Great Eastern Shipping Company Ltd (NSE: GESHIP) Q1 2026 Earnings Call dated Aug. 01, 2025
Corporate Participants:
Unidentified Speaker
G Shivakumar — Executive Director and Chief Financial Officer
Analysts:
Unidentified Participant
Mohammed Farooq — Analyst
Saket Kapoor — Analyst
Himanshu Upadhyay — Analyst
Karan Battalia — Analyst
Presentation:
operator
Sa. Your passcode has been confirmed. Please wait while you are joined to the conference. Sa. Sa. You are now rejoining the main. Conference questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shivakumar, executive director and CFO. Thank you. And over to you sir.
G Shivakumar — Executive Director and Chief Financial Officer
Thank you. Good afternoon everyone. And welcome to the quarterly earnings call for Q1FY 2526. I trust you’ve had a good look at the results which came out last evening. So we’ll do a quick run through of the results and what led to those results. And after that we can have Q&A. Mr. Rahul Sheth is here with me and we will be happy to take questions after that. Customary disclaimers apply. Our consolidated net asset value is up slightly quarter on quarter as a result of the earnings accrual to the cash balance. The net profit while down significantly versus a year ago is up versus Q4FY25.
And we’ve declared the 14th consecutive interim dividend. This time at 7 rupees 20 paisa per share representing a payout of about 27% on standalone earnings. I’m not going to go through the numbers here because I’m sure you had time to go through them since yesterday. Just here we have the standalone net asset value at the bottom which is at 1120 per share down from 1181 a year ago which is of course due to the drop in the values of assets. But up from March, up slightly from the March number. This is what happened and this is what resulted in those numbers.
So you see Q1FY25 we had the crude tankers averaging $46,000 a day which is down to 33,800. In Q1FY26, the product tankers averaging 37,000 versus just under 25,000. So that’s a huge impact that we had. Of course our LPG ships got repriced upwards and therefore there’s an improvement from 36.7 to 43.8 thousand. The bulk areas as well went down from about 18,000 to just under 15,000. But versus the immediate preceding quarter we had some slight improvement. 31,000 on the crude tankers went to 33. The product tankers were about the same. LPG again continuing on charter and therefore the same.
And dry bulk improving slightly as well. Along with the rates coming off. We also sold few ships last year. So that also resulted in Some reduction not in the rates but in the earnings on an absolute basis. Standalone net asset value of course. It’s been going up though for the last two years now. It’s been for the last, since March last year it’s now been stagnant. So we had mentioned this earlier that while asset prices can drop and therefore interrupt the growth in net asset value, earnings are quite strong and the earnings growth and the cash accrual due to earnings sometimes compensates for the drop in the value of the ships themselves.
This is the factors that led to the change in the net asset value. Similarly for the consolidated nav where you have a small drop in the consolidated navigation. Let’s look at what happened in the shipping market. So you had the Suez max earnings coming off from last year and this is market earnings and this is a market benchmark, so not necessarily reflective of exactly what the ships are doing. You also have the Mr. Earnings coming of about 40% year on year. Now what led to this? The dirty trade, which is a crude tanker trade, was flat year on year in the first quarter, which means that demand basically has plateaued.
And while you did not have too much of any addition of fleet, it still made the markets a little softer. You would remember that last year we had the impact of the Red Sea closure which happened in December 23rd. So those effects lingered through the first half of calendar 24 and that’s why the rates were exceptionally high in Q1 of FY25, which is normally Q1 is normally not a strong quarter for tankers and therefore that was an unusual quarter and we came off from those numbers. The product trade also was flat year on year, but mainly the long haul trade which is from east to west.
Eastern refineries exporting to the European Union remained flat and therefore you had weak demand while you had the fleet growing by about 3% again therefore the rates remained quite poor. Asset prices remain flat during the quarter, maybe about 5% down for older product tankers. But on a year on year basis we are talking of 30% plus drops in product tanker values, especially at the slightly older end. The order books have been building up they the last couple of years and still currently at 12% and 20% for crude and product tankers respectively. Coming to tribulk we had a slightly weaker quarter than the corresponding quarter in both the Capes and the subcapes and basically we have the coal trade declining.
That was a major, major reason for the weak dry bulk trade demand and therefore rates. Iron ore trade picked up slightly but that wasn’t enough to offset the global green trade decline which affects the smaller vessels more. That’s the subcapes. And Bauxite continued its strength through the first quarter and that grew 19% year on year. The bulk carrier fleet year on year grew about 3% and the order book still remains only at about 10 to 11% of the fleet LPG. Our four ships of course are on the time charter market earnings were down but still at pretty strong levels.
