L & T May Defer Sale Of Shipping Arm

Larsen & Toubro (L&T) may defer the sale of its shipping division due to unattractive bids, and the on-going crisis in the South East Asian financial market.

"There is a lateral thinking in the company to hold on to its shipping division. L&T is faced with two problems - low quotations for its fleet and crisis in South East Asia," say sources close to the company.

Although S D Kulkarni, chairman and managing director, L&T, had pointed out that the company has received six bids of which five were from international shipping companies, experts in the shipping industry claim that the company has been receiving bids "considerably lower than the anticipated price for the division."

Earlier, L&T had rejected a bid by the state-owned Shipping Corporation of India (SCI) which quoted $35 million for the entire fleet of vessels. The bid was rejected as it did not reach anywhere near the company's expectations. L&T has estimated the value for its six handy-sized bulkers in the range of $ 60 million and $ 70 million.

L&T had decided to move out of the shipping business last year as part of its restructuring. It has put on block the entire fleet which includes LT Pragati (37,489 dwt), the sister lakers LT Odyssey, LT Argosy and Mongal Desai ( 28,331 dwt) and the sister lakers Hold Larsen and SorenToubro (26,609 dwt).

L&T has identified engineering, procurement and construction and cement industry as core areas.

Industry sources claim that the number of ships lying idle worldover has shot up drastically following fall in the eastbound sailings. "With deepening financial crisis in South East Asia, the to and fro movement of cargo in the region has fallen dramatically," they added. Moreover, the falling Baltic rate index in the dry weight segment has also resulted in depressed freight rates.

Consequent to the decline in the cargo movement in the east, there are several ships on sale. In fact, the procurement price of ships has fallen drastically.

Industry sources say "In L&T's case, getting a good price is even more difficult as the ships are 15-16 years old." This means that 70 per cent of the vessels' life is over, they add.