Thank you very much. Ladies and gentlemen, we will now begin the question-and -answer session. We will take our first question from the line of Krishnaraj V from Agathis Investments.
GESHIP · FY2026 Q2
The Great Eastern Shipping Company Limited analyst Q&A
Hi Shiv, thank you for taking my question. My question is not for the current quarter results but largely on financing. I wanted to better understand the benefits of converting the INR debentures into synthetic fixed rate USD loans. The reason I was drawn to this analysis was that broadly we know that the INR debentures are fixed costing around 8.5% and the synthetic USD loans come at, I reckon, around 6%. But if I take the amortized cost of rupee depreciation on the principa l until now, the Rs.300 crores t hat you were carrying till the end of March '25 and about 3.4% depreciation of the rupee for this fiscal, it adds to about 3.8% to 4% with still about four years to go. And then there is an increase in the rupee equivalent of the interest expense which is about 25% or about 1.5% on the 6% at the midpoint of this typically 10- year term. So, all in all, it appears to me that this synthetic conversion gives you an finance cost of about 11.3 % to 11.5% versus 8.5% if you had just left it without doing the conversions and of course there were bank charges. So, I just want to understand how you think about this and what are the benefits you get?
Yes, so a couple of things and thanks for that question, it is an interesting one. So, a couple of things; one is fundamentally we are trying to create a match between our currency of our assets and inflows and the liabilities. So, we are trying to create a dollar liability which offsets the dollar assets which are on our balance sheet , our ships are dollar assets, which earn dollar revenues. So, one is we are trying to match that. So, our fundamental position is that we want to borrow dollars rather than rupees because we do not want that currency mismatch , we try not to take that view. But coming to the specific case of our current debentures that we have, so you are right about the approximate Indian rupee coupon, it is about 8.5%. The issue is with the swap rate for the dollars. We do these debentures when we can get a better rate by doing these synthetic structures to get the dollar debt than by doing straight dollar debt. So, effectively, our fixed rate in dollars on these is less than 4% ... it is about 3.5%. So, if we look at it and the standard depreciation over a long period of time is approximately 3% of rupee versus dollar. So, we have got a 5% spread in the interest cost and where you could lose 3% due to depreciation, so you are better off by 2%. However, it is not our objective to save interest cost. We are not taking a view on whether the rupee is going to depreciate faster than 3% or slower than 3%. We are just doing it as part of managing our risk because we have dollar inflows and dollar assets and we are funding the dollar assets with a dollar liability.
Got it. So, essentially, if the spread is very attractive enough, that is when you go for these structures, otherwise, you do not, that is my key takeaway.
No, sorry, I did not mean to put that. It so happened that the spread was very attractive. However, when we compare the NCD, it is our intention to swap into dollars.
Got it.
And the only comparison that we do is, if I do a straight dollar loan, I get effectively benchmark, whatever LIBOR, SOFR plus some spread in a dollar loan. Can I get below that cost by doing an NCD and swapping it into dollars? That is all we are looking at, not whether it is better to keep it in rupees or swap into dollars.
Okay. Principally, I understand that. I mean, of course, I do recall a similar exercise that you had done just after the GFC when I think you had about 2,500-odd and then I know the hedging loss reserves were sitting at about Rs. 1,000 crores in FY16. So, that makes me wonder whether the benefits are worth the expenses a nd obviously, it is a principa l call. But as we sit right now, versus an Indian debt, just as an academic exercise, are we better off or worse off?
We are better off by about 2%. So, what happens is, if we take the first point and the first principle that we will borrow in dollars, we will always have some MTM loss sitting in our books, because if based on a regular depreciation of the rupee, because that has to come into the P&L in any case when it depreciates . You do not have a corresponding revaluation of the asset of the ship that you purchased. And that is why we do this normalized results slide, because we are trying to strip out that saying that that is not something that you need to take into account.
Okay, got it. Okay, sure. Thanks. I mean, every time I want to feel excited that the rupee is depreciated, I have to hold it back because of this, but anyway, go ahead. Yes, thank you.
We are a net dollar long company, because our debt will always be significantly lower than the value of the assets and the dollar balance is put together. So, in fact, Rs.30 of our last quarter improvement in any way has come from the depreciation of the rupee.
