Great Eastern Shipping has taken advantage of government incentives to set up a new chartering operation in India’s first purpose-built “smart city”.
The country’s largest private shipowner has formed a subsidiary to bring vessels under its operation in Gujarat International Finance Tec-City (GIFT-City).
The international financial services centre is taking shape in Ahmedabad in north-western India.
Great Eastern manager Rahul Sheth told an earnings call the purpose of the new company is to reap the rewards of “a lot of benefits” granted to companies to establish themselves there.
The main intention of the unit is to conduct “in-chartering activities at the moment”.
Sheth said two ships are being operated under term deals by the subsidiary at the moment. He did not specify vessel details.
The company owns more than 60 bulkers, tankers, LPG carriers and offshore vessels.
“We will have to see how this develops,” the executive told the call.
“At the moment, we’ve just made a small start by taking two ships in. And this is a direct derivative of our existing business.”
Different possibilities
Sheth gave the example of chartering a 15-year-old vessel at a fixed rate for five years, which would create the same exposure as buying a vessel that Great Eastern could operate for five years before selling.
“Then I may play the spot market. I can also fix it out,” he added.
“But if I play the spot market, then you make the spread over and above the in-charter rate and the spot market. If I buy a ship, I make the spread between the spot rate and the breakeven rate of that asset.
“We have done in-chartering activities in the past as well.
“At times, we have also won a contract with an oil PSU [public sector undertaking], where we’ve had a contract of affreightment [COA], where basically we make a commitment to conduct a few spot voyages for which we, at times, in-charter vessels for one voyage at a time to facilitate that COA.
“It’s just a different way of serving our customers. You can either own a ship and provide those services, or you can charter in a ship for a longer period and use [it] to provide those services to the customers.
“We used to do it sometimes through overseas subsidiaries, sometimes directly.”
In the first quarter ending 30 June, Great Eastern made net profit of INR 8.1bn ($96.5m), up from INR 5.8bn in the same period of 2023.