So we are still looking at $40,000 a day on the spot market. The trade grew and this is one trade that has been growing very strongly. But you also have the fleet growing and you have a very, very significant order book at 30%. Looking at fleet supply, as I mentioned, the order book hit the bottom in 2023 or so for tankers and it’s been picking up since then. So you’re now at 20% for product tankers and 12% for crude tankers. Looking at scrapping of course with these earnings and the earnings even in tribulk have been pretty decent.
It more than covers operating expenses and even if you have to do a dry dock in that year and therefore the scrapping has been very minimal and you can see that in the numbers for the last four or five years we seen basically no scrapping at all. Looking at asset prices, they’ve been as I mentioned, they’ve been sort of range bound, a little bit of movement in the last three months, maybe a 5% up to a 5% drop in product tankers and bulk carriers. For the slightly older and smaller vessels coming to the oilfield services business, we have the standard data and we have our rigs.
All of them have got contracts which is what we had reported in the last quarter. Two of our rigs, that’s the Chetna and the Chaya have got short term contracts, a four month contract and a seven month contract, both of which will start after the monsoon. So we are talking of October, November, December and they will do the short term contracts. In India we have got another rig coming off contract, that’s a Chitra, coming off contract around December. She’s already landed the next three year contract and after doing the work between the contracts she’ll go back onto a new contract.
Currently the Chetna and the Chaya are waiting for their contracts to start. We have a very small standby rate on the Chetna and we are idling and not receiving any payment for the Chaya on the vessels front. All our vessels are more or less fixed through through the year. Out of our 19 vessels four are operating in the spot market on short contracts. And these are the most capable vessels which we have decided to operate on the spot market or on short term contracts. And those vessels will continue to operate typically on the spot market unless we get a contract which we believe compensates us at a reasonable level.
So we have the vessels essentially fixed through most of the year and the rigs also fixed, but we will have repricings starting in early 2026. This is the standard slide on debt equity. We have now net cash of about $600 million on a standalone basis in the group we have net cash of about $700 million including the subsidiaries and the share price to consolidated net asset value remains at just about 2/3. So we have a 1/3 discount. And finally something that we’re proud of, which is the foundation which works in the CSR social sector. We have partnered with many NGOs and we have hopefully helped to transform many lives.
Thank you and now we are happy to take questions.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. A request to all the participants to limit their questions to three each per participant and to rejoin the queue for follow up questions. To ask a question, click on the raise hand icon tab available on your toolbar or on the Q and A tab available on your screen screen. Kindly turn on your mic when the operator announces your name. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Mohammed Farouk from Pol Capital.
Please go ahead. Hello, Mr. Mohammed Farooq. Your line is unmuted. Please proceed with your question.
Mohammed Farooq
Can you hear me?
G Shivakumar
Yes, we can hear you.
Mohammed Farooq
Okay, thank you. Good afternoon. Congratulations on the solid set of numbers this quarter. Given the improving spot rates as seen in the dry bulk index, the evolving tariff environment under Trump, and the expected trade rerouting due to both tariffs and ongoing Russian sanctions. How do you see Q2 shaping up? Do you anticipate this next quarter performance to be stronger than Q1 or broadly in line based on these developments?
G Shivakumar
So we can tell you what rates are like today? We don’t make a forecast, but this is what is happening currently. Currently rates are for bulk areas are better than they were in the last quarter. That’s in Q1. For tankers, it’s more or less the same as where it was in the last quarter, maybe marginally higher. So that’s where we are today. Again, to be clear, we have only finished a month of the quarter, so this could easily change. You know the nature of Our markets, there are very big swings, swings that happen on a daily and weekly basis.
So we’ll not hazard a guess as to whether the quarter will be better or worse.
Mohammed Farooq
So what about the demands regarding the trade issues, you know, rerouting because of these tariffs, Is there a demand increase on that because of that?
G Shivakumar
No, not really. There is no trade rerouting because of the tariffs. None of the commodities really are affected by these. On a very marginal basis they may be affected, but there’s no rerouting happening really and no significant rerouting. So if you want to just break it up sector by sector. So the oil trade is not really affected by the tariffs because it’s broadly out of it. If you look at LPG, China has a 10% tariff on exports from the US so we have seen some of that cargo go to US Exports of LPG go to certain other Southeast, other Southeast Asian countries, including India as well. And then we’ve seen China pick up more cargoes from the Middle East. So there’s been some change. On the tan mile basis, there is a slight improvement on this rerouting.
And then on a dry bulk, you know, the US Is not a major contributor to the dry bulk trade except for the grain trade. And we’ve seen, and this happened even in the last time in 2018 or so when Trump had put on those tariffs, we saw some of the grain exports from US get sent instead of China to certain other Southeast Asian countries, but the Latin American countries picked up the volume to send it to China. So we’ve seen some of that change as well. But on an overall basis on the dry bulk trade, it’s not had a very big impact.
