Great Eastern Shipping Company: largest private shipping company in India

 

  • Great Eastern Shipping Plans To Get Into The Business Of Container Shipping


    The Great Eastern Shipping Company, India's biggest private ocean carrier, will "evaluate" entering the container shipping sector, a senior company executive said. 

  • This, according to an industry expert, could be a diversification strategy aimed at mitigating the risks associated with oil trade as the world pivot towards green energy, cutting the quantum of crude and petroleum products shipped by sea
  • With just two ships, state-run Shipping Corporation of India Ltd. is the only Indian carrier active in the mainline container shipping market.
  • Currently, three or four major alliances, including the Mediterranean Shipping Company, CMA-CGM, Maersk, Hapag Lloyd, COSCO, Evergreen, Wan Hai, and Ocean Network Express (ONE), are in control of the container trade.
  • With a fleet of forty-three vessels, the Great Eastern Shipping Company has been concentrating on four industries: dry bulk, petroleum products, LPG, and crude oil.
  • “The cyclical container shipping markets are currently experiencing a high. “It’s possible that they are considering entering this industry and attempting to broaden their business,” remarks Shailesh Garg, the director of Drewry Shipping Consultants Ltd.’s India branch, a shipping consultancy with headquarters in London.
  • According to Garg, even though the market for container shipping is currently fairly appealing in terms of freight rates, it might not be the best moment to enter it due to the high cost of assets.
  • “Carriers are now competing on a different level and container shipping is a whole new game.” They are using vessels that have a capacity of 18,000–24,000 twenty-foot units (TEUs). You must meet a minimum size requirement to participate in the game and join an alliance. It would be challenging for a new entrant to get in because there are only 4–6 ships with a capacity of 5,000–10,000 TEU each, according to Garg.
  • Due to the government’s efforts to encourage coastal shipping, fleet owners who wish to enter the market may want to think about using box ships for coastal movement.
  • Therefore, it is important to consider the markets and vessel sizes that one is attempting to enter, advises Garg.
  • Garg suggests that Great Eastern Shipping consider becoming a niche player by participating in intraregional trades such as the increasing intra-Asian trade. The rising India-Middle East commerce is attracting container ship operators to consider the Middle East as a possible destination. “One way to get into this business or feeder operations could be if an Indian player comes in and puts 4-6 ships and provides regional connectivity to markets like the Middle East or maybe some Asian markets,” Garg continued.



Great Eastern Shipping Company: largest private shipping company in India

  • GESCO is the largest private shipping company in India and is promoted by Sheth brothers and Bhiwandiwallas 
  • With almost 59% fleet (in terms dwt) deployed in the tanker segment, favourable charter rates are likely to further augment the cashflow position  
  • Following the European Union's ban on Russian oil, the import of Russian oil has shifted primarily to Asia, particularly China and India. 
  • This shift has resulted in higher demand for tankers. 
  • Resultant demand increased charter rates to historical highs in FY23. 
  • Strong rates in the tanker segment continued in FY24, with trade disruption caused due to Russian Ukraine war continuing. 
  • Events such as red sea attacks, which diverted the tanker to Cape of Good Hope has increased the overall tonne mile demand.  
  • GESCO has, over the past few years, moved from time charter (assured long-term agreements) to spot market operation, resulting in deployment of almost 80% vessels on spot rate and balance 20% on time charter basis (mostly LPG carriers). 
  •   It developed a strong clientele with major counterparties being reputed charterers in oil & gas industry and major commodity traders  
  • The company’s strategy regarding the fleet mix is to keep majority of its capacity open to take advantage of strong markets. 
  • While it has gained in the last few years considering this high operating leverage and low financial leverage, the company is exposed to the inherent risk associated with adverse movement in charter rates and crude oil prices 
  • GESCO has a well-defined liquidity policy, where it maintains cash and cash equivalents to meet the next three years’ debt servicing, capital commitments, dry-docking expenses, and dividend payments, plus $ 100 million cash minus the next three years’ EBIDTA, which is calculated based on 20 years’ lowest freight rates. 
  • A stress test is conducted quarterly to ensure adherence to the policy framework. 
  • Apart from liquidity in the form of cash/bank balances, ships are liquid assets, with GESCOs fleet valued at around ₹10,000 crore, providing 4x cover against outstanding debt (on standalone basis).  
  • GESCO has a strong market presence with well-diversified and large fleet of vessels comprising tankers, product/ gas carriers and dry bulk carriers. As on May 31, 2024, the company owns and operates 44 vessels with deadweight tonnage (DWT) of 3.46 million and average age of fleet at 14 years  

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