Indian Shipping cos stick to ramp-up plans

by Dave

The Economic Times

Undeterred by the global meltdown, Indian shipping companies are going full steam ahead with their expansion plans. Major domestic ship
ping companies, such as Shipping Corporation of India (SCI), Great Eastern (GE) and Essar, have already placed orders for 58 ships in Korea and China worth $3.3 billion and are bullish on their future orders.

The major reason why these companies have not been impacted by the liquidity crunch is that most of them have tied up their fund requirements well ahead of time.

Public sector company SCI, which has already placed orders for 32 ships worth $1.87 billion, will now be inviting bids for its $3 billion order of 40 ships.

“Though the liquidity crunch has affected the borrowing rate, we’ll able to sustain the orders. We plan to 25% through internal accruals and rest 75% through external commercial borrowings (ECB),” said S Hajara, chairman & MD, SCI. The company, however, has spread out the period of the order over three years (2008-11).

With the average age of Indian fleets rising, shipping companies are not altering with their expansions plans, even as the borrowing cost has increased to unprecedented levels. GE, which has placed an order worth $ 780- million for 14 ships, is also going ahead with the orders it has placed.

“The financing for the near-term deliveries are already tied up. For the latter deliveries, we are not yet in discussion with banks as the bulk of the payment is towards the end. As of now, none of our expansion plans have been altered,” an official spokesperson for GE said in an email query.

The ships will be delivered over a period of three years (2009-12). Another shipping major Essar is also going ahead with orders of 12 ships worth $630-million, which will be delivered in 2009-13 period.

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