Yes, I saw that. Sure. Thank you. Thank you so much. Thanks a lot. That is all I have here. Thank you.
We will take our next question from the line of Harsh C, an individual investor. Please go ahead.
Shiv, can you go to the slide on normalized financials?
Yes, sure.
Are there some changes in –
No, no, I think there was an error in the titles of the columns.
Because some of the consolidated figures were some like around Rs.2,700 crores, so, I just wanted to understand -
Sorry, it is Rs.2,700 crores, right? For H1?
No, for Q2 in the filing, it is mentioned as -
No, that is fine. So, the columns got interchanged. So, you will see that the Q2 was showing a higher number than H1, because the column heads were interchanged.
Oh, okay, okay. And just one thing on the NAV slide, I just wanted to understand, given the asset prices have largely remained same, why do we see a decrease in the fleet value?
You will see a decrease in fleet value when we sell ships. So, when that goes from the ship into profit- on-sale, then you will see a decrease in the fleet value. Are you referring to where the bridge that we did for the NAV?
Yes, yes, that one, because largely from the last quarter, the prices have remained same or in fact improved, but we see a decrease in the fleet value.
No, this is not from the last quarter; this is from a year ago, this is from September.
So, it is like the entire year's changes.
That is correct. And July, September ' 24 was when product anchor prices were pretty high, and it came off a lot by June this year.
Understood. And also, there would be some amount of natural decrease because of the aging of fleet.
That is correct. Yes, absolutely right.
Understood. Yes, thanks. Thanks a lot.
So, in this quarter, actually, we have had an improvement of Rs.60 or so in the NAV, where the fleet value is more or less the same, very marginal difference. But the Rs.60 rupees is broken up into Rs.30 approximately of cash earnings and Rs.30 of rupee depreciation impact.
Understood, understood. Okay, okay. Thanks a lot.
Thank you.
We will take our next question from the line of Amit Khetan from Laburnum Capital. Please go ahead.
Thank you for taking my question. So, I had a couple of questions on capital allocation. So, if I look at, we have some Rs.7,000 crores in net cash and even at the current rate of paying dividends, we are accruing at something like Rs.2,000 crores per annum, right, and add to that, we have like significant debt capacity and one could argue that some moderate level of debt is even good for the business. Now, if I look at our cash flow statement, we have deployed some Rs. 5,500 crores over the last decade on a net basis, and this includes the period of 2016 to '18, when we were quite active in buying vessels, right? So, my question is, first, how confident are we that we can deploy this scale of capital when markets are weak? And second, is there a limit to this cash accumulation , because where we take a call that we have more than sufficient capital to which we can intelligently deploy, and therefore, it makes sense to largely dividend it out. Would love to get your thoughts on how the management and the board thinks about this?
Yes, thanks, Amit. I have got Rahul here with me and he will take that question.
So, that is a good question that you have posed. And as you can imagine, we do our own internal assessment of that. So, of course, our fleet has aged over this period of time considering we have not significantly invested in new ships. Of course, we continue to follow a switch strategy, which we did mention in the past that we would not like to ideally drop below this 40- odd ships, and therefore, in this quarter, we have actually bought a few ships, sold some of the older ships, and that does take in a certain amount of capital. Looking in the future, let us say, even if the markets do not come off for some time, we will still continue to do the switch strategy. Of course, every time we continue or we evaluate such a deal, we do look at how the spreads work. The spread meaning selling an older ship and buying a newer ship and whether it makes sense or not. But assuming it does, we have got ships aging in the next couple calendar years, and that will take in a certain amount of capital. The second, but a large part of the capital, like you mentioned, is being kept aside as of now for more favorable prices. And we have done historical calculations and assessments of how liquid the shipping market is in both the second hand as well as in new building. Of course, in 2016-18, the business was smaller, the last few years have been very profitable, and therefore, the amount of cash we have, the amount of debt we can raise has significantly increased, so the potential CAPEX we can do in the future has also increased. In 2016- 18, we solely focused on the second hand market. But in the new building market, you can absorb a significant amount of money. So, just to give you an example, today, if you build a Suezmax tanker, right, it costs about $80 million to build. So, if you place an order for two, three or four of those, it will absorb a significant amount of money. Now, do the yards have that kind of capability? They easily do. We have seen companies much larger than ourselves, being able to deploy much larger amounts of capital. So, we do keep this in mind. And as long as we believe that we can invest this intelligently in the future, we believe that it is worth holding on to the cash.
