Present dry bulk rates very healthy for shipping ind: SCI

Excerpts of CNBC-TV18's exclusive interview with S Hajra:

Q: The Baltic Dry Index has fallen about 45% from the highs that it made in December 2007. What's your sense of how tanker and dry bulk rates will pan out for the better part of 2008?

A: When you say it has fallen 45%, it has fallen from the highest ever peak that the history of shipping has ever witnessed. So I would say that the present rates are very comfortable for ship owners, they are very healthy. Going forward, I do feel that the age profit for bulk carriers are quite high, so a number of ships have to be scrapped necessarily. The ordering is of course 50%, but a lot of these ships will get delivered after two or three years. So going forward, the rate for dry bulk will remain healthy.

As far as tanker is concerned, in recent months there has been some spurt, it had come down substantially, but there has been some improvement. I think overall, for 2008 of course we are talking about some recession setting in USA, sub prime crisis etc, but today, we must realize that unlike in the past, it is not USA which is the only driver of the world economy, China and Indian growth are still strong. I personally feel that, going forward, international trade and shipping will have a reasonably good time.

Q: At the moment, the Baltic Dry Index is at about 6130 levels. For 2008, what kind of levels, higher or lower are you anticipating?

A: I anticipate more or less the same level, I don't really expect them to go much higher but neither do I expect them to go much lower.

Q: What do you expect that this will do to your margins? You posted about 25% margins in the last available quarter, will you able to hold that for the next 12 months?

A: Yes, that is my own reckoning. But of course, I am not prepared to divulge too much on either my top line or bottom line going forward because as per the SEBI and Stock Exchange rules, I can't give such predictions.

Q: About the road ahead, we understand that you are going to order about 50 new ships over the next thee years at a cost of USD 3 billion. You are also increasing your dead weight tonnage capacity to about USD 9 million. Can you give us a sense on what the capital outlay would be over all for the next three years and how do you propose to go about funding this?

A: Overall, as I said, our total investment will be to the tune of about maybe Rs 15,000 crore. Of that, the equity component will be only about 20%, which is just about Rs 3,000 crore.

As on date, Shipping Corporation has a reserve of nearly Rs 2,500 crore because we did not expand very much in the earlier years. So I don't see any difficulty and whatever maybe the crisis, we find that there is still a lot of appetite in both, the international as well as domestic financers for financing the shipping project. So as far as expansion is concerned, I am quite bullish and I don't see any reason that fund will become an issue for my expansion.