BWI: Brickwork Ratings Assigns BWR AAA Rating to The Great Eastern Shipping Co. Ltd’s Proposed Non Convertible Debenture (NCD) Issue of INR 500 crore (in Addition to the Earlier Two Issues Amounting to INR 450 crore)

Press release from Business Wire India
Source: Brickwork Ratings
Friday, January 01, 2010 12:28 PM IST (06:58 AM GMT)
Editors: General: Consumer interest, Economy; Business: Accounting & management consultancy services, Advertising, PR & marketing, Banking & financial services, Business services, Financial Analyst
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Brickwork Ratings Assigns BWR AAA Rating to The Great Eastern Shipping Co. Ltd's Proposed Non Convertible Debenture (NCD) Issue of INR 500 crore (in Addition to the Earlier Two Issues Amounting to INR 450 crore)
NCD Issue Rating: BWR AAA, Outlook : Stable

Bangalore, Karnataka, India, Friday, January 01, 2010 -- (Business Wire India) -- Brickwork Ratings has assigned BWR AAA (Pronounced BWR Triple A) for The Great Eastern Shipping Co. Ltd.'s (G E Shipping) proposed issue of Unsecured Non Convertible Debentures (NCD) of INR 500 Crore. This is in addition to the Company's two earlier NCD issues amounting to INR 450 Crore rated by us in Aug 2009 & Oct 2009 respectively. {Aggregate amount INR 950 crore}.

Brickwork Ratings 'BWR AAA' stands for an instrument that is considered to offer BEST credit quality in terms of timely servicing of principal and interest obligations. The rating factors, inter alia, economies of scale, revenue characteristics, operating efficiency, return on capital and management quality.

BWR has relied on the Company's audited financial results, projected financial figures, and the published unaudited financial results declared for Q1 and Q2 of FY10, information and clarification provided by the Company.

GE Shipping has consistently posted strong growth. For FY 09, on a standalone basis, income from operations increased to INR 3172.33 Crore as compared to INR 3062.75 Crore in FY08. The Company's Net profit increased slightly to INR 1374.69 Crore in FY09 as compared to INR 1356.73 Crore in FY08 mainly due to increase in operating expenses to INR 1259.41 Crore in FY09 from INR 1203.47 Crore in FY08. The Company's Net current assets increased 52% to INR 1369.80 Crore in FY09 from INR 904.03 Crore in FY 08.

The unaudited financial results declared by the Company show that for the quarter ending Sep 2009 the company's total income decreased by 43.6% to INR 487.66 Crore compared to INR 864.1 Crore in Q2 FY09. Net profit decreased to INR 96.77 crore in Q2 FY10 from INR 506.15 crore in Q2 FY09, mainly due to decrease in average TCY $ per day in the crude, product and dry bulk carriers categories.

For the first six months of FY 10, the company's total income decreased by 40.9% to INR 1075.31 Crore as compared to INR 1820.45 Crore in the same period of FY09. Net profit decreased to INR 223.05 crore in first half of FY 10 from INR 893.74 Crore in the same period of FY09.

In FY09, G E Shipping's tanker business accounted for around 67% of the net revenues and 59% of the operating profits. The company's tanker earnings derived from spot market was 64%. The crude tankers, including 'spot' and 'period', earned an average Time Charter Yield (TCY) of $ 41200/day in FY09 as compared to $ 30000/day in FY08. The product carriers, including 'spot' and 'period', earned an average TCY of $ 23700/day in FY09 as compared to $ 20250/day in FY08. At present, the average TCY for Crude carries, product carriers and dry bulk are about $ 18750/day, $ 18850/day and $ 17000/day respectively.

The Company's revenue stream is largely denominated in US dollars. A significant part of this exposure is hedged by denominating most of the debt servicing obligations in US Dollars.

G E Shipping is India's largest private sector shipping company. It started as a sea-logistics support shipping line six decades ago for a family trading business. Later it diversified into areas like offshore oil field services.

GE Shipping's Board of Directors comprises of eminent people from the industry and corporate world. Operations of the company are managed by professionals with relevant industry and management experience.

Rating Outlook:

Besides getting its revenue from freight, GE Shipping has, also grown by acquiring and disposing off vessels at regular intervals which has been significantly contributing to its operational income. GE Shipping with a current fleet size of 38, with average age of ten years is well poised to achieve growth in shipping volumes as the economic scenario turns around. Currently majority of the vessels are engaged in contracts of 18-36 months duration, giving the company steady revenue which in the present context of falling freight rates is advantageous to the Company.

The supply side pressure is likely to ease/ rebalance on Pick up in scrapping activity and Shrinking of the order book. Acquiring modern assets at cheap prices is best strategy to come up at this point of time. For a shipping company, it is key that the timing of asset acquisitions is cost beneficial so as to be able to deliver healthy returns throughout a cycle. With GE's current low gearing ratio, it is expected to take full advantage of the cycle at this point.

The Company's diversification into offshore and energy business is likely to add further stability to its overall operations. GE Shipping, with its dynamic management, active risk management practices and consistent performance, has shown its ability to manage difficult situations in the past. Though the Company is likely to face pressures on margins in the short term, BWR expects GE Shipping to display such characteristics to overcome the present challenging times also successfully, maintain its excellent track record of debt servicing and continue to retain its leadership in the Indian Shipping Industry.

Copyright ©, 2009, Brickwork Ratings.

Brickwork Ratings has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. Brickwork has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented "as is" without any express or implied warranty of any kind. Brickwork does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by Brickwork should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. Brickwork has the right to change, suspend or withdraw the ratings at any time for any reasons.


CONTACT DETAILS
Mukesh Mahor, Lead Analyst, Brickwork Ratings, 1-860-425-2742, mukesh.m@brickworkratings.com
Milind Diwakar, Co-Analyst, Brickwork Ratings, 1-860-425-2742, milind.d@brickworkratings.com
Anitha G, Media, Brickwork Ratings, 1-860-425-2742, media@brickworkratings.com
K N Suvarna, Sr. VP - Business Development, Brickwork Ratings, 1-860-425-2742, kn.suvarna@brickworkratings.com

KEYWORDS
CONSUMER, ECONOMY, CONSULTANCY SERVICES, MARKETING, BANKING, BUSINESS SERVICES, Financial Analyst

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