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Arun Kumar Gupta has taken charge as chairman and managing director of Shipping Corporation of India (SCI) at a time when the sector is in rough waters and any respite is unlikely soon. As he readies himself to take India’s largest shipping line past the crisis, Gupta has his immediate and long-term priorities in place. In an interview with Ruchika Chitravanshi, he says diversification is imperative and currently, cash is God. Edited excerpts:
How do you plan to steer SCI this year, considering the company’s losses are mounting?
Shipping is passing through challenging times. Globally, all shipping companies are facing difficulties; SCI cannot be insulated. There is a mismatch between demand and supply. In 2011-12, SCI recorded a loss of Rs 428 crore; this fell to Rs 114 crore in 2012-13. Recent quarters, too, haven’t been very good. Our immediate objective is to control losses. The business scenario will remain the same; I don’t see any light at the end of the tunnel. We have to conserve cash and cut expenses. Our short-term objective is to cut losses.
How do you plan to diversify, to insulate yourself against macroeconomic challenges?
We will diversify into LPG (liquefied petroleum gas) and offshore business, which requires high-end assets; that is the mid-term vision. We must diversify more into containers and international cargo terminals. This is because all segments cannot go down together. But here, we are seeing all segments perform poorly. The natural hedge of a diversified fleet has not worked for us. We had thought energy transport would always be there and the country would always have a requirement for that. However, the market is in shambles.
Unlike your peers, why haven’t you been able to make an impact in the offshore business?
We ventured into offshore in 1984-85, with Great Eastern. But we didn’t focus enough on this segment. We are carrying out anchor handling well. We need to go into high-end assets. We are thinking big; we have to be careful. For public sector undertakings (PSUs), the risk appetite has to be more. This area is very capital-intensive. Currently, we need money. As there is no surplus cash, there are no new acquisitions the in near future. Offshore will be our focus.
Despite the fact that yours is a Navratna company and is backed by the government, some of your joint ventures have either fallen apart or haven’t been able to take off.
Our joint venture with SAIL did not work. What support are we talking about? Each PSU is a company; it is a business unit. Its individual intent comes first. No one will help SCI. Why will anyone sign a joint venture at this time? They will do it when it is profitable. SAIL had withdrawn due to a depressed market. Though we have also been in talks with Coal India, it will only sign it when it is beneficial for the company. There is a lot of stress on transparency. We cannot award contracts on a nomination basis. Forming joint ventures is not easy; we have to see the venture doesn’t become competition for us.
SCI is often criticised for having bought overpriced assets for which it is still bearing the brunt. How do you look back at those purchase decisions?
We had ordered vessels at very high rates, so had many others. We were criticised that we were sitting on huge cash reserves. There was a disinvestment rumour of SCI. there was a ban on us to acquire any vessels. There was a lot of criticism in the market that the SCI fleet will be reduced. As soon as that got over, shipping had got better. From 2004 to mid 2008, everyone invested. Some assets were priced high, some low. At present we agree our debt burden is quite a bit at Rs 8,437 crore. It is a big challenge. Right now cash is God.
How many more new buildings are you expecting this year?
Right now 8 vessels are on order around 3 are expected to be delivered this year. We have currently 74 vessels in our fleet with 5.85 dead weight tonnage. The average age of the fleet is 8.27 years. As they say in shipping schools a ship starts to earn only after 8 years since so much debts are there, principal has to be paid.
What is the status of your Navratna status since SCI is likely to run into losses for the third consecutive year?
Navratna status is another sword which is hanging on us. It is up to the government to take a call. They can waive it for us, since shipping sector has been in a crisis. The picture should become clear in another 3-4 months. This is a very unique situation.
Regarding your partnership with GAIL, are you going to rope in Indian shipyards to meet the company’s requirements?
We are nearly consultants to GAIL presently. They will float a tender for time-sharing and we will have a step in right. Government is keen to give an opportunity to the Indian shipyards. They should be encouraged but if there is any delay then that will cause a lot of loss. On their own Indian shipyards cannot do it. There has to be some handholding as far as technical expertise goes. This is how we have learnt and reached where we are today.
What is the status of the dissolution of your joint venture with Irano-Hind?
As difficult it is to form a JV, terminating one is even more difficult, especially Irano Hind which was signed in 1974. It has not yet been dissolved. How to part is a very painful affair.
