Great Eastern Shipping Company Ltd (NSE:GESHIP)Q1 FY23 Earnings Concall dated Aug. 01, 2022
Corporate Participants:
G Shivakumar — Executive Director & Chief Financial Officer
Bharat K Sheth — Deputy Chairman & Managing Director
Analysts:
Amit Khetan — Laburnum Capital — Analyst
Abhishek Nigam — B&K Securities — Analyst
Himanshu Upadhyay — O3 Capital — Analyst
Vishal Agarwal — Leo Capital — Analyst
Unidentified Participant — — Analyst
Archan Pathak — Centra Advisors — Analyst
Rajesh Khattar — Individual Investor — Analyst
Jayesh Gandhi — Harshad H Gandhi Securities — Analyst
Presentation:
Operator
Good evening, ladies and gentlemen, thank you for standing by. Welcome to GE Shipping Earnings Call on the Declaration of its Financial Results for the Quarter Ended June 30, 2022. At this moment, all participants are in the listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions]
I now hand over the conference to Mr. Shivakumar, Executive Director and CFO at the Great Eastern Shipping Company Limited to start the proceedings. Thank you and over to you, sir.
G Shivakumar — Executive Director & Chief Financial Officer
Thank you. Good afternoon, everyone, and welcome to the conference call to discuss the results for Q1 FY ’22-’23. Let’s run through the presentation first with some basic information, and then, of course, we are very happy to a lively discussion with all of you with your Q&A.
First of all forward-looking statements. We don’t know what the markets are likely to be like, we are not giving guidance on market, so, please take it in that way. So let’s look at the results for Q1 FY ’23, compared to last year, which is the corresponding quarter and the immediate preceding quarter, our profitability has been much, much higher and we can see that in — when we look at the TCYs, we’ll also look at the reasons for why the market, why we made so much more profit than the previous quarters. So let’s move forward. I’m sure you would have had a chance to look at these numbers only.
Normalized, you would have the numbers — you would have seen the numbers, which are there in our presentation. So they were a little better than our reported numbers, still a multiple of what we did in the same quarter in the previous year. Important and significant factor is the change in the net asset value. In March, so that’s just a quarter ago, our net asset value of about 617 on a standalone basis, 617 or 618, it has now gone up to 732, we’ll also look at the journey of how it got there within that one quarter.
Key financial ratios, EPS on a normalized basis, so the EPS is INR32 on a standalone basis and INR35 on a consolidated basis most important and we keep saying this over and over again, shipping is a very strong cash flow business, so in profitable years it produces a huge amount of cash flow. So we have in the last quarter, earned INR48 cash profit per share. Management’s commentary, this is something that we thought we should put new just to give the highlights and the main takeaways. So all four sectors have done very well in Q1 and you will see that in the TCY — you would have seen it in the TCYs as well that we earned. And having a large part of our fleet in the spot market, which helped us to take advantage of the strength in the markets and therefore earned superior TCYs.
Strong cash flows on the business, as I already mentioned, and coupled with an increase in net asset values, so ship prices have gone up significantly during the quarter, resulted in a significant increase in net asset value. Long period of under-investment in the oil fields in oil and gas production seems to have caught up in the oil market and there’s much more activity coming up in certain areas and that’s boosting demand for rigs and vessels. This makes us believe that we are possibly past the worst of the offshore market, but let’s see how it goes in the next year or two.
Importantly, we must recognize that there are recessionary pressures building up, thanks to the increase in inflation and central banks moving to increase interest rates and the impact of this is quite difficult to assess as we stand today. Looking at the time charter, this is what has driven our performance and we have rarely seen this kind of performance where all ship categories have earned more than $25,000 per day on average during the quarter. This includes whatever part of the fleet was on time charter or on the spot market. So, across the board, all four sectors have done in excess of $25,000 per day in the last quarter. And you can see how it compares to the previous quarter, which is Q4, FY ’22 and Q1, FY Q1 ’22 which is the corresponding quarter in the previous year. And huge performance has come from the crude and product carriers which have doubled or more their earnings of the previous periods.
Looking at what led to the changes in standalone net asset value, we had 618 going to 732, INR41 of that change came from the cash profit per share, INR79 came from the increase in fleet value this also includes the impact of the depreciation of the rupee versus the dollar as we have mentioned many times, though this does not come into our P&L, our assets are all priced in dollars and our earnings also are in dollars. When the rupee depreciates our assets move up in value in rupee terms and that’s part of the impact which has gone in here in the fleet value. Then of course we paid out a dividend of INR5.40 in the previous quarter and that’s reduced the NAV to that extent.
This is the highest standalone NAV since our inception, and over the last five years, this has moved at a CAGR of 16%, again very high numbers and we are not saying that this is something which is going to continue forever, but it’s just the performance, which has happened over this period. It’s also a testament to the way that we have done investments over this period.