Mohammed Farooq
Okay, great sir. Again, as a long term investor, our key objective is wealth creation. The company has posted strong result and maintained robust cash reserves at its valuation, especially in terms of price to earning remains among the lowest in Indian market. Has the board discussed the possibility of a share buyback as a way to unlock value? Also, what other strategic measures are being considered or implemented to enhance the shareholder wealth and improve the market perception of the company’s true value?
G Shivakumar
Yeah. No. There has been no discussion around buyback at the board level. And when we do that, there will be all appropriate disclosures with regard to improving the shareholder value or the stock price. We are not experts in that. All we do is run our business to provide maximum returns from the business and we hope that someday that will be recognized and translate into the appropriate valuation for the stock. But beyond that and we communicate what we are doing as well as transparently as we can. And hopefully that will have an impact sometime.
Mohammed Farooq
Thank you sir. And all the best.
G Shivakumar
Thank you.
operator
Thank you. Our next question comes from the line of Saket Kapoor from Kapoor company. Please go ahead.
Saket Kapoor
Yeah. Namaskar sir.
G Shivakumar
Yeah.
Saket Kapoor
Thank you for this opportunity. Yes sir, you can hear me now.
G Shivakumar
Yes, yes, loud and clear. Thank you sir.
Saket Kapoor
Firstly, in terms of our offshore segment for this quarter, although the revenue has been down Q on Q the profitability has moved up from 82 crores to 126 crores. So what has contributed to these?
G Shivakumar
Yeah, so the main factor is that the. So while the revenue has gone down the contributions of the vessels business and the rig business have been moved in different separate directions. The vessels business has given a much higher contribution in the revenue while the rig business, because two of our rigs are effectively idling, the revenue dropped. Now what has happened because of that is that the rigs when they are idling we bring down the operating expenses to the bare minimum and therefore we save a lot of costs there. That’s what has happened. While for earning the additional revenue in the vessels business we did not need to spend more.
So for the same revenue basically you had lower costs and that’s why we’ve had a better result despite having a very similar revenue number.
Saket Kapoor
Can you provide the split between the vessels and the rig revenue for this quarter and also for the preceding quarter?
G Shivakumar
We don’t give out the numbers. It’s as one segment which is the offshore segment. But I can tell you.
Saket Kapoor
Yeah, please. No, no.
G Shivakumar
Compensated for each other more or less.
Saket Kapoor
So you mentioned that since the rig were idle and there is lower cost attributed to the same the and the vessels revenue and the profitability being higher. So even the lower revenue has compensated for the same. This is what the understanding is.
G Shivakumar
That’s correct.
Saket Kapoor
That’s correct for the rig segment? I think so. ONGC came out with the tender one quarter ago. I think so maybe for four months ago. Wherein the previous previously there were some cancellation also which happened because of the higher charter rate. But the rate at which the the tender happened was way below than the previous rate. I’m just referring to the last rate where it was tendered out in the vicinity of 38,000 to $45,000 whereas the preceding were in upward of 70,000. So what has exactly changed in the in the rig market? If you could just give us some more color how the rig charter rates have moved and also the capex outlined by the PSU have they curled their capex and because of this, our asset being setting idle, we have lowered the rates just to offer not to keep the assets idle.
What’s the thought process?
G Shivakumar
And this question had come up in the last quarter’s call as well and we had addressed it there. But let me give you the short summary of it. The market was on an uptrend from 2021 all the way up to end of 23. In end of 23 was when we had the pricing where we were around $80,000 a day. I think it probably went up close to $90,000 a day. What happened in early 2024 is that Saudi Aramco, which is the largest hirer of rigs customer for jackup rigs, suspended contracts for between 20 and 25 rigs in April May 2024 that resulted in a change in the market and therefore the market sentiment went down and rates went down as well.
In our case we decided that we would like to have the employment while two rigs have got short term employment, the third rig we decided that we would like to take that contract and keep the rig employed even though the rates were likely to be much lower and that’s why we dropped the price and took that contract. We wanted to avoid idling on that rail so we decided it’s better to take a low rate which gives an EBITDA contribution rather than keep the rate id.
Saket Kapoor
So currently what’s the status in terms of the current charter rates and when is the if are there further contracts for deployment of risk pending wherein we will be participating with the two idle ones or what the updates are?
G Shivakumar
Currently the two idle rigs have got received contracts short term contracts. They are currently not working. However, both of the rigs have received contracts one for four months and one for seven months. Both of them will go onto those contracts by the end of 2025 and therefore we do not currently need to look for work for them. Of course they will come off contract in the first half of 2026. At that time we will require to find some work for them. So currently we are not necessarily marketing any rigs.