Fair enough. I know you have talked about this in the past where we have looked at the container segment. Has there been any progress there in terms of new segments that we are looking at?
: So, in the container segment, we do watch it closely. We do not cover it here because of course, we are not invested in it, but I can just give you a very brief overview. So, our decision to hold back on the sector as of now has been all right. So, there are two things. The nature of the container business is different from the tanker business, because in the tanker business or the dry bulk or LPG business, we deal directly with the end customer. So, for example, an ExxonMobil, Reliance, Chevr on, companies like that. In the lining business, what we would do is, ideally, we would be a tonnage provider. So, we would buy a container ship, we would give it to the likes of Maersk, and Maersk has the responsibility to fill up the ship with container boxes, which means Maersk charges a box rate, right, per box to the end customer. So, there is an in-between layout. Now, the box rates have significantly come off over the last few years. As you may be aware, the container market had probably a once in a lifetime kind of boom over the last few years. But those rates have come off significantly. The order books are very strong in the container space. And it is very difficult to call these markets and know when all these things will happen. But we do expect that there can be a correction in the freight rates that a tonnage provider could earn in the future, along with the asset values of those ships. And if we get those opportunities, we would seriously look at the container space as well. Also, just for your knowledge, ships in the container business does absorb a lot of capital.
Got it. Got it. Just a last follow-up to the capital allocation. Now, when the markets turn weak, given that we would be looking at multiple vessels at the same time, and each transaction, my guess is, takes a few months to close, do we have the team in place to sort of for an increased level of activity should that happen?
: Yes. So, again, that is a very good question to ask. Of course, we have also again done an assessment to know that when we do need to act quick, do we have the capability to act quick, both in evaluation and being able to take over a significant number of ships. So, again, to draw to your example of 2016- 18, at that time, we were about 30 ships, and we scaled up to 50 ships. And we have our own internal discipline of the amount of leverage we needed to take. At that point in time, we were capped out on what we believed would be the investable surplus that we wish to deploy that time. But had it been that we had more money available, we could have executed more; we could have gone up to 55, 60, that is a bit of speculation, b ut I am quite confident we could have executed it from an operational angle and that is a doubling of the size. Right? So, now today, of course, we are starting off on a bigger base and therefore, if we are unable to execute that, then after waiting for so long, that would be unforgiva ble. So, clearly, we keep that in mind, and we have prepared ourselves for that eventuality.
Got it. So, we have the bandwidth for that?
: Yes, of course.
Yes, yes. Okay, perfect. Thank you.
: All right. Thank you.
Next question is from the line of Rajakumar Vaidyanathan from RK Invest. Please go ahead.
Yes, good evening. Thanks for the opportunity. So, my question is to Shiv. On the FX line item, sorry for a long question, so I see that the FX line item is appearing under three line items in P&L. There is an Item E and F and then there is also one on the other comprehensive income line where you are showing a gain of Rs. 54 crores to be reclassified to P&L at a later stage. So , I would like to know what are the major buckets sitting in each of these categories? Because first one you said you are repricing the loan, but that will not show up on the asset side because of the gap reasons, so the asset repricing is sitting off balance sheet , so you will only show the loss in P&L , that part I understood. So, Rs.59 crores that you are showing is that that is what you are referring to the loss?
You are referring to standalone results, right?
No, I am looking at the consol.
There are three. First is 4E. That is change in fair value or settlement of derivative contracts. That is a loss in this case, the derivative which converts our rupee debt to dollar debt because the rupee has depreciated has now gone, is now worse, the MTM is worse. Okay? The second one, which is ‘F’ is the revaluation of our cash balances. Our dollar cash balances are significant. So, those are the two items.
The third one? I am looking at 8C, items that will be reclassified to P&L.
Yes, this is, I think referring to our investment in the overseas subsidiaries, where that investment has get revalued, because you have invested in dollars, right, you have capital in certain dollars and that has got revalued.
