See improvement in LPG, offshore markets in FY12: Varun Ind

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See improvement in LPG, offshore markets in FY12: Varun Ind

In an interview with CNBC-TV18 Yudhishthir Khatau, MD, Varun Shipping spoke about the performance of the company and the road ahead.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See latest News about Varun Shipping See previous management interviews See what other Experts & Brokerages are saying about Varun Shipping Varun Shipping BSE | NSE 31/05/12 Are Mutual Funds betting on Varun Shipping?

In an interview with CNBC-TV18 Yudhishthir Khatau, MD, Varun Shipping spoke about the performance of the company and the road ahead.

He said," I am happy to say that the offshore industry has since picked up. We have obtained three charters for eight years in Brazil, but those will only show up in the course of this year, not last year."

The company declared a dividend of 8% this year. Elaborating about the same he said, "Our dividend has always been very consistent. We had to drop our dividends in line with overall shipping company results. We hope that we will be able to improve upon this with the improvement in terms of both the LPG and the offshore market for the year to come."

Below is the verbatim transcript of his interview with Latha Venkatesh and Anuj Singhal of CNBC-TV18. Also watch the accompanying video.

Q: The year before, that is FY10 was a fairly bad year for the shipping industry across the world, and coming from that bad base, some shipping companies actually have done somewhat better in FY11. Why couldn't you improve your numbers?

A: Main impact in the last year came as a result of two measures. One was the offshore industry has still not recovered last year. And there was under utilization of the offshore fleet. I am happy to say that the offshore industry has since picked up. We have reported that we have obtained three charters which are for eight years in Brazil, but those will only show up in the course of this year, not last year.

So that was one and the second is Varun has also taken a decision to move a certain part of our fleet abroad. This is because we have been having issues on taxation and manning and crewing on the India flag. As a result of that there has been a reduction in total fleet that we have had which has also created a drop in results.

But, again that will show an improvement in the course of this year, as some of the loan which we have on those fleet also move outside with the vessel. So the financing structure and the better utilization of the offshore fleet are two impacts which hit us last year. We are hopeful that will be able to be worked out as far as this year.

Q: You have been consistently paying dividend of 15%, that has been down to 8%, why that, because almost halving of dividend and for some of the rated investors Varun Shipping used to come with a good dividend play. So is it a one off, do you expect to go back for that 15% trajectory?

A: Last year we declared an 8%, we maintained the same dividend as we did last year.

Q: But for last couple of year before that it has been 15%.

A: Our dividend has always been very consistent. Varun has declared continuous profits in dividend for 26 years, this is our 27th year. But, we had to drop our dividends in line with overall shipping company results. We hope that we will be able to improve upon this with the improvement in terms of both the LPG and the offshore market for the year to come.

Also Read: Varun Shipping bags order worth Rs 690 cr from Petrobras

Q: I am still not fully clear on what you meant by moving out some part of your fleet. It would still be somewhere in a subsidiary, isn't it, you are consolidated?

A: No, we have actually taken the decision to move apart of our tanker and offshore fleet to associate companies abroad. They are 49% held by Varun Shipping. Varun Shipping would continue to have an equity stake in that particular entity, but it would not be 100% subsidy. It would be 49% associate company.

Q: We don't have your Q4 numbers separately; you have just given the FY11 numbers, could you take us through the quarterly trend?

A: We don't have the numbers with us. We basically have put a consolidated figure to them. But they have been in line with what continued in Q3. So, the results for the full year, have been slightly better than than the previous year. We have had profits on sale of ships being a major contributor. But as I have indicated, the major reason was the under utilization of the offshore fleet.

Q: You are very close to reporting something like Rs 1,000 crore in FY09. What would the revenue growth be in FY12, now that you say you have three more charters?

A: It is a little too early for us to tell, because it depends on how many vessels we retain within Varun, and what we do on the consolidation. So, it is a little too early for us to give you an insight on that now. We will be able to be much clear on this in June when we conclude our reorganization of the business plan.