Canadian billionaire Prem Watsa-led Fairfax-backed Seven Islands Shipping Ltd has spent $56.5 million to buy seven mid-sized oil tankers, at a time when other Indian fleet owners are holding back on expansion due to weak freight rates.

In March, Fairfax India Holdings Corporation invested $72.1 million for a 41.4 per cent stake in Seven Islands, which is India’s second biggest private tanker shipping company.

Of the seven ships purchased by Seven Islands from the second-hand market, five have already joined its fleet, taking the fleet size to 19.

These includes four medium range (MR) oil tankers, each with a capacity to carry 46,000 dead weight tonnes (dwt) and a chemical tanker of 12,000 dwt, a spokesman for the Mumbai-based company said. Two more medium-range tankers will join the fleet shortly, he said.

Founded by ship master Thomas Wilfred Pinto, Seven Islands is engaged in transporting crude oil and petroleum products along the Indian coast as well as in international waters. Its ships are registered in the country and operate as Indian-flagged vessels.

In 2017, Seven Islands planned to raise as much as ₹450 crore through an initial public offering (IPO) to fund a fleet expansion programme.

The IPO was deferred due to poor market conditions and was later shelved after the approval granted by the Securities and Exchange Board of India for the share sale lapsed in November 2018.

India imported 84 per cent of its crude requirements in FY19, of which more than 90 per cent was hauled on foreign-flagged vessels, entailing a foreign exchange outflow worth billions of dollars.

Seven Islands seeks to fill the gap in Indian tonnage to carry more of the country’s oil imports. The company earns close to 82 per cent of its total revenue from three PSU oil firms — Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd — with whom its ships are deployed on time and spot charters.

For ship charter tenders issued by state-owned oil firms, an Indian ship has the right of first refusal to match the lowest rate quoted by a foreign-flagged ship, according to rules set by the Director General of Shipping, the country’s maritime regulator.

Moreover, state-run oil refiners transporting oil products meant for local use along the Indian coast must give preference to Indian-flagged ships for such shipments, according to the country’s cabotage law.

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