1. Shipping Industry
Indian tonnage currently stands at 10.11 million GT and Indian flagged vessels
carry 8.4% of Indian trade cargo. The rest is carried by overseas shipping
companies. Coastal shipping accounts for just 10% or a million GT of India’s total
tonnage. In its National Maritime Agenda, the ministry of shipping has estimated
that Indian seaborne trade could increase 3.56 times by 2020 resulting in shortage
of tonnage. The Agenda has set a target for Indian shipping tonnage of 43 million
GT by 2020.
India’s exim cargo in terms of volumes was 611 million tonnes of which coastal
cargo were ~133 tonnes in 2009-10. In 2009-10, major and minor ports in India
carried a total cargo throughput of 849.89 million tonnes – indicating a year-on-
year increase of 14.27%.The Maritime Agenda, traffic at major ports estimated to
grow at a CAGR of 8.03% to 1214.82 million tonnes by 2020, whereas traffic at
non-major ports is expected to grow 15.96% CAGR to 1269.59 million tonnes in
the same time.
The Great Eastern Shipping Company Limited
It is India's largest private sector shipping company which mainly transports liquid,
gas and solid bulk products. The company has two main businesses: shipping and
offshore. The shipping business is involved in transportation of crude oil,
petroleum products, gas and dry bulk commodities. The shipping business has been
awarded the ISO 9001: 2000 standard certification by DNV.
Overall View of Great Eastern Shipping Company:
Market Cap (crores) : Rs 3906.30
Shares Outstanding : 152708445
Last dividend(%) : 65%
Yield (%) : 2.53%
Recent news about Great Eastern Shipping:
The Great Eastern Shipping Company Limited has allotted 32,400 equity
shares of the Company to Peerless General Finance & Investment Company
Limited from the abeyance quota of Rights issue 1992 & 1994 pursuant to
the order of the Special Court. With this allotment the paid-up capital of the
Company will increase from Rs.152, 28, 96,840.00 to Rs. 152, 32,
20,840.00.
Greatship, the wholly-owned subsidiary of Great Eastern Shipping
Company, today said it is mulling an initial public offer (IPO) and may file
the draft prospectus with the market regulator SEBI in the next 2-3 months.
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2. Comparison with Essar Shipping and analysis on the future of stocks:
The P/E ratio of the great eastern shipping and Essar shipping is 27.23 &
6.46.which is higher almost 4.5 times competitor. It means that the future
prospect of great eastern is much higher and investors are willing to pay 27
times of the earnings. Also market to book ratio of great eastern and Essar is
7.57 &1.19 which means that market value of great eastern is much higher
than Essar and market value of the firm’s investment is 7 times to their cost.
Dividend has been paid twice in the year 2012 which signifies that the
company is performing extremely well.
The ROE and ROA of both the companies is same ie 0.01 and 0.02
respectively. This means that company generates 1% and 2% profit of assets
and equity respectively. This is mainly because in shipping industry the
returns are very less and most of the companies have approximately these
returns.
The current ratio of Essar is 0.62 which means that firm has a negative
working capital thus is not a healthy firm. Whereas great eastern has 4.56
current ratio, much higher than that of Essar. This means that it is more
liquid and working capital is also positive and thus is much better firm than
essar.
Interest coverage ratio is also better for Essar, against Great Eastern which
means interest obligation covered is better for Essar.
Total asset turnover ratio of great eastern and Essar is 0.20 and 0.14 which
means that Great Eastern is able to generate 0.20 revenue for every rupee in
assets whereas for Essar it’s quite low.
The Equity multiplier for Great Eastern is 1.93 and for Essar is 1.74 which
signifies that Great Eastern is relying more on debt to finance its
investments.
Overall the Great Eastern is better than Essar and is more profitable.
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3. Shipping Industry
Indian tonnage currently stands at 10.11 million GT and Indian flagged vessels
carry 8.4% of Indian trade cargo. The rest is carried by overseas shipping
companies. Coastal shipping accounts for just 10% or a million GT of India’s total
tonnage. In its National Maritime Agenda, the ministry of shipping has estimated
that Indian seaborne trade could increase 3.56 times by 2020 resulting in shortage
of tonnage. The Agenda has set a target for Indian shipping tonnage of 43 million
GT by 2020.
India’s exim cargo in terms of volumes was 611 million tonnes of which coastal
cargo were ~133 tonnes in 2009-10. In 2009-10, major and minor ports in India
carried a total cargo throughput of 849.89 million tonnes – indicating a year-on-
year increase of 14.27%.The Maritime Agenda, traffic at major ports estimated to
grow at a CAGR of 8.03% to 1214.82 million tonnes by 2020, whereas traffic at
non-major ports is expected to grow 15.96% CAGR to 1269.59 million tonnes in
the same time.
