Shreyas Shipping has signed a vessel-sharing deal with Shipping Corporation of India, in which the two companies will jointly use vessels in their respective loops.In an interview with CNBC-TV18, VK Singh, CEO of Shreyas, said the deal will help the company's achieve better utilization and also help boost revenues."We will see increase in throughput and topline [thanks to the pact]," he said. Below is the verbatim transcript of VK Singh's interview with Reema Tendulkar and Mangalam Maloo on CNBC-TV18.
Mangalam: Could you tell us the financial contours of the deal. If you could tell us what is the kind of inflow that the company is expecting on account of this deal in terms of revenue and what is the kind of investment that you have to make with regards to this deal?
A: Basically, we are not making any additional investment in this deal because we are just sharing our asset, both companies asset and with that we are using jointly all the vessels of whatever Shipping Corporation of India (SCI) has got in one loop and we have got in one loop, so making it two loops, joint loops so that will help our trade and the customers to get better frequency, better deployment and better utilisation of the vessels which will give us benefit in the numbers term if you say. So that is there we are looking that yes definitely with the better utilisation on the vessels, better frequencies the market can be better, so we will definitely achieve better number to the tune of something 10-15 percent should go up on the revenue side also because we are deploying also larger tonnage, so we have more space with one of the vessel of SCI which there in the loop and we are deploying the largest container vessel which any Indian company owns and that has been deployed on the coast. Definitely there is a greater jump on the coastal side, so coastal development will be great focus with this joint venture between us and SCI.
Reema: Let me delve more on the revenue aspect is it going to be a 50:50 revenue sharing agreement between you and SCI and secondly you said that the incremental revenue growth will be 10-15 percent on account of this tie up?
A: No, it is not like that. It is not the revenue sharing arrangement. It is basically our slot sharing or the tenant sharing arrangement, so I give some space on my vessel to them and they give equivalent space on their vessels to us and by that we have made two loops going all the way to east coast of India, so initially, if you recall, only our loop was going which was operated by Shreyas. Now between Shreyas and SCI there will be two loops operated right up to east coast, west coast and to Jebel Ali and we are touching more number of ports also, so there are more port in this loop so the volume should increase. Virtually the space is bullish so what we have is where we were using 4 vessels, now we will be using 8 vessels. Both of us will be using 8 vessels. So it is the space being shared. There is no revenue sharing or cost sharing. Cost and revenue remains as own vessels I have my costs and their revenue on my vessel for utilising my space will be their revenue and utilising their space by us will be our revenue.
Mangalam: We get that you will be optimising space and utilising that so will that give you operating leverage benefits and if yes what are the kind of margin improvements we can see on account of this agreement?
A: That is where we have thought that with this joint venture we definitely will look at increase in the throughput, increase in the topline and ultimately the idea is definitely any business level what we worked at is aimed at ultimately getting a better revenue and better profitability, so we do think that going ahead when the utilisation level goes higher with more number of ports, better frequency, better transit time, so in that case definitely the topline will go up, more and more volume coming in the fold and the profitability also should go up individually, I think to the extent of about 15 percent.
Reema: Have you done this tie-up for all your vessels?
A: No, they were operating one loop and we were operating another loop. The two loops have been tied up between us not all vessels and beside these two loops which we will be operating jointly we will continue to operate other two loops individually also because only four of my vessels are basically attached to this arrangement – rest of the five vessels I continue to operate separately.
Reema: For the remaining five vessels would you look at similar tie-ups since it helps you in improve your capacity utilisation at a time when the demand is not upbeat?
A: Yes, definitely we can look, but since they had only four of the vessel and three vessels were operating, so it was on the basis of equal tenet, which we have now worked out and one of the smaller vessels we have already given them on charter for operating on the Yangon service that is where we will be using that service also and even our area of coverage will increase with that although that service we operated by SCI, but the vessel will be mine but we will be also using on a spot purchase basis and so that’s where our coverage goes up and we expect larger coverage, larger topline.
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