But this has got nothing to do with your cash flow hedges. This is not, I thought the MTM.
No. That is nothing to do with the cash flow hedges, because that gets classified to P&L immediately.
Okay. But how about the future hedges, I mean, the one, the contracts that you are not fulfilling, for which you are taking a forward?
When you are talking about cash flow hedges, you are talking about general dollar sales?
Based on your future, you could have sold your –
No, no, no, that is not there at all. So, we do very little of dollar sales forward.
Okay, okay. Shiv, sorry to labor on the same point. The reason for this question is in one of the, I think, previous calls when we saw the rupee depreciation, you mentioned that do not expect to see a positive impact on the P&L because of the loan repricing. So, net-net, we will be losing on the P&L, but factually we will be gaining, but from a P&L standpoint, we will be losing. That is what you mentioned in one of the calls.
No, that is absolutely correct. The reason why depreciation is a positive for a P&L currently is because we have more dollar current assets, which is mainly cash than dollar liabilities, which is the loans. So, we have $180 million of loans and close to $400 million of cash. And that is why on a net basis, we are benefiting on $200 million. That is not a normal situation. Under the normal circumstances, we would have $700 or $800 million of debt. And this would have been the case four years ago, you would have had $700 million of dollar debt, and maybe $300 million or $200 million of cash, which meant that if there was a depreciation, you would have had a negative impact on the P&L, which is also the comment that when we explained the normalized.
Okay, got it. So, whatever the statement you mentioned earlier, it holds good, just subject to the cash holdings.
That is correct.
Got it, Shiv. Thanks for the clarification. So, the second question is, there has been an uptick on the VLCC, crude carriers of late. So, I just want to give any color, is there a talk about floating storage back in Vogue, and is that what is driving the prices , and what is the current scenario , and also any color on the future as well?
So, right now, the economics are not floating storage. You need to have a steep contango especially at these VLCC rates. When markets go up, you can put some reasons, of course, the extent to which it has rallied. Whenever market goes up, you cannot pinpoint A, B, C reason and say exactly this is why the market should be exactly at this level. Of course, it currently seems to be at a very strong level. But we did see that there were a lot of sanctions to Russian refineries and oil producers , and there has been a bit of a scramble for cargoes. A nd as Shiv mentioned it earlier in the presentation, when you go for these Atlantic basin crudes, places like Brazil, Guyana, or even from the Middle East, because the Middle East has unwound some of their OPEC cuts, which they had. So, the extra crude that countries like China and India would need to replace the Russian barrels would come from these nations. And in these nations, generally, they pick them up on VLCCs , while main Russian exports have been on Aframax and Suez max. So, there has been a bit of a switch. Of course, the scramble for cargoes, along with extra sanctioning to not only the Russian crude producers, but also there have been additional sanctions on a bunch of vessels that have carried Russian cargoes, which has reduced some of the supply from the market, led to people wanting more, needing ships from the international trading fleet , and so we saw a rebound in the rate, along with the fact that China has also been stocking up and that also added to the demand for ships.
So, how much of that benefit has come to us, because I think we do not own any VLCCs, right?
: No, we do not. But we own the Suezmaxs and Aframaxs and they have also strengthened. Of course, the VLCC saw a big jump. We do not have that. But all our crude tankers are in the spot market. So, to the extent that Suezmaxs and Aframaxs are strengthened, we get all the benefits.
Okay. And do you expect this benefit to last for at least a couple of quarters, if not more?
: We do not make a forecast on the rates because genuinely, you do not know which factors will come to either pull up the market or pull down the market, so we will refrain from that.
Oh, okay. Yes. The last question is on the rig part. So, in the previous call, you mentioned that there will be a lumpy expenditure whenever the rigs go for a contract. So, I just want to know, have you taken any hit in this quarter or the hit will come in the coming quarter , because you mentioned a couple of your rigs are going to go for work in the Q3?
: It will mainly come in the coming two quarters.
Okay. So, there will be a hit in the bottom line or the bottom line will be taken care of?
: Yes, there will be an extra amount of expenses to prepare the rigs for the new contract.