Essar Shipping Limited
The company was originally incorporated on April 16, 2010 under the provisions
of the Companies Act, 1956, in the name and style of Essar Ports & Terminals
Limited having Registered Office originally situated at Essar House, Gujarat. The
company obtained the Certificate of Commencement of Business on June 1, 2010.
The name of the company was changed to Essar Shipping Ltd. On September 7,
2010.
Overall view of Essar Shipping Limited:
Market Cap : Rs 618,7617205
Shares Outstanding : 205,227,768
Recent news about Essar Shipping Limited:
Essar Shipping has reported a sales turnover of Rs 421.10 crore and a net
profit of Rs 6.22 crore for the quarter ended Jun '12.
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4. Logistics services provider Essar Shipping has reduced its consolidated net
loss to Rs 36 crore in the second quarter of current financial year from loss
of Rs 86 crore in a year ago period.
Comparison with the Great Eastern Shipping Corporation Limited
As seen in the ratio sheet, P/E ratio of the Essar Shipping Limited is 6.46
while for the Great Eastern Shipping Corporation Ltd. is 27.24 therefore, the
Great Eastern Shipping Company Ltd. has significant prospects for future
growth.
Earnings per share for the Essar Shipping Ltd. and the Great Eastern
Shipping Corporation Ltd. are 4.67 and 9.41 respectively which implies that
the latter company is having better earnings for its single share as compared
to the former.
Debtor’s turnover ratio for the Great Eastern Shipping Corporation Ltd. is
23.84 which is much higher than that of the Essar Shipping Ltd. i.e. 10.93. It
shows that the Essar Shipping Ltd. has longer period for collecting its debts
as compared to the other company.
Total Asset Turnover ratio for both the companies are almost similar with
small difference i.e. for the Essar Shipping Ltd., it is 0.14 while for the Great
Eastern Shipping Corporation Ltd. is 0.20, hence the latter is doing better
than the former.
Higher Current ratio of the Great Eastern Shipping Corporation Ltd. (i.e.
4.56) than that of the Essar Shipping Ltd. (i.e. 0.62) implies that the first
company is able to meet its short term liabilities much faster than the second
one.
Even on a stringent measure, the Essar Shipping Ltd. is behind the Great
Eastern Shipping Corporation Ltd. in meeting its short term liabilities
considering Quick ratio.
Both the companies have same Return on Assets i.e. 0.01; thus, they receive
same amount of profit from their assets.
It can be concluded that it will be a better option to invest in the Great Eastern
Shipping Corporation Ltd. than in the Essar Shipping Ltd.
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5. Shipping Industry
Indian tonnage currently stands at 10.11 million GT and Indian flagged vessels
carry 8.4% of Indian trade cargo. The rest is carried by overseas shipping
companies. Coastal shipping accounts for just 10% or a million GT of India’s total
tonnage. In its National Maritime Agenda, the ministry of shipping has estimated
that Indian seaborne trade could increase 3.56 times by 2020 resulting in shortage
of tonnage. The Agenda has set a target for Indian shipping tonnage of 43 million
GT by 2020.
India’s exim cargo in terms of volumes was 611 million tonnes of which coastal
cargo were ~133 tonnes in 2009-10. In 2009-10, major and minor ports in India
carried a total cargo throughput of 849.89 million tonnes – indicating a year-on-
year increase of 14.27%.The Maritime Agenda, traffic at major ports estimated to
grow at a CAGR of 8.03% to 1214.82 million tonnes by 2020, whereas traffic at
non-major ports is expected to grow 15.96% CAGR to 1269.59 million tonnes in
the same time.
Varun Shipping
Varun Shipping Co., Ltd. operates vessels for transporting bulk cargoes for the
hydrocarbon sector including LPG, crude oil and other petroleum products. It owns
and operates a fleet of 20 vessels, comprising 10 LPG carriers, 3 crude oil tankers
and 7 anchors handling towing and supply (AHTS) vessels.
Overall View of Varun shipping Co., Ltd:
Market Cap (Mil.) : Rs 2400.12
Shares Outstanding (Mil.) : 150.01
Dividend : 0.50
Yield (%) : 5.00
Recent news about Varun shipping co., Ltd:
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6. Varun Shipping Company Ltd announced that the Board of Directors of the
Company has recommended a dividend of INR0.50 (5%) per equity share of
INR10 each of the Company, which will be paid to the shareholders on or
after January 25, 2013.
