Slamming media reports according to which the Shipping Corporation of India (SCI) is looking to exit its container shipping business, chairman and managing director Arun Gupta says the reports are totally unfounded.
Speaking to CNBC-TV18, Gupta said the company, on the contrary is working towards restructuring it in order to make it viable.
“We are not exiting that line of business. Within that we will restructure it and try and make it profitable. If, however, that doesn’t happen, then we may think of exiting it. But as of now, we are very much in the container business,” says Gupta.
On the company’s business, Gupta says that the entire shipping industry is under pressure and its margins are very thin. The country's largest ocean liner reported a net profit of Rs 49.60 crore for the first quarter ended June 2014. It had reported a net loss of Rs 98.70 crore during April-June quarter of the last fiscal.
But Gupta is hopeful of a better Q2 as the container segment, he adds, is seeing slight positivity.
The company has an outstanding of Rs 7300 crore but Gupta rules out selling any ship in order to pare its debt.
“We have a strong restruring plan in place and it will service our debt efficiently,” he adds.
Below is the transcript of Arun Gupta's interview with Ekta Batra & Anuj Singhal on CNBC-TV18.
Ekta: There were reports indicating that the company might be looking to exit its container business. Could you clarify on the same and whether you are contemplating such a move?
A: We are not going to exit from the liner business. However, we have stated that within the liner division the services which are not viable, we will try to restructure them and if do not succeed that particular service, we might close but we are not going to exit totally from the liner business. It has been misinterpreted.
Anuj: What is the outlook for that line of business because there has been problem with that particular business for sometime now?
A: Absolutely. It is not only the liner business but shipping overall has been under lot of stress and pressure. However, shipping is not looking good and the division traditionally has been where the margins are very thin, so we have been examining liner division critically and we will continue to do so and if there are some services within the liner division which are not profitable, we might close them down.
Ekta: What would these services be and why would you say they are not profitable and the reason being it would be use to cut down debt, if incase or incremental working capital that you would have to take on in order to service this business?
A: It’s not the question of debt. In the liner business, we have to work in consortium with other players. It has to be a weekly service. We have service to Mediterranean and Europe, we have service to Far East which covers Singapore and beyond to China and Korea further we have services to gulf which covers the Persian Gulf along the Indian coast to Colombo. So, we have various services. Earlier we had services to USA, South Africa; they were not viable so we have closed down.
At present we have three main services and out of these services if anything is not viable, we might try to restructure or as a last resort, close one of the services.
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Anuj: Since you said that the shipping industry is not looking good and in Q1 also your profit was only because of other income but EBITDA wise all three segments were negative. Would you expect the year to have the same kind of trend in terms of making losses?
A: In Q1 we made profit of Rs 49.5 crore. Yes, I agree that that profit was not operational profit. Major source came from other sources, other income. Q2 performance operationally should be better than Q1. Baltic Dry Index average in Q1 was around 978 and now it is hovering around 1,080. Tanker market has been stable or there has been a little upward trend. The container segment also – there are some signs of upward movement, so operationally Q2 will be better than Q1.
Ekta: What is your current debt situation stand at, your gross debt and even net debt?
A: Our loan outstanding as of today is roughly Rs 7,300 crore.
Ekta: Would you look to exit or selloff any of your ships in case you need to service debt and maybe freight trades continue to be depressed?
A: I do not think there is any need to sell any ship at present. Whatever loans we have got, they are all external borrowings at very attractive rates and we have our structured plans to service our debt. I am not worried on that front.
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