No, my question is incrementally we gain or you will not see that benefit in Q3, Q4?
Yes. So, the initial period of any contract tends to be loaded with these expenditures a nd then later on, it gets sort of free because it is only OPEX then. So, we would not expect too much contribution from the rigs in this period.
Shiv, the last question, so on the forecast, you have mentioned for the rigs, the visibility is only 75% for Q3, in Q2 also you mentioned the same 75%. So, I mean, given that you already have a visibility of these rigs going into contract, why we have not changed the percentage?
That will be because those rigs will be off higher for some time preparing for those contracts. So, we do not count the off higher time as part of the coverage.
Okay. Got it. Thank you so much.
Yes. Thank you.
We will take our next question from Kirtan Mehta from Baroda BNP Paribas Mutual Fund. Please go ahead.
Thank you so much for the opportunity. One question in terms of sort of some of the rates have been a bit tighter than and persistent through the tightness. You have mentioned that some of the contracts will keep on either a short-term contract or a new short contract to sort of continue to maximize the earnings from this tightness. So, could you sort of summarize at the portfolio level how much of short-term -?
Sorry, the line is really unclear. We are not able to get your question. You could maybe put it up in the text.
Sure. I will do that. Thank you.
We will take our next question from Karan Bhatelia from MAIQ Capital. Please go ahead.
Hi, sir. Good evening. Congratulations for the result. I am sorry I joined late, sir, if I am just repeating the question. Just going through an article regarding US-China trade, so I have been seeing that there has been a massive drop in the containers as well. So, how does it affect our -
The line is gone… So, just on a very rough thing, the containers, of course, since we are not there, it does not affect us. The only two commodities which are really affected by the US -China trade war are grains and LPG. So , those are the only two commodities. We are not affected by what happens on the container front.
I get it, sir, but just to understand, basically those containers are being transported via maybe a Kamsarmax or whatever some sort of –
Those container ships are different from all our ships. We do not have any container ships.
Okay, sir, got it. Thank you.
We have one text question. I will just read it out. So, this is from Himanshu Padhyay. The asset prices have increased in the last few months despite the charter rates not improving that much on product and dry bulk carriers. Can you tell what is happening and why asset prices have moved up?
That is a good observation. So, on crude, the charter rates have moved up, but on dry bulk also, I would say the charter rates have moved up in the last couple of months. Shiv mentioned that there has been some forward buying. So, you can see some link between the asset prices and dry bulk. Of course, if you try to draw exact relationships just to oversimplify it, rates have moved up 10%, asset value should move up exactly by 10% , that never happens in any market. But let us say the broad direction has been upward for both. There is some positive expectation on dry bulk, mainly on the cape-sized vessels, where we see the asset prices holding up much stronger than the sub -capes, mainly because there are many more mines coming up in West Africa, both for iron ore and bauxite. On product tankers, yes, I agree that we have seen the prices strengthen a bit despite the charter rates not moving up as much. There is a bit of a de -link over there. But eventually, it is dependent on people's ability to procure vessels in the second-han d market. And the last few transactions set the price. But I am not forecasting it very much, maybe possible that maybe starting of next year, maybe some of that extra increase in the price comes off if the charter rates do not improve.
What is the current outlook on dry bulk market with respect to coal and iron ore? Has the market picked up in the rates?
So, again, I am not going in getting into a forecast of the market, but I can just tell you roughly where we are today. The coal market has been a bit weak. But firstly, dry bulk rates move as a totality of all the dry bulk commodities. You have only focused on coal and iron ore. Iron ore, while there are months where it is strong and months where it is weak, overall coal and iron ore trade has been a bit weak. In iron ore, if you see the major demand area is China, you are maybe reading in the news that the amount the government wants to spend on infrastructure is a bit topped out. We are also seeing the real estate market facing a lot of issues. Iron ore is also consumed in export markets. So, when China is producing a variety of goods that are sold to America, Europe and other kind of countries, there is a consumption of steel and therefore consumption of iron ore. All of the steel production in China has been down this year, even in the last couple of years by a few percentage points each year. However, the iron ore production in China sometimes remains weak, mainly because the iron content in that iron ore is on the lower side. Because iron ore prices today are roughly on the lower side, sometimes steel mills find it more economical to import higher iron content from countries like Australia and Brazil instead of using domestic ore. And then it is on the margin of whether they import a little bit more or import a little bit less. And that is kind of at least somewhat holding up the iron ore imports. Coal has been on the weaker side. We are seeing power generation increase in both India and Europe, at maybe just or 2-3%, and renewable energy growth has been strong, hydropower production has been decent. And because of that, coal imports have been a bit weak. But we are seeing minor bulks, mainly driven by bauxite, fertilizer, other agricultural products holding up very well. And that is why we are seeing the strength in this dry bulk market, despite the main two commodities actually being on the weaker side. I hope that answered your question.