Saket Kapoor
And can you give some color on where the charter rates are since the Aramco fiasco or the Aramco providing a lot of supply?
G Shivakumar
You had the correct number. You are in the ballpark for the ONGC rates.
Saket Kapoor
Okay and last yeah sorry sir, I interrupted you.
G Shivakumar
What were you telling Mentioned a number of below $40,000. That’s where that was the correct range of the contract.
Saket Kapoor
And lastly sir, from the government PSU capex front any any Understanding that we get in terms of the curtainment or.
G Shivakumar
Yeah, this is not. Yeah, you had asked this question as well. This is not public information. We don’t know what’s happening there. All we know is that some contract tenders have got cancelled. So actually the number of rigs with the largest customer in India have got reduced. But we don’t know what their long term plans are really or what are the plans for the next six to 12 months. Whether they’re going to come out with more tenders or not.
Saket Kapoor
Right, sir. And currently sir, what portion of our business is from the government and how much is private?
G Shivakumar
Sorry, you mean on the offshore business.
Saket Kapoor
Or the total piece are also.
G Shivakumar
And offshore also in the shipping business. It’s a small part. When you say government, I’m including PSUs. It’s a small part of the business. Maybe less than 15% of our fleet is engaged in PSU business. In shipping and in the offshore business. The rigs, two rigs are operating with the largest customer, who is the psu. And one of the short term contracts is also with the psu. The vessels of the. Of the vessels which are operating in India, a majority are operating with the end client as ongc. Whether directly or indirectly, they are working with ongc.
Saket Kapoor
Okay, sir. And lastly sir, on the shipping aspect, what. How do we book our order booking? If investors look at the visibility part standing today in the month of July, what is the visibility we have in terms of the total fleet? How much, what. What kind of revenue have we booked, the charter rates and, and how do we go on developing the building the.
G Shivakumar
Order book going ahead, how much is the spot is we have maybe 20% of our fleet operating on charters. Less than 20% we are operating on charters. Typically these are one to two year charters and we take calls on this depending on the view we are taking on the market. If we get offered a good rate for a time charter, we would take it. Our default mode would be to operate in the spot market.
Saket Kapoor
And what are the conditions? Current market conditions?
G Shivakumar
Current market conditions. They are the same as what they were in the previous quarter. Dry bulk slightly stronger and tankers more or less the same.
Saket Kapoor
Okay. And all the raw. Questions. Thank you. I will do that sir.
G Shivakumar
Thank you.
operator
Ladies and gentle gentlemen, request the participants to limit their questions to three each per participant and rejoin the queue for follow up questions. Our next question comes from the line of Isa Shah from Mirzar Enterprise. Please go ahead.
Unidentified Participant
Am I audible, sir?
G Shivakumar
Yes.
Unidentified Participant
Okay. Good afternoon sir. So I just have one question I wanted to understand how is the shipping cycle across all our assets?
G Shivakumar
Okay.
Unidentified Participant
In face of the tariffs that has recently been going on.
G Shivakumar
Yeah. So the shipping markets. So spot markets have been reasonably strong for tankers though they are down from year ago, Q1 over Q1, but they’re still historically at fairly strong levels. Dry bulk are maybe around market averages. At current spot rates they’re probably above long term averages as well. And LPG of course are very, very high in the long term historical context. So that’s where we are in rates compared to the long term numbers that we’ve seen.
Unidentified Participant
Okay, so how do you see the cycle? Is it like do we see it going upwards or how do we see the cycle now?
G Shivakumar
The market’s been strong, it’s tough to see what can drive it upwards. For the market to get stronger you need either demand, end user demand to go up or you need some logistical disruption which makes the fleet less efficient. On the disruption one never knows what can happen. But on the demand side it doesn’t appear that economies are doing very well. So there’s not going to be a big demand upside really whether it’s in oil or dry commodities. So the general outlook would be either you hold at this level or it gets weaker rather than having any upswing from here.
Then of course you could have say seasonal improvements in oil demand, etc. But otherwise the cycle is already pretty strong.
Unidentified Participant
Okay. Okay. Thank you so much sir.
G Shivakumar
Thank you.
operator
Thank you. Our next question comes from the line of Himanshu Upadhya from Bugle Rock pms. Please go ahead.
Himanshu Upadhyay
Hello, good afternoon. Am I?
G Shivakumar
Yes.
Himanshu Upadhyay
Hi. So my first question was on regarding this loan we are giving from Great Eastern Shipping to Gil at 450 crores. Okay. When we look at the consolidated balance numbers, what we give in the presentation and standalone the difference between the net cash is around 1000 today crores. Okay. So and one of the largest subsidiary or working subsidiary for is for us is Gil. So would this majority of 1000 crore would be in G only or it is across various other subsidiaries and hence we have to we are giving this loan or there some Capex plan on Gil and hence.
