The Great Eastern Shipping Company Limited

G. Shivakumar

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G. Shivakumar

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G. Shivakumar

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G. Shivakumar

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Roshan Nair

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Bharat Sheth

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Bharat Sheth

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Bharat Sheth

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Bharat Sheth

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Bharat Sheth

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If the markets are very weak, you have a chance that there will be significant scrapping which takes out some of the fleet and therefore brings demand/supply back into balance.

— G. Shivakumar

So, on the older assets, it's very difficult to place it out for long periods of time, simply because of the age.

— Bharat Sheth

And I think I've mentioned this in the past that since we have a very conservatively leveraged balance sheet, and now indeed, we are net debt, we may as well take risk through the operating leverage, because just think about it that we could have fixed some of these tankers, let's say, because a year ago, let's say our 2004 built vessel in the start of '22 was still 18-years old.

— Bharat Sheth

And that's the thing about shipping that you really want to keep as much of your operating capacity open and balance that out by running a very conservative balance sheet, so that you're never under pressure to take suboptimal decisions on fixing the ships out.

— Bharat Sheth

And remember, you got to take this capital into three buckets: One is just the risk capital, which the company always will keep as cash.

— Bharat Sheth

It's very difficult to give forward guidance.

— Bharat Sheth

Are you seeing any changes which can really affect the product and tankers market, apart from the seasonality, because I think recently there has been quite a lot of decline in both the clean tanker and the dirty tanker index.

— Vaibhav Badjatya

And because the odds are so very uncertain, typically, traders have multiple options when they quote for the business.

— Bharat Sheth

So, it's very difficult to really say, what else will drive demand other than ups.

— Bharat Sheth

Currently, the VLGCs are under pressure if you take the West Coast route.

— Samraj N

The next question is what will be the impact of the ban on Russian clean products on ton miles?

— G. Shivakumar

Q

Good afternoon, everyone, and thank you for joining us for this conference call. Mr. Bharat Sheth — our Deputy Chairman and Managing Director is here to take questions; we are very happy to take your questions on the company and what's been happening in the markets. So, let's go into the "Presentation." Again, we might make forward-looking statements. It is not our intention to give any predictions or focus on profitability. For the first time ever, our profits have crossed Rs.1,800 crores; our previous highest was in the super cycle where we were just short of Rs.1,400 crores, so in the nine

Management

Q

I had a couple of questions regarding the offshore business, just to get a better understanding. So, I think there was recent news about our rig getting on-contract at something like $80,000 a day. How does this compare with the previous pricing on the same rate and on the average of the remainder of the three rigs that we have?

G. Shivakumar

Yes, we have received a contract. We don't comment on the rates. But the contract has been done at a rate which is about 75% higher than the current contract running on that rig. So, the recently awarded rate is more than twice the rate at which the other three rigs are working, the average on the other three rigs. How should we think about the earnings in the offshore segment between say the rigs and the vessels, I'm sure the rigs are earning a lot more, but could you give a rough sense of the split between the two? There is no correlation on that. So, all that happens is, when the rig market

Q

First question is on the dry bulk side. Rates have corrected very sharply. So, do you think now it has bottomed or at least there is not significant downside from hereon?

Bharat Sheth

Obviously, there can't be much more of a downside, because now you are earning at operating costs across two sectors; one is the capesize sector and one is the supermax sector and some of this is seasonal. So, it's not as if it was unexpected... very much in line with what was expected, typically the time when you have a lot of disruption due to bad weather both in Brazil as well as in Australia, which are the two main dominant exporting areas. Having said that, if you look at what the forward paper is showing, it's in significant contango. And therefore, what the market is clearly saying is,

Q

My first question is, we bought an AHTSV recently, okay. Can you help us understand the rational means for it -- was there some one-off opportunity to deploy at a very lucrative rate or the price itself was very cheap?

Bharat Sheth

Basically, Himanshu, what happened was that there was ongoing tender in front of us. We saw that there was likely to be a slight shortage in the number of assets that were going to offer under the tender, and we got this opportunity to pick up this asset. I wouldn't say it's cheap, it wasn't as cheap as it would have been let us say six or nine months ago or one year. But, we are pretty confident that we will get through in the tender and effectively pays back the asset at the end of the contract if we do get a contract. So, basically, it wipes out most of the rest. I have a question on this c

Q

So, my question was like on the VLGC trade miles. Is expected to remain elevated for the coming years like tankers?