Let us take one live question and then we will go on. We have a question from Harsh C, an individual investor. Please go ahead.
Shiv, I am just looking at the standalone cash flow statement and there is some Rs.425 crores of loan to subsidiaries. So, I believe this is to GIL, correct?
That is correct.
And this is the sum total of all the payment, like all the debt has been retired from GIL or -
That is correct. So, there is no other debt now in the group apart from the Great Eastern d ebt itself, apart from RM.
Understood. And I am just looking at the financing activity as well, I mean, just comparing from the last H1, there was some Rs.282 crores of dividend and this year it has come down to almost Rs.180, so, any reason for that given that we are better off compared to last year from a cash availability point of view, the reason for this reduction in dividends?
This might be that we did something as a final instead of an interim. So, there was just a timing difference because last year we made a total of Rs. 424 crores. It cannot be all, but we will just see this.
Okay, but like as a principle, ideally it should match or in fact improve, right?
No, the profits are not higher than in the previous year. H1 was lower than the previous year.
Understood. But what is the management's thought process while declaring the dividends the current quarter of profitability primarily?
One is to look at the current quarter of profitability, so , current quarter six months. In this case, because it is a quarterly dividend, current quarter of profitability. Yes, that is what we are looking at usually and whatever requirements are there. So, then you decide a rate depending on how much we want to retain.
Understood.
We have a question from Krishnaraj V from Agathis Investments. Please go ahead.
Yes, I thought I will just educate myself with another question. When I look at your business, it seems to me that for the classes of ship that you trade in, the supply side is more foreseeable than the demand side because you know the order book and the scrapping, etc., So, that is the case. One does see that scrapping has not been intense at all, although the order book as a percentage of supply keeps growing. So, it appears to me that the market has to crack to give you some opportunities , the scrapping has to intensify. I do not know if my line of thinking is correct and if you can throw some insights around at least? Thank you.
So, firstly, in the order book, what you are saying is broadly correct. So, let us take today's position, right? The market has been fairly strong. You have to just remember one thing that when you look at yard capacity, yards have the ability to build ships in our sectors but also in other sectors. As of today, and if you just take, maybe Cal 2026, '27, '28, most of the yards are full with LNG and container ship orders. Those ships are generally more profitable than building tankers and bulker s and considering that those markets were very strong, people went and placed orders and filled up all the slots. Had those slots not been filled, then ship yards could build ships much faster and they would have had space for us to order tankers and bulke rs. Considering that today you know that the yards are generally full, they are only taking orders for end '28, Cal '29, and therefore, we do broadly know what the fleet supply is going to be over the next three years. But to build a ship, let us say, this is just for your general knowledge, but let us say LNG and container ship orders had not filled up all these yard slots, then it generally takes about 12-18 months to build a ship, which means that people could have gone and placed orders and you would have seen ships coming in Cal 2027 and then the lead time to increase the order book is much shorter. But in today's situation, at least you know what it is going to look like for the next three years. Now, scrapping is a more complicated forecas t. Generally, we have seen periods in the past where markets have been weak but owners have held on to their ships, either because they are still able to trade them or their balance sheets are strong enough for them to hold it on a bit more. So, sometimes we have seen scrapping ages reduce, sometimes we see scrapping ages hold on. So, that is a bit of a guess. What was your last question I think you asked?