G Shivakumar
I got the question, there’s no capex plan. About 50 to 60% of the cash that’s there is sitting in GIL itself. The issue that is there is that the loan is in India and a lot of the cash is in the overseas subsidiaries. There is some inefficiency in bringing the cash from the subsidiaries as of now and therefore it was felt better to do this transaction.
Himanshu Upadhyay
Okay, okay. And one more question just to understand your thoughts. Nearly one year back and one and a half years back, it seemed we were much more eager to have a replacement of older ships with early newer ships.
G Shivakumar
Okay.
Himanshu Upadhyay
And as of today, when we see the product tankers and rival which is 5 to 10 years each is down by few 15% or 10 to 15 or whatever those percentages, that eagerness seems to be much lesser. Okay. To renew the fleet though, we have done one transition, but it is. After. A very long period of time. So any thoughts on that? Why? At the one year back it seems we were much more eager to replace the things and right now we are going much slower when the prices are down nearly 15%.
G Shivakumar
So Himanshu, there has been no change in strategy on that front. We are as eager as earlier to continue with the switch strategy. You should just keep in mind that if asset values have come down 20, 30%, basically they come out for the ships we are going to buy and the ships are going to replace them. With the Delta. The extra capital that you will end up investing to conduct the switch strategy broadly remains the same. So there has been no change of thought on that. It’s just that we also look at when the ships are reaching those age profiles at which to conduct the switch, that’s all.
But per se, you still find the markets to be expensive and you are not thinking about expanding the fleet. The focus is just replacement. Currently yes, at the moment it is to replace.
Himanshu Upadhyay
And one more thing, on the offshore side you stated that the besides jackup the other segment has done pretty pretty well and hence the numbers are much better. Is there any dry docking which is pending because before to give the before the checkup goes for these two orders, even if it is short term or you think this is the status quo for now for next. Can you just explain the last statement again, could not hear it clearly. No, I was saying that we had stated that the offshore segment did well because of vessels which did pretty much better. I was just asking that is there any dry docking expenses pending which before the jacka pricks go for tenders.
G Shivakumar
Before. Every jackup tender that we deploy our rigs, there is some amount of work that gets done on the rigs. But that’s a part and parcel of the business that a certain amount of expenses you will expect in every year. Of course in this year, like Shiv had mentioned previously, we’ve got three rigs going on to contract. There are years where you know if all the rigs are fixed out, then there may be you know, you may not have a rig coming off contracting repriced, but generally before the rig goes on to contact, there’s always a little bit of expenses that we have to incur.
Unidentified Participant
Yeah.
G Shivakumar
If you’re looking for whether there’s lumpy expenditure. Yes, there is lumpy expenditure. When a new contract. Yes, when you go on to a. New contract, we expect that in the third and fourth quarter.
Unidentified Participant
Yeah. So I was just trying to understand. There is a larger. On dry docking which is pending.
G Shivakumar
Yeah. Yes. Separation. Yeah. It’s not quite dried up with preparation for this contract.
Unidentified Participant
And on some of our ships are Chinese built. Okay, how has that settlement happened? Because many of the ships are generally trading between US and Europe and all those routes. So any port penalties or all those. And is the market settled or. There are still some disruptions happening for the Chinese made ships which end up going to usa. So we have very few Chinese ships, four or five. But you should also keep in mind that you know, when the ustr, which is these, let’s call it a tad for a tax which came on these Chinese built or Chinese owned ships, eventually they diluted the rules quite a bit. So if you, you know, if you’re trading within thousand nautical miles of us they exempted. If you’re below 81,000, you’re exempted. So we’ve done a calculation to see what is the impact of the Chinese owned Chinese building. And it only comes to about a few percentage meaning like 2% or 3% of the entire world trade that would get liable for this tax or tariff.
And that’s too minor to have a big impact because it’s very easy for ship owners to reroute those vessels and not put those vessels on the US Trade because the tariff that they have discussed for those 2% of the fleet is prohibitive to call us. But you know, the market has also already taken it into account and you know there’s been no real impact on.
G Shivakumar
Us and it’s not going to come into force as well. Yes, but you know it will not.
Unidentified Speaker
Yeah.
Unidentified Participant
And how significant can these be? Because in what we understand even in you EU there are. They are increasing the number of sanctioned ships. So. And any impact of that and what U. S. Chinese tariff Chinese made ships higher. Terry. And the sanctions also what is for.
