‘I believe in quality shipping, not so much the size of operations'

India Steamship (ISS) was once one of the country's top three liner shipping companies. Not any more. It is not even a separate company now, only a division of Chambal Fertilisers & Chemicals Ltd. However, ISS has reinvented itself in past five years, emerging as a transporter of oil. Mr Arun Sharma, Executive President & CEO, spoke to Business Line on the challenges facing ISS.

Excerpts from the interview:

From a major liner operator to a transporter of oil ….

The collapse of the erstwhile Soviet trade dealt a severe blow to liner operation. You know what has happened to the country's second largest liner operator Scindia Steam Navigation Company.

Why did ISS choose to concentrate on oil transportation?

When I came to ISS in early 2006, the liner operation had ceased to exist. The fleet comprised only three old tankers, totalling 250,000 dwt, with one originally belonging to Ratnakar Shipping, a K. K. Birla company.

We sold two of the old tankers and acquired five new tankers each of 105,000 dwt, all now gainfully deployed on good charters. The acquisitions were made between 2006 and 2010.

The only old tanker that is still with us is engaged in coastal movement and will be operated till it can be gainfully employed. We believe energy transportation is there for long term.

Any plan for further acquisitions?

Not immediately; perhaps we will take a call sometime in early 2012. Till then we'll wait.

What kind of acquisitions do you have in mind?

Frankly, I believe in quality shipping and not so much in the size of operations. We are quite focused on the energy segment. When we think of further expansion, very large crude carriers (VLCCs) look interesting from the point of view of both India's as well as global crude movement. Oil exploration is going to be a big business and therefore investments in support vessels, including anchor handling and towing, will be another area of interest to ISS.

The tanker market at present is down. Hasn't it impacted earnings?

Not much.

How come?

We had locked in our vessels on long-term charters at a time when the market was good. The market took a turn for the worse from end-2008 and the bad phase is not yet over. The spot charter rate of an Aframax tanker today is less than $9000. We chartered out our vessels when the rate was between $26,000 and $30,000.

Was it foresight or luck?

Both; 50 -50, you could say. But there is a point. We went for base rate plus profit-sharing strategy. I'm one of the earlier ones to have looked at this concept in India. I went for it in my earlier companies despite much opposition. Most favour this concept today.

Will the present phase persist in the tanker market?

2011 and 2012 will be tough years.

How do you propose to face it?

The chartering contracts of the five tankers will be over by the middle of this year. We have to sign new contracts.

The strategy in a depressed market has to be somewhat flexible. I'm not unduly worried.

Some of the top global tanker operators want to know about our future plans for deployment of vessels. This gives me comfort. Besides, we are backed by Chambal Fertilisers. We spent more than $300 million in acquisitions.

Will the global tanker majors pay more?

No, they will not pay even a dollar more than the market rate but what is satisfying is that we have been able to establish our credibility in the global tanker market. I consider this an achievement.

How did you establish the credibility?

By being fully committed to quality management, both on shore and on board. From quality of operation flows a commitment to protection of life, property and environment. This has yielded good results.

Good people, and we have been able to attract many, are our real assets. A shipping company can attract good people if you are seen to be running quality ships backed by quality on-shore management, providing quality resources. We have taken great care to ensure this.

We are now approached by good shipping professionals, not only from other parts of country but even from outside India, who are keen to join ISS. It would be wrong to presume that top professionals shun Kolkata.

At the senior level on the technical side, quality and chartering, we have professionals who have moved from other locations to Kolkata.

Though I served in Shipping Corporation, Varun and Great Eastern Shipping, all based in Mumbai, I have had no problem in heading a Kolkata-based company. ISS moves with a very sound business philosophy.

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