Bharat Sheth

So, on VLGC, the trade miles will broadly be where it has settled in Cal'22. I think the difference of course on the VLGC is that, that's one sector where the supply side is a little ahead in relation to where the conventional tankers are and where the conventional dry bulk businesses. Is Russia a big propane exporter? I don't think so. Only LNG. Would you like to give any guidance on offshore breaking even given that as it is decidedly in a much more positive environment, right? It's very difficult to give forward guidance. I think there was a caveat at the start of today's conference, where

Q

So, we have explained the fundamentals of the business in the presentation. Are you seeing any changes which can really affect the product and tankers market, apart from the seasonality, because I think recently there has been quite a lot of decline in both the clean tanker and the dirty tanker index. So, anything fundamentally you're seeing any changes or just seasonal and just one-time?

Bharat Sheth

So, we think it is a little more seasonal, although, this season, it's got a little more exaggerated, but traditionally, if you see Jan and Feb tend to be weaker than November and December, right, because all the pre-stocking for the winter already happened. And also, people then also do a lot of refinery maintenance in different parts of the world, typically in Jan and Feb, and then the refiners get back into action for the summer season. So, if you just look at averages over the last many, many years, Jan, Feb are always a little weaker. They are 10-30% weaker. I just said to one of the prev

Q

I just wanted to understand the slide #18 in our presentation, which talks about revenue coverage for Q4. So, are we starting to go slightly long on the rates as in covering our ships for slightly longer than what we used to do earlier, is that how it should be there?

G. Shivakumar

Q4 is basically just these three months. So, it's logical that you will have much more coverage when you only have three months left. The base itself is less. When we talk of coverage, basically what we're talking about, if we're telling you in July, we're talking about the remaining nine months of the FY, if we're telling you in October, we're telling you for the six months, if we're telling you in January, we're telling you for the last three months, and therefore by defmition, same number of days is only 90-days per ship, so it will show a higher number. In Jan, Feb, we've seen rates come o

Q

Since Mr. Shiv said that we are very close to OPEX on the bulker side, I just wanted to ask, basically all in breakeven, if you take the G&A and this one finance expenses, so can we presume that on the bulker side, we were negative if you take on the net side?

Bharat Sheth

Even if you just take currently, you see, you got to have a vessel that is in the spot market. You have to take average earnings. So, there are some vessels which you might have fixed 40-days ago, some vessels you have fixed six months ago, some you have fixed one week ago, like that. So, if your question is, is the dry bulk division EBITDA-positive, it's EBITDA-positive even today. Currently, the VLGCs are under pressure if you take the West Coast route. So, is this also rubbing off on the Aframax and Suezmax rates? Not to the same extent. As I just explained to somebody else, that January, F

Q

You have already taken some of my questions from the chat and I have already written the next set of questions on the chat, but I will just read them out. So, one question is on the dividend 'Irk The Great Eastern Shipping Cu. Ltd. payout. You have given an excellent dividend in this year, which works out to be the highest dividend ever in the history of the company, but the dividend payout ratio works out to 15%. So, as a policy, how much payout ratio does the company wants to maintain?

Bharat Sheth

Broadly speaking, our payout ratio will be somewhere between 15% and 20% give and take. That's the current thinking. These things can change. But I think that's where we are somewhere in that range at the moment. It's always a function also. Obviously, you want do a 15% payout ratio if your profit is, just for argument sake, say, Rs.10 crores, I mean, then you will flow up from your accruals so on and so forth. My next question is like on the gas carriers, you have the fleet with the highest average age. So, when do you plan to sell the older ones? No, we still have plenty of life on the gas c

Q

I just had a clarification on the offshore segment. So, the rig that we have repriced, is my understanding, correct that it's currently off contract and not earning anything and this goes -?

Bharat Sheth

No, but it is on the older rate contract. There was a tender which allowed us to participate in it. So, when the old contract terminates, which is in the second half of calendar of this year '23, the new rate will apply when it renews its contract. It's earning money. So, basically all our rigs are currently earning money, it's just that one of the rigs is on the older contracts, it will get repriced — It has already been repriced. But, the repriced earning will kick in when she enters a new contract, but all the four rigs are earning.

Q

Just wanted your thoughts on this. So, somebody did ask about SCI as a company. Would SCI be a good asset and it's on the divestment list, so would that be an asset you would evaluate for a buyout or something?

Bharat Sheth

No, we are not in contention. So, we didn't put in that expression of interest. Of an asset that you don't like, is it? No, we had multiple reasons, which we don't obviously want to discuss on the call, but it was a decision that was collectively taken that we'd rather grow on our own. We have a text question from Nikhil Jain of Zontro. He asks, why do you think product rates have fallen so much? The next question is what will be the impact of the ban on Russian clean products on ton miles? And third question is, China buying a lot of Russian crude thereby reducing ton miles? I've said this be

Q

Thank you, everyone. The transcript and the audio of this call will be uploaded on our website in the next couple of days. As always, we are available for your queries, contact details are on our website, so, please contact us if you have any requirements.

Bharat Sheth

Thank you, all.