Very stable medium-term SCI outlook: MD
How do you assess the performance of the past quarter? What visibility do you have on margins that will stabilize soon?
Regarding the margins having contracted, I would say that is not entirely true because if you compare it with the corresponding quarter of the previous year, yes it did contract. But if you compare it to the previous quarter, we almost tripled our operating profit compared to the March quarter. Thus, the company did better and the margins did not contract compared to the previous quarter. If you are talking about comparing it with the corresponding quarter of the previous year, then I draw your attention to the surge in tanker prices at that time due to the contango effect due to which a lot of floating storage was created. .
If you compare the results of our segment, you will clearly see that in the corresponding quarter of the previous year the oil company made a profit of Rs 406 crore and in the current quarter it loses Rs 63 crore. . This clearly gives an indication of the impact of the freight rate market on the performance of the company. The company is largely driven by market indices and in this context I would also like to share with you that the Baltic Clean Tanker index which was on April 20 at 1305 is currently at the 473 level.
So, the results you see are not unique to the Shipping Corporation of India. That would be the phenomenon for all companies that have largely a very solid tanker fleet. And in terms of the outlook for the future, we consider that we would remain stable given that we are a very diverse company. We operate in all segments of shipping and as you can see in the corresponding quarter of the previous year the passenger ship segment recorded a double digit loss, but in this quarter the ocean liner has a profit of three figures. This balances the performance of the business and gives the business a stable outlook.
What are the non-core assets that you have on your books? What is their overall contribution to business and income?
I will not be able to give you full details as this constitutes UPSI to a certain extent and in May 2020 SEBI LODR released a very clear regulation saying that I cannot disclose more than what I have already disclosed on the stock exchange. It’s already in the public domain, but I can’t give you the information you are looking for in terms of earnings and contribution as I haven’t disclosed it to the exchange yet either.
On the divestment front, have you heard anything?
On the divestment side, the virtual data room is open. We opened it in July 2021. The virtual data room is managed by DIPAM. While the data is uploaded by Shipping Corporation of India, the data room is exclusively managed by the transaction advisor hired by DIPAM and the data room is currently still under due diligence by potential bidders. Once the due diligence process was completed, DIPAM would launch a tender for the financial bids. From now on, with the information I have, the transaction should be completed in FY22.
What are the medium-term prospects for the company?
As I just said in my opening remarks, the outlook for the company, even in the medium term, looks very stable as we are first and foremost a diverse company. Even if one segment does not perform well, we have always seen that it is compensated by the performance of another segment. The ocean liners segment is doing extremely well at the moment and throughout fiscal 22 we consider that the ocean liners segment will continue to increase its profits and even the bulk segment is currently showing a very stable outlook.
We expect the same trend to continue throughout FY22. As far as the oil tanker segment is concerned, we are not very optimistic. We believe this won’t be a real game-changer until winter demand picks up or something dramatic happens to the Covid protocols, and the demand and supply equation changes. Until then, we don’t see the oil segment as a very bullish segment just yet.
We understand that there is this shortage of containers. Do you see any repercussions or an impact of that?
Regarding Shipping Corporation of India, we are not facing any shortage. We have a good inventory of containers and we ensure a good turnaround. This is what gives the company good returns on the
segment. But you’re right, when it comes to the global phenomenon, there is a huge shortage of containers. This is what drove container prices up.
At present, the container segment continues to skyrocket in prices to unforeseen levels at any visible time in the past. But the position of container stocks has improved in recent months. It’s not as bad as it was three months ago. Things are improving. Recovery in ports is also improving, with most countries completing dual vaccination. Things in ports are much better than they were a couple of months ago.