Quick word on the buyback, we completed the buyback or we closed the buyback in early July when the six-month period was completed we managed to do just under 60% of the buyback of the amount that we had targeted for the buyback. So, we spent INR132 crores and we also spent about INR30 crores on the buyback tax, so a total of about INR160 crores to INR163 crores at an average price of 316 plus the tax. So that’s completed now.
Let’s look at what happened to the shipping markets in the last quarter, first the tanker markets, you will see the tables at the bottom, which give the YTD this year and previous year and you can see the few hundred percent change because the markets are very weak and they have turned around largely as a result of the conflict in Europe, which has disrupted the normal functioning of the market, and by bringing in inefficiencies into it. So let’s look at the reasons. So — and what happens when you have these inefficiencies which come into the supply chain is that the rate just take off and when the market is otherwise quite balanced, all it takes is a couple of percentage points change in the demand-supply balance to take rates from $10,000 to $25,000. We have mentioned this in the past and you can see how it played out last year — in the last quarter.
The recovery in the spot earnings in product tankers was mainly due to supply tightness in the Atlantic market, which meant that you needed long haul carriage of refined products from the east to the west, which took up more product tankers, refining margins were very high and therefore refining — refineries were running at close to full capacity, which also results in improved demand for tankers. While the crude and product trade actually remain 4% and 1%, below the pre-COVID levels. So we are still not reached the levels of 2019. We hope that this will gap will get made up soon. Again this is subject to how the macroeconomic spans of whether we enter a recession etc.
Another factor which help the market for the increased congestion, and something called the stationary fleet and again ships waiting for cargos, or possibly waiting and one of the theories which is going around is ships which are waiting to trans-ship Russian oil either crude or refined products and that has tightened the supply of ships. The dry bulk market was keeps performed significantly worse than in the previous year. So, versus 31,000, the got about 21,000. Again, I must clarify these are market averages, these are not our averages, these are market spot averages. So they were significantly worse. While the Supramax is actually did a little bit better than in the previous year, and this has been a feature of the last couple of quarters where the smaller sized vessels have done much better than this Capes sizes.
Again, margin of iron ore and coal movement not being very strong. In fact, iron ore trade declined by 2.5%. coal trade was up about 2%, but on a — from Jan. to June, it’s probably negative. Congestion state elevated during the quarter, it appears that that congestion is easing off slightly in July, which is probably one of the reasons why the market has gone down in the last month or so.
LPG market continued to be quite strong, again 32,000 versus 42,000, so quite strong, our ships, of course, are not on the spot market, our ships are all on time charters. Looking at fleet supply and we’ve spoken about the order book before, we are at very low levels of the order book, we thought we’d put it in graph form to represent how low we are. So the tanker order book is just about 5%, the bulk carrier order book. So when I say tankers, I’m talking about crude and product tankers, the dry bulk order book is about 7%. In all of these, the median order book over the last 20 plus years that we have data for has been between 15% and 20%. So we are very, very low by historical standards.
Asset prices have done well as you would expect, crude and product tankers prices have gone up significantly in the last three to four months. Dry bulk continues to remain strong while LPG also continues to be strong, marginally going up during the quarter. Scrapping has not been happening, there has not been much scrapping. In the first half of the year, we had less than 1% scrapping in crude and product tankers, again markets have been reasonably strong, so for crude and product tankers, so no reason to rush into scrapping, and dry bulk, of course, the market was very strong through the period, so very little scrapping has happened.
Coming to the offshore market, this is standard data. The utilization, global utilization of jackups has gone up to just about 70% now. So we’re starting to get into tightening kind of situation. We have quite a few rigs which are cold stacked for more than three years, which is 10% of the fleet that possibly may not come back into the market that’s something for us to see as the market strengthens. We have seen lots of new inquiries for contracts, lots of rigs changing hands especially jackup rigs for contracts in the Middle East between Saudi Aramco and Abu Dhabi have been pulling in many more rigs. We’ve seen asset prices for rigs move up 50%, 70% sometimes even close to a 100% over the last six months or so.
Even the vessels market, especially for the more advanced vessels in the international markets have improved significantly, we’ve had pricing increases of between in the international markets again, between 40% and 100% over the period between beginning of ’22 and end. And that’s what really makes us believe that the worst is behind us. This I mentioned again, utilizations have come up to — global utilizations have come up to about 70% for jackups, just under 70%.
What is our situation, we have no rigs coming up for pricing till middle of next year. So the rig comes off contract in the middle of next year, that’s calendar ’23. However, the pricing of this rig will happen sometime in the next six months, hopefully, there will be tenders out, we will bid into those standards and hopefully we will be able to price that rig and get that contract. Apart from that we have six vessels coming up for repricing in the rest of FY ’23. Again this is a Slide that we show all the time, so we levered up, we have levered down now, we’re down to about as of June about $75 million in net debt, now we are even lower numbers and we are in a position to do capex at the right prices. Our share price to consolidated NAV, this is as of Friday. So we are still at about 0.6 price to NAV.
