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Shipping Corporation of India– Glimpse of hope? - Views on News from Equitymaster
 
 
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  • Jun 24, 2000

    Shipping Corporation of India– Glimpse of hope?

    The government has proposed to bring down its holding in Shipping Corporation of India (SCI), one of the mini-ratna’s, from 80% to 40%. The long awaited disinvestment has finally taken off (atleast in resolution!).

    The Shipping Corporation of India, one of India’s leading shipping company, accounts for over 50% of earnings and 52% of tonnage in the sector. It has more than 110 ships including oil tankers, bulk carriers, container ships, offshore support vessels and passenger carriers. Currently, the tanker division contributes nearly 70% of the company’s turnover. However, since the government holds nearly 80% in the company, it is forced to run some services like the passenger vessels under compulsions, which apparently are loss-making ventures.

    But, after the rough patch during Southeast Asian crisis, the demand for oil vessels is finally picking up. Strong demand is expected from the western loading countries, which could lead to a hardening in freight rates.

    To compete with the foreign peers, the company has entered the domestic market for financing its acquisition of Rs 1,500 m Long Range (LR) II tanker with 83,500 dead weight tonnage from Cochin Shipyard Limited. With SCI focusing on energy sector, which would include transportation of crude, petroleum products, LNG and LPG, the increase in the freight rates could be a real boost for the company.

    After all, being a public sector unit has its own nitty-gritty’s. With all sort of opposition from all parties, the government has finally made a call to disinvest its stake in SCI to a strategic partner. With the coming in of a strategic partner, which could be a one of the oil companies, the company will be able to focus on the energy transportation by hiving off all other non-profitable businesses. All said and done. But it has to be seen whether Shipping Corporation of India can pass through those procedural hassles and see twilight at the end of the tunnel.

     

     

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