G Shivakumar
Russian we saw some sanctions, you know, coming out of Biden’s administration at the end of January. We saw temporarily, you know, there was a sanction on, you know, in China there is a very big refining region called Shandong which takes a lot of These ships. And temporarily in the month of February, maybe early part of March, there was a bit of uncertainty in the market of how these ships will fly. But some of the market finds a way to rebalance. We’ve seen that the data that we can track, it shows that the exports out of Russia have not really changed and they somehow find a way to eventually reach their destinations.
We have not seen any materially impacted impact on these sanctions. Although, you know, recently there’s been an EU sanction, you know, where they have. It’s not coming to effect yet, but they have lowered the price cap, you know, and they had, they basically said that if the price is below $60, you can, you know, international, legitimate owners can lift cargo from Russia and transport them. And a lot of Greek owners were doing that. So maybe 30, 40% of the Russian exports were carried on legitimate trades, non sanctioned trade. Now that they have put in a cap of $45, which is much lower, we’ll have to see how that pans out because that’s a big change that’s coming into effect in the month of September right now.
They’ve given some time for the previous contracts to wind down. We’ll have to see how that comes up because that’s a big change. That’s the first big change on the pricing broadly from the start of the war, which was three years ago.
Unidentified Participant
Okay, thank you, thank you, thank you.
operator
Our next question comes from the line of Karan Battalia from Maiq Capital. Please go ahead.
Karan Battalia
Hello? Oh yeah, good evening, sir. So congratulations on acquiring the commsarmax vessel. So the company is engaged in substantial. Divestment of crude carriers over the period. So what’s the major reason for this? If you could just throw some light on it.
Unidentified Speaker
Sorry, Crude carriers over the period. We’ve reduced the crude carriers. What is the major reason?
G Shivakumar
Ah, so basically we had a few ships which hit an overage limit and therefore they had to exit the fleet. This happened a few years ago. At that point in time, then the Russian war took place, asset values rose and we did not basically switch those asset classes out. So they just naturally ended their tradable life. There was no conscious call to reduce exposure to the crude segment. Ideally, we would like to increase the number of crude tankers again.
Karan Battalia
Yeah, correct, sir. So actually my question was, I mean, I understand the reason of selling it off, but there was no replacement for that, you know, to acquire new vessels. So is the demand lacking or like, is it because of the it geopolitical tensions?
G Shivakumar
Like what’s the intention is actually to increase the crude fleet again. So what happened was, and another participant asked us on this call on our switching strategy. So what happened is in 2022, once the Russian war took place, of course the market increased substantially along with it. Asset prices increased as well. Some of those crew tankers exited in the early part of that cycle. The Russian war of course, has lasted a much longer period than we thought. We then had the Red Sea disruption which kept the markets higher. Sometime in the end of Cal23, we decided that because we had lost, you know, we had peaked at 48, 49 ships some time ago.
We were at about 41, 42 ships in the end of 23. At that point in time we decided that not to let the fleet come down in size any further. And so to continue to start a switch strategy and to maintain a certain amount of exposure to the market. It just so happened that we had already lost some of the crew tankers by then. And then since then, we’re just holding ground to whatever free capacity we had at that time. And just to be clear on the switch strategy, the switch strategy according to us works because you are selling an older ship at a high point in the cycle and then reinvesting that into a newer ship at a high point of the cycle.
Now that we don’t have those older ships which have exited the fleet a few years ago, you can’t really switch them because the sailors have been too far back.
Karan Battalia
Got it, sir. So any plans, like is the pricing levels too high for the vessel to buy the ship or maybe we could lease them or like.
G Shivakumar
So we have actually in chartered one of the ships in our subsidiary in Giv City, which is a Service Max tanker, one of the largest crude tankers. So we have done that, but at the moment we’re not looking for any incremental purchases.
Karan Battalia
Got it, sir. Thank you. I’ll get back in. Give.
operator
Thank you ladies and gentlemen. We’ll move on to the text questions. The first text question we have is from the line of Surendra Yadav. And the question is, what’s the rationale for ECB refinancing And Gil, similar arrangement could have it being done during the last refinancing, which I believe was due in Q4FY24. What changed from then to now? Why are we deploying cash at 7.5% ROI when IRR benchmarks are 10 to 15%?
G Shivakumar
So the loan which has been given to the subsidiary is over a period of two and a half years. What we felt now is that the amount of cash which is sitting with credits and shipping is not something that we can deploy within this period. And therefore this is effectively surplus cash at least for the next two and a half years. And we decided to do it now to measure this versus the ship irr which is over a much longer period of time would not be correct.
operator
Thank you. Our next text question comes from the line of Amit Khetan from Labanum Capital. And the question is a shipping segment has seen very low normalized opex of 270 crore this quarter compared to last few quarters run rate of 300 to 330 crore. Is this just a function of operating a lower number of ships or is there some one off element here?