Initiatives on environment, these other initiatives we have mentioned in the past, the first one is that we have reduced our annual emissions by about 40,000 tonnes between FY ’19 and FY ’22 by investing in various energy saving technologies, you can’t do much to a ship because it’s the same ship, so you can only improve on the margin by maybe 2% to 6%. This saving we are talking about is overall about 4% for the fleet, we tried to fit various energy saving devices onto our vessels, so that we can save on fuel consumption and therefore reduce our carbon emissions. So that’s a constant endeavor that we do, we use the best quality of paint to ensure that friction when the ship is sailing is minimized. We’re always looking at new things that we can do to reduce the fuel consumption.
Finally, yeah, this is the story of Great Eastern Shipping, which is in our coffee table book, the picture on the left is our first office and but this is our current office, you can read our story of the last seven decades in the coffee table book which is on our website, and we are very proud to share that with you.
That brings me to the end of this presentation. And now we are very happy to take questions. Mr. Bharat Sheth, who is Deputy Chairman and Managing Director is also here and we’ll be happy to take your questions.
Questions and Answers:
Operator
Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Naman Bhansali from Perpetuity Ventures. Please go ahead.
Naman Bhansali — Perpetuity Ventures — Analyst
Yes. Congratulations on a great set of numbers. My first question is that, we’ve seen a constantly improving NAV for GE Shipping, significant part of it comes from high asset prices, so what is the sustainable number for NAV if you assume that the asset prices fall?
G Shivakumar — Executive Director & Chief Financial Officer
So, there is no sustainable number for NAV, so it depends on the extent of the asset price fall, so I don’t have a forecast that we can do for asset prices really. So, I mean, for every — so let’s take a sort of thumb rule, the fleet value, the value of the shipping fleet is about $1.1 billion, for every 10% drop in that value you would have a INR50 to INR55 drop in the net asset value. But we can’t forecast what the asset values could be.
Naman Bhansali — Perpetuity Ventures — Analyst
Okay. Fair enough. And my next question is, as you see good terms for offshore going forward, [Technical Issues] the existing number of rigs and vessels?
G Shivakumar — Executive Director & Chief Financial Officer
Yeah. We are not planning to allocate more capital from Great Eastern Shipping in that segment. If that company itself is able to generate the surpluses required to grow then it can do so, they are free to do so, and they’ve always been free to do so. But that it’s unlikely that there will be capital allocated from Great Eastern as of now.
Naman Bhansali — Perpetuity Ventures — Analyst
Okay. Understood. And my final question is that as you’re seeing that the interest rates are rising all over, in the phase of discussion. And, so, you have mentioned in your management commentary that it’s difficult to assess still from past experiences if you can just throw some light on how that impacts the shipping industry, the recession [Technical Issues]? Mr. Sheth, would you want to take that, if you’re able to hear the question, otherwise I can take it.
Bharat K Sheth — Deputy Chairman & Managing Director
I can’t hear. What is the question? Let somebody repeat it to me.
G Shivakumar — Executive Director & Chief Financial Officer
Yeah. The question was what has happened in the past when there has been a recession? So do we have an experience of what has happened to the shipping industry in the past when there has been a recession?
Bharat K Sheth — Deputy Chairman & Managing Director
So recessions, historically, again, it depends on the length of the recession, the intensity of the recession, etc. Very deep recessions have obviously not been good for the industry, because it leads to demand challenge. But again, shipping business that is determined often by events. So we have seen, you could get a general recessionary times — there some cross talk as well.
G Shivakumar — Executive Director & Chief Financial Officer
Yeah. Please go ahead.
Operator
Sir, you may please proceed.
Bharat K Sheth — Deputy Chairman & Managing Director
Yeah. So we have seen that because shipping is more determined by certain events, which take place, it has so happened that in spite of recession that times the markets have done well, but obviously with the macro headlines is that recessions can’t be on a sustained basis, if it’s a deep recession and it is sustained for multiple months or years, obviously that can be good for the industry.
Naman Bhansali — Perpetuity Ventures — Analyst
Okay, sir. That’s it from my end.
Operator
Thank you. The next question is from the line of Rajesh Khattar, an Individual Investor. Please go ahead. Mr. Rajesh Khattar, maybe request you to unmute your audio and please proceed with your question. As there is no response from the current participant, we move to the next question from the line of Amit Khetan from Laburnum Capital. Please go ahead.
Amit Khetan — Laburnum Capital — Analyst
Hi, thank you for the opportunity and congratulations on a very good set of numbers. Based on what you’re seeing in the markets today, where do you see the best opportunities to deploy capital and given that we are likely to have a problem of plenty when it comes to cash. How are we thinking about capital allocation?
