“Shipping companies need to go ahead and buy aggressively”

Shipping and logistics company Shreyas Shipping and Logistics Ltd also provides land transportation, warehousing and other value-added services. Vinay Kshirsagar, chief financial officer of Shreyas Shipping speaks with Moneylife’s Amritha Pillay about the trends in shipping, logistics and warehousing

Amritha Pillay (ML): How do you expect the container segment to perform in the short term?
Vinay Kshirsagar (VK):
There is a slight improvement in container traffic in India, but globally the container segment is in fact having excess capacity. Even today, more than 500 vessels, which constitute about 13% of the global available tonnage, are laid up. Globally, the supply is more because the US market has not yet picked up. Overall, the container market will take some time to stabilise. India has witnessed a growth in volumes but that does not confirm a reversal in the trend. However, I can conclude that the decline in volumes has bottomed out. The container segment will take the next six to twelve months to stabilise. What is important for the industry is to arrive at equilibrium between demand and supply.

ML:  Recently, freight rates in the container segment have gone up. Is this hike related to volume growth?  
VK:
Mainline operators have increased their freight rates substantially, although the volumes have not increased significantly. This confirms a good trend. The idea is to improve earnings for the operators with the increase in freight rates.

ML: What about the performance of other segments like tankers and dry bulk?
VK:
The bulk segment is doing better. The tanker segment continues to be under pressure. This segment is very difficult to predict. India would be importing lesser crude in the coming years, because of a number of refineries that are coming up in the country. Such factors are important in determining the volumes for the tanker segment. The container segment caters to the high-end goods segment. During times like recession, the container segment becomes the least priority item, so that is the reason why this sector is much affected. However, the bulk segment caters to essential goods and it is not affected majorly.

ML: On a whole, what is your view on the shipping industry at present?
VK:
Unless international trade comes back to normal, the industry may not do well. On a short term outlook, it is a good opportunity because ship assets are available at good prices. Shipping companies need to go ahead and buy aggressively.

ML: What kind of domestic trade volumes do you expect?
VK:
Domestic volumes have increased substantially. Around one or one-and-a-half years back, 50,000 tonnes of cargo were moved every month on the Indian coast, today around 1,20,000 tonnes of cargo are moved on the coast. Even though more players have entered this segment, the size of the market has also increased. The volume movement in this segment is insignificant when compared to road or rail transport. However, I am quite confident and optimistic that cargo movement has to be diverted to costal shipping, given the huge expansion planned in the power sector and the steel sector that requires huge amount of raw material to be moved. At present, road and railways as transportation options are choked up. They cannot take an additional burden.

ML: How much do costal trade volumes depend on mainline operations?
VK:
As far as Shreyas Shipping is concerned, we operate feeder, domestic and regional services. We are dependent on mainline operators only for feeder services. Since we have moved into the logistics model, it has helped us to be in a better position compared to any other feeder operator.

ML: Do you expect the expansion in the power & steel segment to drive volumes for costal shipping?
VK:
In fact, whichever sector is expanding and needs movement of its raw material will have to explore costal shipping as an option. Also, with the development of small ports and new ports, more volumes can be expected.

ML: Along with feeder and domestic services, you also operate regional services. You recently restarted your Indo-Pak service, what are the updates on your other two regional services, which were also suspended?
VK:
We had suspended our regional services to Karachi, Jebel Ali and Singapore due to low trade volumes during the recession. However, we have started the India-Karachi route in November 2009 and plan to start the remaining two regional services as trade volumes increase. {break}

ML: How do you expect asset prices to perform in the coming months? Have they bottomed out or will they fall further?
VK:
They have bottomed out and will not fall any further. They should stabilise at the current prices for the next four to eight months. Then, there is a possibility of asset prices shooting up.

ML: Shreyas Shipping has already sold four vessels, do you see some new buying to increase your fleet?
VK:
We sold these four ships just before the global meltdown, made a profit on sale and retired our debts. Now, we see it is the right opportunity to buy, as almost all classes of vessels are available. We are evaluating our options for acquisition of new vessels.

ML: Along with shipping, the company also has presence in the warehousing segment. Is there any expansion planned in this segment?         
VK:
We currently have warehousing facilities, but we do not own them. On expansion, we are working out a plan to enter other spaces, which will help value addition like packing and distribution.

ML: What are your expectations in the warehousing segment in the coming years?
VK:
I expect the volumes for the warehousing segment to grow. There is enough warehousing capacity available and the current utilisation of these spaces is very low. Thus, no added capital expenditure should be required for this space. I expect the volumes to grow; as the space is already available, the utilisation rates for the same will go up.

