The Hindu Business Line : `We prefer to operate in a niche market'

" I've no plans for any other type of vessel till I have a fleet of at least 10 Aframax carriers. It will be another three-four years before I look for something different." — MR ARUN SHARMA, EXECUTIVE PRESIDENT AND CEO, INDIA STEAMSHIP

Time was when India Steamship Company (ISS), a K. K. Birla Group company, was one of three leading liner operators out of India, the other two being Scindia Steam Navigation Company and Shipping Corporation of India (SCI). Subsequently, Scindia closed operations and ISS fell into bad days. Several moves were initiated to revive ISS, first by having another shipping company in the same group, Ratnakar Shipping, merged into it and by allowing it to gradually withdraw from the liner services, then by undertaking financial restructuring and one-time settlement of all liabilities. Finally, in August 2005, ISS was merged into Chambal Fertilisers & Chemicals, Ltd, also belonging to K. K. Birla Group.

Now, as a division of Chambal Fertilisers and Chemicals, India Steamship is poised for a leap forward. "We are now on the road to recovery," Mr Arun Sharma, Executive President and CEO of India Steamship, told Business Line. Mr Sharma, who joined India Steamship in March, has had a 23-year stint with SCI. He also worked with Varun Shipping. Before joining India Steamship, Mr Sharma was with Great Eastern Shipping. Mr Sharma spoke about ISS and its future plans.

Excerpts from the interview:

India Steamship recently acquired a new ship...

Yes. On June 9, we took delivery of Ratna Puja, a 105,000-DWT, 2006 Chinese built Aframax crude carrier, from Drytank, a Greek company, in Athens. Earlier known as Vadella, the ship is virtually brand new.

The cost...

About $74 million.

Isn't that slightly on the high side?

I don't think a similar vessel is available now at less than that.

Has it been put into operation?

Yes. We have given it on one-year time charter to Glenco, the UK-based oil trading company. We understand it is being operated in the US Atlantic.

What is your total tonnage now?

Prior to this latest acquisition, our tonnage was a little less than 250,000 DWT, comprising three ships, all Aframax crude tankers — Ratna Urvi (96,088 DWT), Ratna Shalini (89,960 DWT) and Ratna Abha (60,725 DWT). With the latest acquisition, the tonnage is up by a little more than a lakh DWT.

Are these three vessels gainfully deployed?

I believe so. Ratna Urvi is on Contract of Affreightment with Mangalore Refinery and Petrochemicals Ltd while Ratna Shalini is on time charter with Mercator Line. Both transport crude between Persian Gulf and India. Ratna Abha is with Indian Oil Corporation, carrying crude on the east coast between Kakinada and Haldia.

Are you planning more acquisitions?

We've already placed orders with Hyundai of South Korea for three vessels, all Aframax types, each of the capacity of 105,000 DWT and each costing $65 million.

Any plan for scrapping "Ratna Abha"?

Ratna Abha is nearly 25 years old. We've to scrap it sooner or later but no firm decision on it has yet been taken. Once it is scrapped we may go for yet another acquisition. We've an option that we can order for the fourth carrier with Hyundai at the same price. We've not yet decided on it; we do not want to do anything in a hurry.

All crude carriers...

The vessels we've ordered are coated types, that is, suitable for carrying both crude and products.

When will they join your fleet?

First in May 2008, then July 2008 and finally September 2008.

Don't you think for a product tanker, these are very large vessels?

Yes, by present-day standards but may not be so when they will be delivered.

I'm convinced that the demand for large-size product tankers will rise in next few years time.

Why?

With advanced countries having more or less decided not to set up any more refineries, all the new refining capacity will be created in West Asia and India and there will be large-scale movement of products, particularly gasoline, high speed diesel and jet fuel, from these countries to the US and Europe. Large capacity tankers will be ideally suited for long haul. I've no doubt that 80,000-100,000 DWT capacity product tankers will gradually replace the 30,000-40,000 DWT types currently in use.

Aren't you planning any other type of vessel, say, bulk carrier?

No, not immediately. We want to be focused on a given segment; we prefer to operate in a niche market. Take, for example, Teekay Shipping of Canada. It has a fleet of about 150 Aframax tankers. The world shipping knows where to go for Aframax. We're still very small. Frankly, I've no plans for any other type of vessel till I've a fleet of at least 10 Aframax carriers. It will be another three-four years before I look for something different.

Gas is set to emerge as the energy of the 21st century and there is a rush among the shipping lines to go for gas carriers. What about your company?

After Aframax tanker, if we look at anything, it will be gas carriers. The demand for gas is certainly going to rise but oil is not going to disappear either. While the demand for gas will be mainly for the industrial sector, oil will continue to be in high demand for the transport sector.

I, therefore, see no let up in the demand for crude tankers in the foreseeable future.

How do you propose to fund your new acquisitions?

Being part of Chambal Fertiliser and Chemicals Ltd, India Steamship need not be unduly worried about a resource crunch.

Besides, we're now earning profits — Rs 14 crore PAT in 2005-06 and, barring unforeseen developments, our profits in 2006-07 should more than double.

What is the biggest challenge you face in your turnaround effort?

The biggest challenge facing not only India Steamship but also the shipping industry, in general, is how to get the right kind of people. We want good people to join our company.

As it is, identifying and recruiting right people for right jobs is difficult but perhaps more difficult is to retaining them. My roadmap for future is clear: We want to be a 100 per cent professionally run outfit and I've the full backing of the owners.