Varun Shipping Company Limited announced that the Company has signed
contracts with Petrobras, Brazil, a Government of Brazil undertaking, for
three Anchor Handling Towing and Supply Vessels (AHTS), Suvarna,
Subhiksha and Sudaksha.
Comparison with Bharti Shipyard and analysis on the future of stocks:
The P/E ratio, ROE of the shipping industry are 6.71 and -0.96 respectively,
but we can see from our calculations that they are 16.37 and 1.8 respectively
which show us that Varun Co., Ltd is growing well in a declining industry.
With the new chairman bought in October declaring dividends, we can
expect a good share holder’s returns as a vision of the firm, so betting on the
stocks would not be an idea.
The share prices of the firm have been dipping marginally in the last few
days but considering a long term investment, the share prices can be
expected to grow steadily to Rs 30 in two or three years. (670 crores
contracts being signed in the last quarter)
Though Bharti might look good with the current ratio, we can see that the
quick test ratio is similar for both the firms, the profitability ratios of Bharti
are very high compared to Varun, but Varun has high inventory turnover
ratio which implies that Varun has the capability to do large number of
projects compared to Bharti and moreover it shows that Bharti takes up huge
contracts which earn more profit margins but Varun is good on volumes.
The P/E ratio as already seen for Varun Co.Ltd is more than the industry
average but for Bharti its far lesser than the industry, it points towards
saying that a smart investor would be more keen towards Varun Co., Ltd
than Bharti.
Interest coverage ratio is also better for Varun Co., Ltd against Bharti.
As an analyst I would suggest that ‘Buy Varun Shipping for period of one
year and it will double in this period. Target for this period is 30-My target
for Varun Shipping is Rs 30 for the long term with a stop loss of Rs 15.’
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7. Shipping Industry
Indian tonnage currently stands at 10.11 million GT and Indian flagged vessels
carry 8.4% of Indian trade cargo. The rest is carried by overseas shipping
companies. Coastal shipping accounts for just 10% or a million GT of India’s total
tonnage. In its National Maritime Agenda, the ministry of shipping has estimated
that Indian seaborne trade could increase 3.56 times by 2020 resulting in shortage
of tonnage. The Agenda has set a target for Indian shipping tonnage of 43 million
GT by 2020.
India’s exim cargo in terms of volumes was 611 million tonnes of which coastal
cargo were ~133 tonnes in 2009-10. In 2009-10, major and minor ports in India
carried a total cargo throughput of 849.89 million tonnes – indicating a year-on-
year increase of 14.27%.The Maritime Agenda, traffic at major ports estimated to
grow at a CAGR of 8.03% to 1214.82 million tonnes by 2020, whereas traffic at
non-major ports is expected to grow 15.96% CAGR to 1269.59 million tonnes in
the same time.
Mercator Limited
Mercator Limited (formerly Mercator Lines Ltd.) is the parent company and is the
second largest private sector shipping company in India based in Mumbai. The
Mercator group of companies has diversified business interests in Coal, Oil & Gas,
Commodity Transportation and Dredging.
Recent news about Mercator Ltd:
Diversified conglomerate Mercator 's consolidated net profit fell by 20.9
percent to Rs 5.3 crore in the second quarter of current financial year from
Rs 6.7 crore in a year ago period. Consolidated total income rose by 5
percent to Rs 822 crore from Rs 781 crore during the same period.
Mercator fell 0.25 percent to Rs 20.20 on the Bombay Stock Exchange at
14:33 hours IST.
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8. Over the past four years, the revenue contribution from the shipping segment
has been constantly declining from 89% in 2008-09 to 29% in 2011-12 due
to adverse market conditions. In order to maintain growth momentum,
Mercator strengthened its energy segments. Consequently, the revenue from
these segments has increased from 3% in 2008-09 to 68% in 2011-12.
Comparison of Ratios
The Current Ratio of Mercator Ltd is greater than Varun Shipping which
indicates it has comparatively greater ability to meet its short term
obligations. The ideal current ratio is 2:1 but it varies from industry to
industry.
Mercator Ltd has slightly greater liquidity as compared to Varun Shipping.
Higher the quick ratio higher the liquidity of a business. Inventory is less
liquid and is therefore scrapped from current assets.
Since the Cash Ratio of both the companies is less than 1, therefore it won’t
be able to pay all its Current Liabilities in immediate short term.