My question was that, I think you have answered most of it. I just want to educate myself , I mean, there is nothing specific. I think from what I am hearing from you is that order book, more or less, yards are full. So, fleet supply, not many ships are going to be coming into the water. What can happen is that there are a lot of ships that are older, especially, other than the product, the product is quite old. So, scrapping can intensify and if scrapping intensifies, then there can be supply-related spikes in the charter rates and so forth, that I was trying to just understand that?
Yes, this can happen. But if let us just only because you are asking it as a general question, let us say if the market is very poor and a lot of ships got scrapped and let us say the market prices, the charter rates increase as a result of that scrapping, then own ers, as long as charters are willing to take those ships, may hold back on further scrapping. Because what happens is for the ship owner is if the debt is paid off and the ship is fairly old and as long as they can make up the operating costs, generally the tendency is to continue to run those ships. And if you are in a world where fleet supply that is coming online is not very strong, maybe charters release some of the age norms that they have for those kind of ships. It is all a matter of supply demand because you have to move the cargo eventually.
Got it. You do not see any regulatory changes in the horizon that would accelerate scrapping?
So, as of today, generally internationally traded tankers do not really cross the age of 20, 21. There is, of course, a market for ships above 21, but, it is very far in few. So, and maybe the carbon-related regulations that are coming up are multiple years away. We see some delays from IMO as well. So, we do not even know when those are coming in. So, in the near future, I would not think of any regulations coming in to accelerate scrapping.
Got it. Yes, thanks a lot.
Thank you. Sir, would you like to take the t ext question? will just do that. So, the first set is from Kirtan Mehta. Three questions, how much percentage of our fleet is geared to capture persistent higher rate either through spot or short-term contract exposure?
So, broadly, we maintain most of our fleet on the spot market. The LPG fleet is generally fixed out. We have four of those ships out of our 40, so we will call that 10%. Out of the remaining ships, 36, maybe three, four at any given point in time are on time charter. We have no fixed rule of fixing any ships on a time charter. So, we are always willing to be in a position to take advantage of the spot market. The second question?
(Reading question from Kirtan Mehta) We are seeing continued strength in diesel crack and recent rise in gasoline crack. Will these likely to ease over November as refineries return?
That is a tough one. It will be very difficult for us to speculate on how these cracks are going to change.
The next question is from Ojas Singh. With the government Sagar Mala project program aiming to boost coastal shipping, how is Great Eastern positioned to benefit from these initiatives - are we actively taking advantage of the opportunities arising from Sagar Mala to expand our business or improve efficiency?
So, we have always participated in the coastal trade and we have been participants in the coastal trade for a long time, and we will continue to participate whenever there are opportunities for us to deploy our ships here.
Next question is from Snigdha Tibrewala. The investor presentation says that the NAV per share is 1,484. Is the NAV calculated as the equity shareholders’ funds in the balance sheet or any other method?
So, the way we calculate net asset value is that we just replace the net block of the fleet with a market value of the fleet and then we calculate what is left over as the shareholders’ funds. So, if the net block is say Rs. 8,100 crores, which let us call it $900 million, but a fleet is valued at $ 1.6 billion, which is say let us say Rs.13,000 to 14,000 crores, then we replace it with that number, and then we calculate the net asset value minus the net debt and divided by number of shares gives the net asset value per share. So, this is basically shareholders’ funds, but with the ships mark-to-market. (Reading question from Rajakumar Vaidyanathan) And the last of the text questions we see here, from Mr. Rajakumar Vaidyanathan. Many foreign vessels are converting their registration to India location. Our government recently has put an ambitious target for ship building and ship repair. Your comments. Lastly, my humble pranams to Shri K.M. Sheth ji for an illustrious career. May the God bless him, good health and peace.
Thank you for that. We will convey it to Mr. Sheth. So, yes, shipping seem to have become very big in the government's consciousness. We are very happy about that and we are very happy with the development of a shipping ecosystem in India. So, we welcome all of these initiatives from the government.
Thank you, sir. There are no further questions, sir. Any closing comments from you?
No, nothing, no closing comments. The transcript and the audio will be put up on our website shortly. We are always available to speak with investors. So, please reach out to our team, our contact details are given, so, please reach out to our team if you have any further questions. Thank you.
Thank you, members of the management team. On behalf of The Great Eastern Shipping, that concludes this conference. Thank you for joining us and you may now exit the meeting.