G Shivakumar — Executive Director & Chief Financial Officer
So, at this moment, asset values continue to remain elevated, our current — on basis current prices we are unlikely to almost certainly we will not be in the market to acquire any assets and as we build cash, what we’re really building is firepower more and more firepower as and when the asset values present what we think would be a better risk reward ratio opportunity. So that’s one use of capital. And the other use of capital as and when we get optionality we would look at buybacks. As you know, currently we can’t reinstate a buyback until August of ’23 and then we will see at that time what are the discounts if any to net asset value, where the net asset value is and then determine whether we should do more of that.
Amit Khetan — Laburnum Capital — Analyst
Understood. My second question was on the offshore segment. So we were earlier reporting something like a INR40 crore, INR50 crore normalized EBITDA. So this quarter this has gone up to something like INR85 crores. Is this a number that should be sustainable, if the markets hold up?
G Shivakumar — Executive Director & Chief Financial Officer
So, we are hoping as I think the CFO just mentioned as repricing takes place on our assets, we have a rig that reprices in the next few months, we have certain offshore supply boats that reprice also in the next few months. And we do believe that we will be in a position to reprice at higher and higher points. So logically, if that were the case and there was no other operational challenge, the answer is yes.
Amit Khetan — Laburnum Capital — Analyst
Got it. Got it. And lastly, how many of our dry bulk and tanker ships would be on time charter currently and have we taken any new time charters in the last quarter?
G Shivakumar — Executive Director & Chief Financial Officer
We have taken some time charter more recently on the tankers, not on dry bulk as the CFO just mentioned some of the tankers are at elevated price earning level, we are doing it cautiously but one of the ways to protect net asset value and to protect on earnings is to take advantage of these high spot earnings. So consequently, we have at these more elevated prices we have begun a gradual process of fixing vessels for up to 12 months. But please do remember that the one-year rates are in backwardation to the spot rates and so we are doing it in a very, very gradual manner, because there’s a big disparity between one year rates and where the spot market is.
And at the same time, just to let you know, we had some vessels which we had fixed at the much lower price points of the market and they come up themselves for repricing. So basically we are balancing. Something comes out from lower levels and something is going in at much higher levels.
Amit Khetan — Laburnum Capital — Analyst
Sure. Sure. But what would be the mix of time versus spot today and is that higher towards time today compared to, say, two years back or so?
G Shivakumar — Executive Director & Chief Financial Officer
No. It is — today, we are on balance still more inclined to spot, but as I said, we will — we keep watching where the one-year rate is. We are not going much beyond one year. So we are not going down two and three years, also partly to do with the age of some of our ships. As you know, we have a fair number of tankers in particular, which are 14, 15 and 16 years of age. They become very challenging to fix for very long periods of time. So there we are fixing for 12 months and we will keep looking at every opportunity that comes, but it’s difficult to give a precise answer as to, we don’t have a policy that we must have an X percentage of our fleet operating in fixed — in the fixed market as it were. So it’s always going to be a function of how we — where the spot market is today? What is the backwardation? Who is the customer? So there are multiple variables that go into our decision making.
Amit Khetan — Laburnum Capital — Analyst
Understood. That’s it from my side, and all the best.
G Shivakumar — Executive Director & Chief Financial Officer
Thank you.
Operator
Thank you. The next question is from the line of Abhishek Nigam from B&K Securities. Please go ahead.
Abhishek Nigam — B&K Securities — Analyst
Yeah. Hi. Thank you so much for the opportunity. Congrats on a very good results. So first question on the dry bulk side, it seems to be an interesting space, limited supply growth maybe, but also risk of recession, slower growth in China. So how are you thinking about this? On balance, are you more positive, or are you slightly mixed outlook there?
G Shivakumar — Executive Director & Chief Financial Officer
So, if you see the data that has been made available from Jan. to July, we have had less total cargo that has been traded in dry bulk as opposed Jan.-July of ’21. Having said that, we have seen that the supply side is obviously very limited. We’ve also seen congestion at times up, it sort of builds up and then it wanes again, and then it builds up again, etc. We’ve seen weather disruptions to which are both good and bad for the markets depending on the duration of the weather disruption. So there are simply too many moving parts to say that the future direction of how the market will behave, it’s obviously come off from the months of May and June, but these things can quickly reverse again. So we are personally not too concerned, we remain predominantly in the spot market as far as dry bulk is concerned.
And I guess another indication of the general confidence in the dry market is that asset values have not really corrected that much in spite of a 20%, 30%, 40% drop in some of the earning levels that has been achieved in the market today with what it was say one, one-and-a-half months ago, two months ago. And I guess that the fact that asset values are holding pretty well, there seems to be a general confidence in the market overall, particularly because the net supply growth is very limited. We also must remember that there are regulations that kick in from end this year, early next year, which may have a consequence of vessels trading at low speeds, which then effectively pulls back the supply of ships. So that is again positive.
