The Shipping Ministry today said Shipping Corporation of India's (SCI) does not need any bailout as its finances are sound as of now.
"There is no need for the government to step in to assist SCI because it has fundamentally financial strength and that it is capable of handling the current situation," Shipping Secretary K Mohandas said at a specially convened press meet here following recent reports about the Corporation's grim financial health.
However, the top management of the Navratna company, which posted a Rs 5.9 crore loss in Q1, admitted to difficulties saying revenues and margins are under pressure and that the corporation has also downsized its capex plan to 10 vessels this fiscal from the 24 acquistions announced last month.
Corporation Chairman and Managing Director S Hajara was quick to add that the grim situation is not unique to his company as the global shipping industry is hit because of oversupply and falling freight rates.
"At present, our margin, the revenue..everything is under pressure due to the very severe downturn in the industry," Hajara said.
An internal document of the Shipping Ministry had recently compared the company to the ailing national air carrier Air India and said it is "on the brink of financial collapse."
The document further quoted the Ministry had also recommended SCI to go slow on its proposed acquisitions of 24 vessels saying it would to lose up to USD 200 million in value from the proposed purchases. The report had also cautioned that the company was getting into a debt-trap.
Hajara said only nine vessels of its USD 1.4-billion total order book of 28 has seen a fall in value due to the fall in asset prices since the slump in shipping trade.
On company's debt situation, the Chairman maintained that its debt equity ratio stands currently at 1:0.66 and it will not go beyond 1:1 even if the corporation goes ahead with the proposed acquisition of 24 vessels. He further claimed that this debt-equity ratio is among the best in the industry.
Hajara also rubbished reports of difficulties in tying up funds, stressing the company's debt-raising capacity is intact but it has not approached lenders as there is no need for any funds at present.
However, describing the shipping as a "dynamic area", he said the Corporation has cut down on acquisition plans for this year to just ten vessels.
At the AGM last month, the Corporation had announced plans to acquire 24 vessels and invest up to Rs 3,700 crore. "We have not restructured (our orders). But as it stands now, we are quite sure that the entire number of vessels (24) will not get ordered this year," Hajara said.
However, he did not specify the amount it will be investing in the ten vessels consisting of two bulk carriers, one container ship, six anchor handling tugs and one Panamax vessel.
When asked if the Corporation's plans of picking up stakes in shipyards are on, Hajara said it is currently concentrating more on its core activities, though it has not been stalled.
"We are trying to only concentrate on the core business and conserve as much cash as possible. It will have some delay or effect in our diversification plans."
On recent reports of SCI cancelling a three ship order placed with the Cochin Shipyard, Hajara said the company was merely in talks and did not place any final order and hence there is no question of a cancellation.
SCI has 81 vessels with a DWT of 5.82 million tonne and an average age of 14 years. The Corporation is targeting to take it up to 93 vessels, 6.17 mt DWT and 14.08 years respectively.