Debt to Equity ratio measures how much money a company should safely be
able to borrow over a period of time. Mercator Ltd (1.53) has less proportion
of debt in its capital structure as compared to Varun Shipping (3.3)
Return on assets indicates the no. Of cents earned on each dollar of assets.
Thus higher value of return on assets shows business is more profitable.
Varun Shipping has slightly more ROA compared to Mercator Ltd.
Varun Shipping is more efficient in generating income on new investment
compared to Mercator as it has more return on equity.
P/E ratio of Varun Shipping is greater than Mercator Ltd which means it has
higher prospects of future growth. The investors would be willing to pay
much more for per rupee of current earnings.
Higher market to book ratio for Mercator Ltd means it has been successful in
creating more value for its stakeholders.
Debtors Turnover Ratio indicates the efficiency of a business in collecting
its credit sales. Mercator Ltd is comparatively inefficient in collecting
outstanding sales and cash collection. It is favorable in case of Varun
Shipping.
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9. Asset Turnover ratio tells how successfully the company is using its assets to
generate revenue. Mercator Ltd uses its assets efficiently and optimally as
compared to Varun Shipping.
Higher value of Times Interest Earned Ratio indicates greater ability of a
business to repay its Interest and Debt. So, it is more favorable in case of
Varun Shipping. Creditor lends to a company only with the higher Times
Interest Earned Ratio.
Shipping Industry
Indian tonnage currently stands at 10.11 million GT and Indian flagged vessels
carry 8.4% of Indian trade cargo. The rest is carried by overseas shipping
companies. Coastal shipping accounts for just 10% or a million GT of India’s total
tonnage. In its National Maritime Agenda, the ministry of shipping has estimated
that Indian seaborne trade could increase 3.56 times by 2020 resulting in shortage
of tonnage. The Agenda has set a target for Indian shipping tonnage of 43 million
GT by 2020.
India’s exim cargo in terms of volumes was 611 million tonnes of which coastal
cargo were ~133 tonnes in 2009-10. In 2009-10, major and minor ports in India
carried a total cargo throughput of 849.89 million tonnes – indicating a year-on-
year increase of 14.27%.The Maritime Agenda, traffic at major ports estimated to
grow at a CAGR of 8.03% to 1214.82 million tonnes by 2020, whereas traffic at
non-major ports is expected to grow 15.96% CAGR to 1269.59 million tonnes in
the same time.
Shipping Corporation of India Ltd
SCI was established on October 2, 1961 by the amalgamation of Eastern Shipping
Corporation and Western Shipping Corporation. Two more shipping companies,
Jayanti Shipping Company and Mogul Lines Limited, were merged with SCI in
1973 and 1986 respectively.
SCI started out with 19 vessels. It gradually metamorphosed into
a conglomerate having 83 ships of 4.6 million metric tons deadweight (DWT) with
interests in 10 different segments of the shipping trade.
For the past fifty years, Shipping Corporation of India has been providing yeoman
service to the country’s Economy by meeting its ocean transport requirements and
has emerged as the undisputed leader in India’s shipping industry. The SCI
continues to be the only Indian mainline carrier providing liner services from India
to the major global destinations.
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10. Starting as a Liner Shipping Company, SCI, with its safe, reliable, efficient and
economic shipping services has emerged as one of the most admired, diversified
and progressive shipping companies in the world.
Recent news from Shipping Corporation of India Ltd
The vessel is the last of the series of four Panamax bulk carriers ordered by SCI
with STX (Dalian) Shipbuilding Co. Ltd., China. Orders for these vessels were
placed in August 2008.
Comparison with Varun Shipping Co and analysis on the future of stocks:
The Current ratio of Shipping Corp. of India Ltd is 1.6 while that of Varun
Shipping Co is 0.6 & Inventory Turnover ratio of Varun Shipping Co is
higher than that of Shipping Corp of India which shows that Varun has
capability to do higher project compared to Shipping Corp of India.
Comparing to profitability ratio Shipping Corp of India Ltd is going under
loss since few years while Varun Shipping Co is making profits.
Share price of Shipping Corp of India is dipping marginally over few days.
This is due to recession in the Indian Economy.
The P/E Ratio of Varun Shipping Co is better than that of Shipping Corp of
India. So the investor would be keen to invest in Varun Shipping Co than
Shipping Corp of India.
As an analyst I would suggest that ‘Buy Varun Shipping for period of one
year and it will double in this period. Target for this period is 30-My target
for Varun Shipping is Rs 30 for the long term with a stop loss of Rs 15.’
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