You might have read that there is in fact, the first shipment of grain is out from Ukraine and potentially there is 20 million, 30 million tonnes of grain that could possibly be shipped from that area, assuming all goes well, and I believe that if once that full 20 million, 30 million tonnes of cargo come into the market that is also a market positive or freight rate positive. So there are some factors that are positively inclined for the market, some less so, so let’s see how — where the freight rates eventually. There is just simply too much volatility, which will continue.
Abhishek Nigam — B&K Securities — Analyst
Sir, on the offshore side, so your day rates have been locked, but that segment is sort of, it’s kind of seeing some [Technical Issues] on the supply chain side and energy costs and salaries for crew. So how should we think about margins for the offshore segment going forward?
Bharat K Sheth — Deputy Chairman & Managing Director
I think we just mentioned, I think, the CFO, just did mention earlier in this call that the worst seems behind us in the offshore sector and as our assets come up for repricing, we’ve said there is, we’ve got a rig that comes up for repricing within next few months. Although the rate will be effective in the second half of next year, and then we’ve got boats that come up for repricing now and more so in the first half of next year. So as they come up for repricing, we are confident that each repricing will be at a higher point. So, we remain pretty confident at this moment of the market — of that market. Sorry.
Abhishek Nigam — B&K Securities — Analyst
Last question from me, just a bookkeeping question. So your press release mentioned some insurance claim of about INR44 crores. So just to be clear that will flow through in the P&L in the second quarter.
Bharat K Sheth — Deputy Chairman & Managing Director
That’s right.
Abhishek Nigam — B&K Securities — Analyst
Okay. Thank you so much.
Bharat K Sheth — Deputy Chairman & Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Himanshu Upadhyay from O3 Capital. Please go ahead.
Himanshu Upadhyay — O3 Capital — Analyst
Yeah. Hi. Am I audible?
Bharat K Sheth — Deputy Chairman & Managing Director
Yes.
Operator
Yes, sir.
Himanshu Upadhyay — O3 Capital — Analyst
Yeah. So my first question was, when we look at the NAV and try to compare, given the offshore values have increased, okay, but because of buyback and the other things, it is not very clear. Can you tell how much would be the increase in NAV or the value of offshore fleet? Just some understanding on that and what percentage of increase would it have been there on that?
G Shivakumar — Executive Director & Chief Financial Officer
Yeah, let me just take that. So Himanshu, the values have gone up, it stayed within the range that we traditionally get range of values from the broker for the offshore assets because they are not as liquid and they don’t get priced as often as the shipping assets so what has happened is that the values were tending towards the lower end of the range, now they are trending towards the upper end of the range. So for instance, now it is 780 to 830. I would say it just probably earlier it used to be closer to 780, now it is probably closer to 830.
Himanshu Upadhyay — O3 Capital — Analyst
Shiv, what I’m trying to understand is if I take the slide, Q1 FY ’22, the NAV on standalone was 540, so this included the value of ship plus the book value of offshore vessel.
G Shivakumar — Executive Director & Chief Financial Officer
Yeah.
Himanshu Upadhyay — O3 Capital — Analyst
And that side was 567 and 616, so net-net, it was INR26, INR27 to let’s say over the book value, okay, gain from that. Right now it is some 732 and 779, so 49 to 40 yield is there. So, if I take 832, it would be much bigger —
G Shivakumar — Executive Director & Chief Financial Officer
Yeah, I got your question, Himanshu. So it’s not because of asset value increases, it’s because of two things, one is their earnings accrual. So, every dollar of PPI, CBDT accrues to the NAV, right. So the exchange rate change has improved. So it is not because of from a year ago, the prices having changed. The ranges have remained more or less the same including from a year ago.
Himanshu Upadhyay — O3 Capital — Analyst
So it would not be so —
G Shivakumar — Executive Director & Chief Financial Officer
That changes purely due to earnings and to exchange rate difference.
Himanshu Upadhyay — O3 Capital — Analyst
Okay. And one more thing, on the asset side, it means on the offshore side itself, how much would be the approximate change in the drilling and offshore rates, because the number of days have changed in both things.
G Shivakumar — Executive Director & Chief Financial Officer
Yeah, so, last year, [Speech Overlap], yeah.
Himanshu Upadhyay — O3 Capital — Analyst
On the fleet if you have, so let’s say, drilling services reached a change by this much percentage and offshore logistic rates have changed to this much. So just some idea?
G Shivakumar — Executive Director & Chief Financial Officer
You’re talking of — so you’re talking of our rates or you’re talking of the market?
Himanshu Upadhyay — O3 Capital — Analyst
Our rates have changed by how much on drilling services and offshore logistics Y-o-Y.