ML: Which would be the main sub-segments that will contribute to the growth of the warehousing segment?
VK:
Agriculture products are likely to drive the volumes for the warehousing segment. With more supermarket models coming up for agri-products, the demand for cold-storage facilities will also increase. The required cold-storage facilities for such products are not available, which presently leads to an imbalance in the prices.

ML: What about your presence in third-party logistics?
VK:
We plan to enter the third-party logistics segment. The logistics industry is a sunrise industry. There is an immense growth potential in this segment for the simple reason that this is the only industry where people don’t require much capital expenditure, which leads to high returns on capital. Investors prefer such segments and thus logistics companies command a decent private equity. In the past year, private investment in this segment has been good and I expect the investment in this sector to improve substantially by another 100% to 200%.

ML: You are also present in the land-transportation business, wherein you extend road transportation services to your clients. You also plan to expand in this space in due course, what is your view about the road freight segment?
VK:
With the increase in the movement of raw material for various industries, the volumes for road freight are bound to move upwards. There is also a possibility of a number of new organised players entering this space.

ML: Where would the group’s thrust be in the coming years, given your presence in so many sub-sectors?
VK:
We plan to look at the bulk logistics segment. We plan to have more value-added services like warehousing and transportation. The concentration on the bulk segment is mainly because of it being more assuring than the container segment.

ML: What kind of financial performance can be expected from the company in this fiscal?
VK:
As we have sold ships, we cannot expect any growth in turnover. Our logistics company, which is our 100% subsidiary, has made a total turnaround. As far as our shipping segment is concerned, I will achieve cash breakeven. In these tough times, I think even this is commendable.
 

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COMMENTS

B.R.Gaikawad

7 years ago

excellent & BOLD comments.
realistic picture of shipping business

pushkar vartak

7 years ago

Good interview, would like to see and read more of these.

Chandraveer Singh

7 years ago

It is rightly said that the bulk carrier were not affected much in this tough time.
Further the comments mentioned above are really commandable, only can be given by a person who is more thorough and keeps upadate on daily basis.

Chandraveer Singh

7 years ago

The above comments are really comandable, only can be given by a person who is thorough in the market about the shipping business. Further bulk carrier are really doing well in this tough time.

jibin

7 years ago

sir iam jibin complete diploma in mech engg i working in oman i like to work in ship my exp fire &saftey dip and hydraulics &pnumatic any vacancie
pls help me

Connecting people, empowering lives

A spate of recent suicides among students and the ongoing worry about this mind-numbing phenomenon is a cause of national concern. Over 100,000 Indians commit suicide every year, and the number has only risen over the past two decades, say experts. Worse, over 71% of suicides are by people below the age of 44. While suicides are attributed to acute mental agony, the trauma on those who are left behind is not less. Savita Narayan profiles a Pune-based NGO called Connecting… which helps people cope with the effect of suicide on the survivors

“We had forgotten to smile. The joy had gone out of our lives,” says Arnavaz Damania, a survivor affected by the suicide of a relative. The impact of the event made her realise the need for counselling not just for a survivor but also the larger circle of family and friends. “We felt lost and were just going from day to day, automatically doing our chores. I’ve always been a positive person and so I began to look for ways to improve the situation. I had to help even if it was the one family," says Ms. Damania.
 

She surfed the Internet, seeking people or institutions to approach. AFSP, the American Federation of Suicide Prevention, put her in touch with Dr Aruna Jha in Chicago who runs the Asian-American Suicide Prevention Initiative. Dr Jha conducted a seminar in Pune on awareness creation which led to the forming of a group.

India, China and Japan account for 30% of worldwide suicides according to the World Health Organisation—and the numbers are increasing yearly. Indian society has changed dramatically over the past decade. Increased pressure for good performance at students' exams, maintaining peak results at the workplace, loosening of family ties and lack of good interpersonal relationships are some reasons.

In 2005, Ms Damania set up Connecting... at Pune, with trained volunteers to offer counselling, suicide prevention and facilitation programmes to create awareness of coping strategies and healthy outlets for intense emotions such as anger and frustration. The entity also interacts with survivors and counsels families of suicide victims to manage the trauma.

A suicide attempt is the reaction of a person unable to cope with unbearable psychological pain. Before reaching this juncture, the person usually explores ways to make the pain more bearable but does not find a solution on his own. He lacks both inner resources to cope as well as a perspective on how to approach the problematic issue. Often, he undergoes long periods of suffering in isolation before giving indirect indications to near and dear that he's reached the end of his tether. Connecting... is a neutral point of contact for the suicidal; the help lines offer empathy that is usually unavailable to him. The initial contact is from the suicidal caller or a sympathetic well-wisher. Treatment is possible only when the initiative comes from him. Connecting... offers trained and skilful counselling, ensuring that the person, at the first instance, is calmed and that the immediate crisis of peak vulnerability is deflected. In subsequent contact sessions, through empathy and positive reinforcement, the caller realises on his own accord that life is worth living and that workable solutions to his problems can be found.

