One of the most notable success stories in the development of Indian shipping has been the role played by Great Eastern Shipping Company. From pioneering Indian tramp shipping to private-sector participation in offshore oilfield services, Great Eastern’s 57-year history is a story of enterprise and leadership. K.M.Sheth, the executive chairman of Great Eastern, here shares his thoughts on his company’s past, present and future.
Great Eastern Shipping was incorporated in the summer of 1948, and acquired its first Liberty ship from the U.S.A. It was the first Indian shipping company to place an order for construction of ships at the Kobe shipyard in Japan. Says Mr Sheth, “We started off by importing sugar to India. Over a period of time, we became the first Indian line to start a liner cargo service from the west coast of the U.S. and Canada to India. Our ships carried iron ore from India to Japan and then on to the west coast of North America. In the mid 1960s our bulk carriers were exclusively used to alleviate the nation’s grains crisis. We have diversified over the years, and our fleet is currently made up of a mix of dry cargo, product and crude tankers, and gas carriers.”
Sustained growth.
According to Mr Sheth, the acute depression of 1980’s took its toil on a host of shipping companies. Great Eastern, however, enjoyed an improvement in its net worth and, as a result, took a bold decision to purchase more ships at the then low prices. Says Mr Sheth, “It turned out to be a wise decision. Our profit margins were good and in 1994 we became the first Indian shipping company to launch a GDR(Global Depository Receipt) issue of USD 100 million.”
Over the years, Great Eastern’s fleet has grown from one ship of 10,615 dwt to 42 ships aggregating 2.88 m dwt – the largest private-sector shipping company in India. “Last year was undoubtedly the ‘year of the ship owners’, with demand driving freight rates across all segments of shipping,” says Mr Sheth. “Whilst tanker freight registered new highs as a result of a very steep rise in global oil demand, dry bulk rates were driven by China’s seemingly insatiable appetite for raw materials.”
The board of the Bombay-based company is in the process of de-merging its offshore oilfield services into a new company, which will be independently managed by Vijay Sheth. Great Eastern will now focus on building a younger fleet profile. Its tanker fleet now has an average age of 11.4 years, its LPG fleet is at an average of 22 years and its bulkers have an average age of 15.4 years.
Investment opportunities.
Asked if he plans to acquire more VLCCs, Mr Sheth says: “We are looking at investment opportunities both in the tanker and in the dry bulk and gas segments”. He also says that Great Eastern is considering a move into LNG shipping and have bid for the Petronet LNG tender in association with Teekay Shipping. However, the executive chairman of Great Eastern says he wants the government to allow a more facilitating climate for the growth of the shipping industry.
He explains, “There are too many disincentives. The introduction of the tonnage tax last year was good, but there are still several hurdles, such as fringe-benefit tax and service tax. Though Indian owners have gradually increased officers’ wages to almost the levels paid by foreign flag owners, Indian officers continue to prefer employment with foreign flags for tax relief.”
Looking ahead, Mr Sheth relates how global demand for oil and commodities varies over time and this subjects freight rates to volatility. “Great Eastern Shipping appreciates the cyclical nature of this industry and recognises the challenge of continuing to achieve superior returns by prudently managing commercial and financial risks,” he says and concludes: “While market conditions remain challenging, we look forward to the future with confidence.”
Date: 2005-12-20