G Shivakumar — Executive Director & Chief Financial Officer
Okay. Y-o-Y, the big change is that in Q1 of last year, we had two rigs, not, okay, one-and-a-half rigs, one-and-a-half rigs were idled through the quarter, because of change of contract. So, one rig came off contract — sorry, two rigs came off contract, one of them went back on contract at the very end of June, the other rig came off contract in May and went on contract after the months. So that’s the reason between the big jump between Q1 FY ’22 and Q1 FY ’23.
Himanshu Upadhyay — O3 Capital — Analyst
So rates have not materially changed or?
G Shivakumar — Executive Director & Chief Financial Officer
No, rates have gone up, see rates from the bottom of the market have gone up by 60% in, I’m talking of Indian period contracts. So those have gone up. They’ve gone up less than the international market which have gone up probably 100%. But based on the last pricing, these rates have gone up about 60% from the lows of the market. But the main difference between Q1 FY ’22 in Q1 FY ’23 is the volume, which is the number of operating days we had. Last year we had 90 to 2.5 rigs, 90 days into 2.5 rigs, this time we had 90 days into 4 rigs.
Himanshu Upadhyay — O3 Capital — Analyst
And one thing.
G Shivakumar — Executive Director & Chief Financial Officer
Yeah. Okay. And on the, just some thoughts on the market side. Okay. So when we look at the presentation, you have shown the order book being one of the lowest. Okay. And what we also understand is that people are not ready to give so much orders because of change in energy regulations, which can be there by 2030. Okay. And this is what we read in, I may be wrong, but this is what we read that there are lot of changes which are happening in the energy. So can we have a scenario where the order book remains low and the market remains high for two, three years or you think it will mean revert, because new orders will start coming, just some thoughts on that and how do you then play out if the scenario is that because of regulations people will not be ordering too much. So can we have a three to four year good period? And in that case, how do you play the market, I mean, some thoughts on that? I think Mr. Sheth may probably —
Bharat K Sheth — Deputy Chairman & Managing Director
So, well, let me answer, first of all, it is wrong to say that orders have not taken place in at shipyards. Shipyards currently are fully or when I say shipyards, I’m talking about the Tier 1 shipyards, whether it’s Japan, China, Korea, they are all booked until ’25. What has happened is that the bulk of the orders has happened on the container ships as well as on LNG. And because shipyards prefer to take those orders because they are obviously much bigger on a unit basis in terms of value, we are seeing. Hello?
Himanshu Upadhyay — O3 Capital — Analyst
Yeah, yeah.
Bharat K Sheth — Deputy Chairman & Managing Director
Yeah. Can you hear me?
Himanshu Upadhyay — O3 Capital — Analyst
Yeah. We can hear you.
Bharat K Sheth — Deputy Chairman & Managing Director
Okay, sorry. Yeah. So what has happened is the yards have prefer taking orders of the container ships as well as the LNG ships and consequently, there have been significant reduction in ordering on other asset classes like tankers, which includes crude and products as well as dry bulk. So it’s not that people are not ordering ships because solely they’re concerned on technology that is of course as well but predominantly you simply can’t get an order through possibly now till end ’25, maybe even ’26 right, that’s one.
Himanshu Upadhyay — O3 Capital — Analyst
Okay.
Bharat K Sheth — Deputy Chairman & Managing Director
Now if you saw this data of the low order book, the low order book was also the three months ago, it was also the six months ago. It’s not changed, right. So with the low order book that we saw last year, we still had the lowest tanker market of the last 30 years. Right. So the low order book always helps but cannot be a determinant in where the freight rates are going to play out. So what has really happened, and if you see what has happened just between the early part of this calendar year and until we had this big Russia-Ukraine challenge. The rates have just gone up considerably. So it is much more at this moment linked to the trade disruptions that has been caused by the conflict, it has been led a lot more by congestion that is — that has been caused by various infrastructural challenges that terminals are facing globally as opposed to only looking at the supply side of the equation.
So really — and this is what shipping is all about. We saw it happened in ’20 — at the start of the pandemic in 2020 when we all know what happened to the storage of oil and the steep contango that led to and we saw the tanker markets going up to 2 times, 3 times in a very short period of time. And today, whilst it’s not the contango that is playing out, it is the fact that there are just multiple trade disruptions which has caused inefficiency, if that is the right word within shipping and that has led to this big move in markets.
Himanshu Upadhyay — O3 Capital — Analyst
So if the rates remain here, can we expect the order book to start increasing over next one year, means just your thoughts and how do you place the market?
