Reliance looks to set up ship leasing shop in GIFT city

Reliance Industries’ (RIL) arm is all set to establish a ship leasing entity at IFSC - GIFT city in Gujarat. The total investment and expenses will be to the tune of ₹22,033 crore. Reliance International Leasing IFSC has proposed to set up the leasing entity in GIFT IFSC. 

The setting up of the shop is subject to the SEZ committee’s approval.

The proposal made to GIFT SEZ Authority is “for approvals to set up a ship leasing firm to carry on the business of Operating Lease of ships, vessels and voyage charters,” sources said. 

The company has named three directors including Hitesh Kumar Sethia, who is the President and CEO of Jio Financial Services Ltd; Amit Mehta, who has been with RIL for the past 20 years, is the SVP and Head Gases at the conglomerate, and Jayesh Biharilal Dholakia, who is an AGM in RIL.

A query sent to RIL remained unanswered.

Financial aspects

Speaking about the source of finances, Reliance has reportedly maintained that the promoter and investors will invest the capital from financial liabilities and internal accruals. The promoter and investors will invest ₹5 crore capital from financial liabilities, ₹11,607 crore and balance ₹13.26 crore from internal accruals, according to information reviewed by businessline. 

“Reliance has approached International Financial Services Centres Authority (IFSCA )for approvals to set up a ship leasing firm to carry on the business of Operating Lease of ships, vessels and voyage charters,” a source said.

On the financial aspect, the information reviewed show that the, “Free on Board (FOB) value for the export of services for a five-year-period is projected at ₹10,780.41 crore (₹2,156 crore per annum). The foreign exchange outgo is ₹10,397 crore, resulting in a Net Foreign Exchange (NFE) of ₹383 crore.” 

“IFSC Authority has received application from Reliance International Leasing IFSC Ltd,” said Dipesh Shah, Executive Director (Development), IFSCA. “We are seeing great interest from institutions to set up ship leasing business from GIFT IFSC. Currently, at IFSC, we have authorised seven entities and three in-principle approvals. Already three ships have been leased into India from IFSC,” he added.

A total of 35 people will be employed with a NFE of ₹38,330 crore in five years. 

Ship leasing at GIFT City 

Ship leasing is the latest addition to the gamut of activities permitted by the regulatory authority IFSC at GIFT city. 

Incidentally, Ripley Shipping India IFSC Private Ltd was the first company to lease a vessel from the GIFT city. The company received a certificate of registration from IFSCA in March 2023 to operate in GIFT city. MV Ripley Pride is a bulk carrier (Panamax) that was built in 2003 in Japan with a carrying capacity of about 76,858 deadweight tonne (DWT).

Earlier, Indian entities went to Dubai and Singapore to create a shipping venture, due to want of regulations and tax clarity in India. Setting up a ship leasing entity at GIFT city allows Indian entities to transact in foreign currency. This is enabling Indian firms who shifted overseas due to regulations and taxes to come back to IFSC in India, thereby helping to onshore the offshore financial services. 

Currently, only Indian flag ships are allowed in IFSC-GIFT city (like in the Domestic Tariff Area) because it comes under the Merchant Shipping Act, 1958.

As of October 2023, India stands 16th in the global list of the largest maritime countries, with a coastline spread across 7,517 km and 205 minor ports. 

Despite an enabling landscape, Indian companies continue to associate with foreign entities for freight agreements, in an attempt to ship their cargo. 

Globally, ship leasing is considered a popular trading tool and is leveraged across the manifold segments of the shipping industry including containers, dry bulk, tankers, etc. 

As of April 2023, the global charter hire market was estimated at $100 billion.

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