G Shivakumar
Yeah, there is one. Both of those are factors. One is a lower number of ships that we are operating as compared to we have a 10% lower fleet versus Q1 of last year. The other thing is that we have actually had some reduction in cost. We have been focused on seeing how we can do some cost reductions. So that’s one minor thing. What has also happened is that Q1 we had significantly higher costs in Q4. That’s the immediate preceding quarter as a result of which Q1 expenditure was less. So that’s the other impact that we had.
So to sum it up one is lower number of ships. Second is actually lower cost per day per ship as a result of some efforts that we put in.
operator
Thank you. Our next question comes from the line of Zahara Sherry and the question is with the Rio Tintos Simando iron ore mine expected to start from production in November this year, is it true that up to 170 dedicated cap sized vessels will be required for shipments to China? Can the dry bulk market absorb this new new demand? If not, what could be the shortfall and could it impact rates?
G Shivakumar
I’m not sure whether it will require so many Cape size vessels but yes, this true rerouting. Yeah it’s a real but the mine is coming up. You should also keep in mind there is actually a lot of export also coming from guinea in West Africa on bauxite that will also absorb a lot of Cape size vessels. That’s actually a longer haul. So you’re going to get a lot of demand for Cape sizes from there. But you know you do have a certain amount of fleet growth, you know and you know iron ore trade let’s say at least up till now this year has been negative.
So sometimes there’s a rebalancing. So whether there is going to be many, I think the Question is leading on whether there’s going to be some massive shortfall and a massive demand for Cape sizes. It’s difficult to predict the market but this I think seems a bit of a stretch.
operator
Thank you. Our next text question comes from the line of Kuldeep Singh and investor and the question is what will be the catalyst of offshore utilization and rates? Will it be an increase in oil prices or more countries planning for exploration investment in their respective geography to avoid energy dependence?
G Shivakumar
Yes, this is true. The utilization rates for the offshore rigs and the vessels have come off since early part of Cal24 but they still remain decently strong. And yes, you know eventually it just boils down to the oil companies confidence in their drilling activities.
operator
Thank you. We have a next question from the line of Surendra Yadav and the question is in continuation with previous question of Gil ECB refinery. Can shareholders expect higher dividends payouts in case of similar markets given. That the. Management feels deployment of capex is constrained?
G Shivakumar
Yeah. So you could see that the dividend payout which was running at around the 20% mark in the last three years has already gone up in this quarter at 27% payout ratio. So that’s one indicator. We are not saying that this is a change which has been done permanently but there has been an increase in the dividend payout ratio. Again it will be a function of whether we feel we can deploy the capital or not. Remember I mentioned that this money comes back to Grady Stern within the next two and a half years and therefore it is still available for deployment in capex.
So it’s not that the money has gone permanently from Great Eastern Shipping so it will be coming back. All we felt was that we don’t require it for the next two and a half years because we already have a significant amount of capital. So out of the cash balance which is there in Great Eastern Shipping this is the amount that we are talking about is less than 7 or 8%. So it’s a small part of the cash balance of Credit Trans Shipping.
operator
Thank you. We have a follow up question from the line of Mr. Saket Kapoor.
Saket Kapoor
Can you hear me sir?
operator
Yes sir.
Saket Kapoor
Firstly, in terms of the, the profit from sale of ship, what have, what have we outlined currently?
G Shivakumar
Yeah.
Saket Kapoor
In terms of the profitability and the number of ships or the vessels which are up for for sale. And secondly sir, for for investors what should, what should be, what should be penciling in in terms of the revenue profile for us for the current financial year taking into account the. The current business environment and third point sir, you were, you were answering to one of the text question about the capsized vessels requirement not moving up even when there will be, there will be a mine for iron ore from New guinea getting upstream. So can you explain what you were trying to allude to that reply once.
G Shivakumar
Again Let me take that last question first. What we meant was the question said, we said that there would be demand for 170 cape sizes. That seemed a little bit of a stretch. Basically this is unless you have end user demand going up by the same amount of iron ore then that demand cannot happen because then you are just going to have a rerouting which is either you take some Brazilian cargoes, you replace some Brazilian cargoes with cargoes from Africa or you replace some Australian cargoes. So then it’s only on the margin and it will have a significant impact but maybe not a full 170 ships.
That was the only point. It will have a positive impact. Just we don’t know how much that positive impact will be.
Saket Kapoor
You were telling that it depends sir, one second. It depend that how the ramp up is there and how much demand is there for the, for the mineral from the, for the steel producing nation. That depends on how the demand will shape up. This is what you are trying to allude to.