G Shivakumar — Executive Director & Chief Financial Officer
So, I mean at this — let’s say that if the rates remain elevated, eventually people will want to order ships for now. I’m talking about the conventional ships right. So whether it could be crude oil tankers, product tankers dry-bulk, etc. And if people — if the yard says, look, we can give you supply till ’25 or ’26, I think there’ll be some owners who might say, okay, we’ll wait till ’25, ’26 and some may is say, no, there is no point waiting for ’25, ’26. We’ll just buy something in the water today. So again, different people will act differently, some people who definitely need, there are some people who just love a newer fleet in their books or a more modern fleet in their books, they will wait till end ’25-’26 and some will not. So it’s difficult to say what, ours is a very fragmented industry and what each person does and what drives their decision making, difficult for us to forecast.
Himanshu Upadhyay — O3 Capital — Analyst
We held in in-chartering business of the Gulf company which used to run it. So what are they doing right now? Are the in-chartering, they don’t have any assets right now?
G Shivakumar — Executive Director & Chief Financial Officer
No. So, we this last year, I mean, in the current fiscal year, rather, we won a contract to transport crude oil for one of the Indian refiners, it’s a fixed price contract and to service the contract our overseas subsidiary. And of course to take a position in the market we have in-chartered a couple of Aframax tankers and since the time we have in-chartered them, the market has moved up, so hopefully those, we have just two ships for a short period of time. So not, they’ve not been taken for long periods, they’ve just been taken for a short period, but they are in the money.
Himanshu Upadhyay — O3 Capital — Analyst
Yeah. Thank you. For further queries I’ll join back.
G Shivakumar — Executive Director & Chief Financial Officer
Thank you.
Operator
Thank you. The next question is from the line of Vishal Agarwal from Leo Capital. Please go ahead.
Vishal Agarwal — Leo Capital — Analyst
Thanks for the opportunity. My question pertains to the [Indecipherable] right now the spike in the rates has largely been caused by the trade disruptions with Russia-Ukraine war and other stuff. Adjusted for that, one, some of those things even out given that the order books have been weak for the last few years, how does the demand-supply situation for tankers and all look, because crude oil demand in absolute tonnage does not seem to be growing at that rate. So how does one forecast how where other markets headed in terms of — are they likely to be tied or are they likely to be at very low rates?
Bharat K Sheth — Deputy Chairman & Managing Director
So, demand is never easy to forecast. And I think I’ve mentioned this on multiple investor calls that we have at least given up trying to forecast and again had you asked us to give you a forecast of what the tanker market would have done in March, we would have been very embarrassed by those numbers today, because it’s gone up 3 times, 4 times, 5 times wherever. So these things become very difficult to forecast. What we do know and we know it will help is that the supply side of the equation is very, very much control and is at a multi-year low. So any trade disruption and it could be the war, it could be something else tomorrow is going to lead to these spikes, because we have effectively there is a tight market on the supply side. And whenever there is a tight market on the supply side, any change in demand for whatever be the reason will lead to a very sharp spikes. If you have an overbuilt market, then the spikes whilst there will be spike there’ll be much more subdued. So demand is just impossible to tell.
Vishal Agarwal — Leo Capital — Analyst
Understand. And at the current order book level, sir, which is 5% level, is the absolute supplies staying flat because as many ships are retiring as is the new order book or is it increasing or is it flattish?
G Shivakumar — Executive Director & Chief Financial Officer
So actually from the supply, which you see — which is the headline supply, remember there are always a certain number of vessels, which are also in dry-dock, right. Now in strong markets people try to defer dockings and then you get sort of a gradual bunching, in weak markets people prepone dockings. So the supply side is affected not only by the headline news, which is new ships coming out, it is determined by how many ships are in dry-dock which also be tracked globally, how many ships are under repairs in dry-docks, under statutory requirements, how many ships are in congestion. And these minor deltas, so it could be a 1% for the strain on supply because there is a bunching of dry-docks, there is a bunching of ships in multiple parts due to congestion, all that makes a significant difference to the effect or the impact it has on the markets.
And I think I have mentioned it before that just marginal place on supply demand leads to this huge volatility, so one extra cargo, one extra ship is what it takes for the markets to move in both directions, one extra cargo means the market can go up a lot, and one extra ship can mean the market can come down as well. So eventually, it’s all on the margin and sentiment plays a predominant role, I would say, in the market behaviour. Remember this market is determined by thousands of players.
Vishal Agarwal — Leo Capital — Analyst
Understand. Understand. From this trend. But given the order book situation and the fact that you mentioned that till 2025 the shipyards are practically booked, over the next three years for the tanker market will be absolute number of tankers or capacity of tankers go up, go down, or will it be flattish?
G Shivakumar — Executive Director & Chief Financial Officer
No. So, obviously because there is still a supply growth, the number of tankers will go up. Now what is difficult to determine is what will happen to scrapping. Now how people react to the new regulations that are coming up and they are coming up very, very quickly will also determine whether there will be a net-net supply growth or a net-net supply de-growth for any reason is scrapping accelerates or, let us say that there are terminals and customers who say we will not take vessels above a particular age then automatically those vessels whilst they may still be in the water are effectively no longer supply grid. Right? Are you following?
