Shipping company promoters may go for buyback, delisting

Kailash Rajwadkar

Mumbai, Nov 4: The promoters of medium and small shipping companies in India may find it prudent to buy back their company’s shares and opt for delisting from the bourses. Tolani Shipping has taken the lead through an open offer and this may just be setting a trend, with the shipping industry caught between the uncertainty prevailing over the trade globally, point out industry observers.

This is evident from the second quarter results given by the shipping companies which has seen the bottomlines dip when compared with its preceding quarter.

The Indian shipping industry, with a market capitalisation hovering around Rs 1,500 crore, has around 20 players with Shipping Corporation of India accounting for a market cap of Rs 700 crore, while GE Shipping and Essar Shipping accounting for Rs 525 crore and Rs 100 crore, respectively.

On the other hand, feeder and coastal operators like Tolani Bulk Carriers, Chowgule Shipping, Shahi Shipping and Shreyas Shipping among others who have hardly seen their stock above the offered price may well consider delisting the shares from the bourses rather than pay an average listing fee of Rs 10 lakh.

Delisting would also circumvent the hassle of complying with the statutory obligations like organising annual general meetings and circulating annual reports and notices, industry sources said.

The stocks of Indian shipping companies are not investor savvy and are hardly traded at the bourses. The low earnings of the shipping companies also do not encourage the promoters to tap the capital market and raise equity for their expansion plans, which negates the need for listing on the bourses, sources said.

The lack of investor savvyness from shipping stock can be borne from the fact that GE Shipping, whose second buyback is currently underway at a maximum price of Rs 42, continues to trade around Rs 24.

Industry sources said that in face of the dismal global oil demand scenario, and anaemic economic activity, depressed tanker rates may continue in the medium-term making an immediate revival a distant dream.

In fact, the terrorists attacks in the US has advanced the decline for the Indian shipping industry by around five to six months. The industry was anyway anticipating the softening of freights rates in tune with the cyclical nature of the shipping industry in a year’s time, sources said.