G Shivakumar
That is correct. From the importers. So we have looked at it from the exporter point of view. Yes, the cargo is available. The question is whether the importer wants that much more cargo. So that’s where you have it. That is there an end user demand for that imr. So it’s just that. That’s all your other question was on profit on sale. We don’t plan for profit on sale, we don’t budget for it. If we see an opportunity to do a good transaction of a sale and a profit happens from that then so be it. We are not planning and budgeting saying that I want to take X crores of profit on sale in this year or this quarter.
So that is something that we don’t do. And finally on the revenue profile for this year as I have mentioned before, the market is extremely volatile and 80% of our capacity is open to the spot market and therefore it is very difficult to predict what earnings could be. And that’s why we don’t do earnings forecasts at all.
Saket Kapoor
And sir, correct me here, there is one college tax that is there for the other geographies that is not there for our institution or for the taxation part for the shipping industries. We are at par with the international.
G Shivakumar
Fleet on income tax from profit from operating ships, that’s on freight and charter income of ships. We have something called tonnage tax which is very common across the world. So that is more or less at par. We may be very marginally higher than some jurisdictions which have zero tax, but we are more or less on par with regard to shipping income, that is profit from earning freight or charter hire from running ships.
Saket Kapoor
Right, sir, and if I may add just last point, how are the consumption of spare spares and stores and the fuel part of the story? How are those line items, the cost shaping up and what. How are we aligned to mitigate any adverse impact of the same? Sir, if you take the Q1Q number for the spares and stores, that has gone down significantly. So what does this lowering of spares and stores explains in terms of a Q on Q basis?
G Shivakumar
Just on that, I would not read too much into it. One is it might be just on account of having fewer ships. The second thing is we expense these spares costs when the spares reach the ship. It could just happen that we were not able to deliver the spares on board the ship during the quarter and therefore it got postponed to maybe July or August. So don’t read too much into it. These things can happen just due to logistical reasons. Yes, we have made an attempt to bring down the cost of running the ships. But don’t read too much into one quarter’s data.
Saket Kapoor
What is then the key key raw material for running that is the fuel only, I think so that is needed. So for that we have long term.
G Shivakumar
No, in a void charter, fuel is. Fuel is the largest cost. But that’s only for vessels which are on void charter, which is a very small proportion of our fleet. The rest of the vessels typically are on contracts in which we don’t take the fuel cost on our account. So our exposure to fuel price changes directly. Direct exposure to fuel price changes is very minimal.
Saket Kapoor
So lastly to conclude, the fixed cost component for running the entire fleet is. And what are the variable cost?
G Shivakumar
So the largest fixed cost component for running a ship is crew expenses, which works out to around $3,000 a day. So that’s the largest three to $3,500 a day. That’s the largest fixed cost expense which we have to. All variables. Others are all smaller costs. So you might have maintenance costs which may, including lots of things may work out about 2,000. So those are all much smaller costs. Again, in the context of the revenues, these are pretty small and these are fixed costs and they don’t change that much on a year to year basis.
Saket Kapoor
Thank you. Thank you sir for elaborating all the answers. Hope to join again.
G Shivakumar
Thank you.
Saket Kapoor
Thank you.
operator
Thank you. We have X questions and the next text question comes from the line of Gaurav Ja and the question is what is GE shipping dividend policy and how is it, how it is calculated?
G Shivakumar
Yeah. So the dividend, when we consider the dividend the dividend policy says that we will take into account whatever other capex cap capital requirements may be there for the business while calculating the amount of dividend that can be paid. So when the board takes has a discussion on how much dividend is to be paid we also say how much would we like to retain for the modernizing of the fleet for the expansion of the fleet. So that’s how it is calculated.
operator
Thank you. Our next text question is from Surendra Yadav and the question is for Q1, what was the spot and time charter split for the three shipping segments excluding gas? The Israel Iran conflict in May June led to jump in rates of sews max and LR2s. Was management able to lock in some contracts during the heightened spot rates?
G Shivakumar
Yeah, so the spot exposure in crude tankers is 100%. Spot exposure for dry bulk is probably around 80 to 90%. And when I say spot exposure that means contracts of less than six months and for product anchors is probably around 85% or sorry for product anchors is about 70% spot exposure. So we did not lock in any contracts. That spike happened for a very short period and we did not lock in any contracts at the time. It was a very short period of spike.
operator
Thank you ladies and gentlemen. That was the last question for today. I now hand the conference over to Ms. Anjali Kumar, head of Corporate communications for closing comments.
Unidentified Speaker
Thank you everyone for joining in to our call today and for engaging with all your deep dive questions. The transcript of this call will be on our website and all of you are free to reach out to our IR team as well and we’ll be happy to have a meeting or a call with you. Thank you so much. Thank you everyone.
operator
Thank you on behalf of the Great Eastern Shipping. That concludes this conference. Thank you for joining us and you may now disconnect your lines.