the market has to crack to give you some opportunities, the scrapping has to intensify. I don't know if my line of thinking is correct and if you can throw some insights around it, please.
So firstly, on the order book, what you're saying is broadly correct. You do -- so let's take today's position, right? The market is -- has been fairly strong. You just remember one thing that when you look at yard capacity, yards have the ability to build ships in our sectors, but also in other sectors. As of today, and if you just take maybe Cal '26, '27, '28, most of the yards are full with LNG and container ship orders. Those ships are generally more profitable than building tankers and bulkers. So -- and considering that those markets were very strong, people went and placed orders and filled up all the slots. Had those slots not been filled, then the order book -- then shipyards could build ships much faster and they would have had space for us to order tankers and bulkers. Considering that today, you know that the yards are generally full, they're only taking orders for 2028 to Cal 2029. And therefore, we do broadly know what the fleet supply is going to be over the next 3 years. But to build a ship, let's say this is just for your general knowledge. But let's say, LNG containers ship orders have not filled up all these yard slots, then it generally takes about 12, 18 months to build a ship, which means that people could have gone and placed orders and you would have seen ships coming in in Cal 2027. And then the lead time to increase the order book is much shorter. But in today's situation, at least you know what is going to look like for the next 3 years. Now scrapping is a more complicated forecast. Generally, we have seen periods in the past where markets have been weak, but owners have held on to their ships, either because they're still able to trade them or their balance sheets are strong enough for them to hold it on a bit more. So sometimes we have seen scrapping ages reduce. Sometimes we see scrapping ages hold on. So that can take a bit of -- that's a bit of a guess. And sorry, what was your last question? I think you asked...
Yes. My question was that I think you've answered most of it. I just want to educate myself. I mean there's nothing specific.
Yes, no problem. You are free to ask.
Yes. So I think from what I'm hearing from you is that order book more or less yards are full. So fleet supply, not many ships are going to be coming into the water. What can happen is that there are a lot of ships that are older, especially other than the product -- product is quite old. So scrapping can intensify. And if scrapping intensifies, then there can be supply-related spikes in the charter rates and so forth. I was trying to just understand that.
But if let's just say only because you're asking it as a general question, let's say, if the market is very poor and a lot of ships got scrapped and let's say, the market prices the charter rates increase as a result of that scrapping, then owners, as long as charters are willing to take those ships may hold back on further scrapping. Because what happens is for a shipowner is if the debt is paid off and the ship is fairly old and as long as they can make up the operating costs, generally, the tendency is to continue to run those ships. And if you are in a world where fleet supply that's coming online is not very strong, maybe charters release some of the age norms that they have for those kind of ships. It's all a matter of supply demand because you have to move the cargo eventually.
Got it. You don't see any regulatory changes in the horizon that would accelerate scrapping?
So as of today, the generally internationally traded tankers don't really cross the age of 20, 21. There is, of course, a market for ships above 21, but it's very far and few. So -- and some of the -- maybe the carbon-related regulations that are coming up are multiple years away. We've seen some delays from IMO as well. So we don't even know when those are coming in. So in the near future, I would not think of any regulations coming in to accelerate scrapping. [ id="-1" name="Operator" /> Sir, would you like to take the text question?
So we'll just do that. So the first question is -- first set is from Ketan Mehta. Three questions. How much percentage of our fleet is geared to capture persistent higher rate either through spot or short-term contract exposure?
So broadly, we maintain most of our fleet on the spot market. The LPG fleet is generally fixed out. We have 4 of those ships out of our 40, so call that 10%. Out of the remaining ships, 36%, maybe 3, 4 at any given point in time are on time charter. Others broadly we -- and we have no fixed rule of fixing any ships on time charter. So we are always in a position, always willing to be in a position to take advantage of the spot market. The second question is.
We are seeing continued strength in diesel crack and recent rise in gasoline crack. Will these likely to ease over November as refineries return? That's a tough one.
Yes, that's a tough one. It will be very difficult for us to speculate on how these cracks are going to change.
The next question is from [ Ojus Singh ]. With the government's Sagarmala project program aiming to boost coastal shipping, how is Great Eastern positioned to benefit from these initiatives? Are we actively taking advantage of the opportunities arising from Sagarmala to expand our business or improve efficiency?
So we have always participated in the coastal trade, and we have been participants in the coastal trade for a long time. So -- and we will continue to participate whenever there are opportunities for us to deploy our ships.
Next question is from [ Snigda Tibrewal ]. The investor presentation says that the NAV per share is INR 1,484 is the NAV calculated as the equity shareholders' funds in the balance sheet or any other method? So the way we calculate net asset value is that we just replace the net block of the fleet with the market value of the fleet. So -- and then we calculate what is left over as the shareholders' funds. So if the net block is INR 8,100 crores, which, let's call it, $900 million, but our fleet is valued at $1.6 billion, which is, let's INR 13,000 crores to NR14,000, then we replace it with that number. And then we calculate the net asset value minus the net debt and divided by number of shares gives the net asset value per share. So this is basically shareholders' funds, but with the ships mark-to-market. And the last of the text question we see here, from Mr. Rajakumar Vaidyanathan. Many foreign vessels are converting their registration to India location. Our government recently has put an ambitious target for shipbuilding and ship repair, your comments. Lastly, my humble pronounce to Shri KM Shethji for an illustrious carrier, may the God bless him good health and peace. Thank you for that. We will convey it to Mr. Sheth. So yes, people -- shipping seems to have entered the government -- has become very big in the government's consciousness. We are very happy about that, and we are very happy with the development of a shipping ecosystem in India. So we welcome all of these initiatives from the government. [ id="-1" name="Operator" /> There are no further questions, sir. Any closing comments from you?
No, nothing -- no closing comments. The transcript and the audio will be put up on our website shortly. We are always available to speak with investors. So please reach out to our team. Our contact details are given. So please reach out to our team if you have any further questions. Thank you. [ id="-1" name="Operator" /> Thank you, members of the management team. On behalf of the Great Eastern Shipping, that concludes this conference. Thank you for joining us, and you may now exit the meeting.
Read the full transcript via the API
You're viewing the first half of this call. Get the complete The Great Eastern Shipping Company Limited transcript - plus 252,000+ transcripts from 12,000+ companies, speaker segments and full-text search - through the EarningsAPI REST API or hosted MCP server.
Get an API key View API docs →For developers and AI pipelines
Programmatic access to The Great Eastern Shipping Company Limited earnings transcripts and 252,000+ others is available through the
EarningsAPI REST API and the hosted MCP server.
Quarterly plans from $105 - full transcripts, speaker segments, full-text search,
and the /api/v1/transcripts/recent polling endpoint for ETL pipelines.