Support for survivors is also essential to prevent the recurrence of an attempt. Survivors usually harbour feelings of guilt. The stigma of societal judgement makes them opt for empathetic counselling on a one-on-one basis. Group sessions are useful for victims' families encouraging the sharing of experiences, of healing together to start the grieving process. The discussion is led by the facilitator.

Workshops are conducted for the police and hospital workers to modify their approach and improve interactions with victims, the affected families and survivors. Connecting... is actively engaged in sensitising the general public towards stress and interpersonal relationships. These programmes take place in schools, housing societies, corporate offices—any group of people who want healthier interactions in their daily lives. The sessions are very impactful and tailor-made, taking the form of role-playing and demonstrations. Music and Art therapy is also offered.

Connecting... has the immediate need to expand its existing helpline facility from 6 hours to 24 hours with more phone lines, trained counsellors and media exposure; setting up a media watchdog to monitor and ensure empathetic and factual reporting of suicides; the setting up of emergency cells in hospitals which sensitively handle incoming cases, the subsequent legal aspects and documentation.

Connecting... helps the suicidal and their families in and around Pune. There are still hundreds of others in India who need their reassuring touch. 

Registered under Section 80G of the Income Tax Act

Connecting Trust, Dastur Girls School, Moledina Road, Pune 411001
Phone: +91 20 26333044
Helpline: +91 9922001122 (2pm-8pm)
www.connectingindia.org
[email protected]
 

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COMMENTS

kanthiaatre

7 years ago

Savita it reminded me of the counseling Geeta did while she was a student in Delhi.A stress free house is what the kids need at the time of exams.There is no alternative in our exam system yet. Lets all focus on telling the kids exam is not end of aa in life
Good article Savita,well researched one that too

Keshi Dayalu

7 years ago

I am surprised to find out that the suicide rate has gone up. It is up to near friends and relatives to see the major changes in behavior and attitude of a possible victim. I would look for the most obvious warning sign- not doing things that you normally are passionate about, such as taking a walk, reading, socializing, traveling, playing games, and even watching movies. All around the world,life in general has become very hard to cope with and we probably will see this trend continuing. My own observation is that each generation is under more stress than the previous one. It is true we are living longer, but the quality of life could be a lot better.

More bank licenses.. Boom to Bust?

The ‘good’ news is that the banking market will be opened up for a few more private players. But how many of these new entrants actually pass muster?

The Budget talks about re-opening the window for letting more private banks in play. Most market participants and commentators have welcomed the move. I have some reservations on this. Of the many hopefuls who the market thinks should be interested, how many are fit to run a bank ethically and professionally without a conflict of interest? Very few names will actually pass muster. Reading the market commentaries, I shudder when I see some names being put forward. Especially in the context of the fact that the Reserve Bank of India never lets any bank go bust, but encourages bank delinquencies by arranging for subsequent adoption and marriage.

If market gossip is to be believed, a couple of industrial houses already own substantial stakes in a couple of small private banks. While the shareholding is not fully transparent yet, management control is apparently with the hidden owners. The informed gossip is that this Budget has re-opened the window of giving more licenses—specially to enable these houses to legitimise their holdings.

India is a large country. Every bank does not have to be pan-India in nature. The regional banks can thrive. It may be a good idea for the government to actually permit takeover of such regional banks by foreign banks, with the proviso that they have to remain listed entities. This would enable infusion of capital and technology into these banks and also increase domestic shareholder wealth. Let the government permit one or two banks in each region to be acquired by foreign banks like HSBC or Standard Chartered. They can increase their coverage and the regional banks can benefit with better management and technology.

The PSU banks are surely headed for disaster. It is a matter of time. Consolidation or mergers between two bad apples will not produce one good apple. Also, I have always maintained the view that creating a large balance sheet merely by merger, will not lead to credit expansion. A better idea would be to offer PSU banks to be taken over by larger private banks or foreign banks. That can enhance the quality of the banking sector and also stem the rot of poor quality lending from domestic banks. Of course, the government will not permit this, since it would mean an end to the business of loan melas and loan-waiver melas.

The political agenda of the government is systematically destroying the fabric of banking.  Look at the latest attempt by the government to define the lending rate. It is ludicrous and whilst every PSU banker talks against it in private, none have the gumption to even write a ‘letter to the editor’.

Coming back to the Budget, the move to permit more private licenses is being seen by a few as a resumption of economic liberalisation. I hope they are right. To me, it seems more a case of political expediency to accommodate a few. In the process, a few bad banks will get created and will have to be bailed out in the future. The other favourable spin-off is that more private banks will bring in lots more FDI (if foreign investment is liberally permitted) and FII investments, which is always good for the markets.
 

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