Vishal Agarwal — Leo Capital — Analyst
Yeah. No, I get that. But thus scrapping not follow a very clear rhythm that vessels are —
G Shivakumar — Executive Director & Chief Financial Officer
No, it is not. So, scrapping, so let me explain to you, last year if you recollect that is I’m talking about Cal ’22, right. We had the lowest average tanker market of three decades. So — and you had a multi-year high of scrap prices, multi-year high, so would you have concluded that scrapping will accelerate right, because on one hand, you had a multi-year low market on the other end you had a multi-year high scrap market, and yet scrapping disappointed. And again this is because for every extra trading day that you can extract from a ship basically you’ve got an option and suddenly you get a market like what happens today. Now, think of that owner who deferred its decision of scrapping, he suddenly making a lot of money.
So, I’ve said this often enough in the past that there are a lot of owners who will take these chances and are agnostic to the age of their ships and would be happy to trade them as much as they possibly can. So again these are individual decisions that are taken by a multitude of ship owners across the world, and it’s very, very difficult. Common sense would have said last year’s scrapping should have been at a multi-year high and yet it did not happen.
Vishal Agarwal — Leo Capital — Analyst
Understand, Understand. So I think that is what kind of even in the next three years, the order book is therefore 5%, so that much more inflow will come in, how much will go out, it’s hard to forecast, because it’s tough to forecast.
G Shivakumar — Executive Director & Chief Financial Officer
It’s very hard to forecast, but what I just feel and again, of course, I could be wrong that the way sort of the trade is headed clearly older vessels, let’s say tankers beyond age of 20 will find it more and more difficult to trade, partly due to the new regulations, partly due to customers, placing an emphasis on more modern tonnage and partly new to terminal restrictions. So a combination of everything points to a net supply growth much less than the headline news.
Vishal Agarwal — Leo Capital — Analyst
Okay. Understood. Got it. Got it. This might be a naive question, but how does one compare the NAV which I believe is calculated based on the current value of the open market [Speaker Overlap] with the cost of a fresh ship, with the cost of fresh construction like our — do ships periodically trade above or below their new replacement cost and where are things today?
G Shivakumar — Executive Director & Chief Financial Officer
Yeah. In strong markets which we saw in — I mean today is a very strong market, but it’s not what it was in 2006, 2007 and 2008. So, in 2006, 2007 and 2008 we had a situation whereby the vessels in the water, older vessels, five-year-old vessels and seven-year old vessels, eight-year-old vessels were commanding numbers significantly higher than newbuilding prices that hasn’t yet happened. It may have happened in the container sector, I am seeing some extraordinary transactions in the container where significantly older tonnage is getting, I mean just seriously off the chart prices, because people want to ship today in the water in order to take advantage of today, who knows what the market will be in ’25 or ’26. So we have seen this happen before, but that is not the case yet today.
Vishal Agarwal — Leo Capital — Analyst
Understand. And for crude tankers and dry-bulk, which are the segments that we are present, how does the price today compared with the fresh construction cost?
G Shivakumar — Executive Director & Chief Financial Officer
So again, it depends on, are we talking of because what has happened is, so let me — it become a little more complicated than answering that in a simple way, because you’ve got different kinds of assets in crude oil, you got the eco ships, you have the ECO ships with scrubbers, you have non-eco-ships but with scrubbers and you then have the non-eco non-scrubber ships. Now each of the price points of these — so within the crude sector if you just take one sector the VLCC [Indecipherable] again in that now you have multiple sub sectors. And the price points of the multiple sub sector there is a great deal, right.
So again to compare that really with where newbuilding prices are is not making a lot of sense. I mean, there is not a simple one-to-one equation or a simple answer to that question, you could have provided it when everything was lot more commoditized when you could compare apple-for-apple, but now you are not just no longer can you compare apple-for-apple.
Vishal Agarwal — Leo Capital — Analyst
Understand. But directionally, what’s your sense it broadly trading at the cost of fresh construction?
G Shivakumar — Executive Director & Chief Financial Officer
No, no, it is trading well below the cost of fresh construction today. So if what you’re really alluding to, is there a scope for these values to go up? If the freight market stay at these elevated prices? The answer is yes. values will keep going up.
Vishal Agarwal — Leo Capital — Analyst
Understand. Because the cost of fresh supply is much higher. So order of magnitude there is a — [Speaker Overlap]
G Shivakumar — Executive Director & Chief Financial Officer
More than the cost of supply being higher, you’re not getting supply till ’25, maybe ’26. Now it’s very difficult to sit in July of ’22 or first day of August in ’22 and try and forecast what’s going to happen in ’25 or ’26.
Vishal Agarwal — Leo Capital — Analyst
Understand, understand.
G Shivakumar — Executive Director & Chief Financial Officer
Multiples of orders will want to ship today. [Speaker Overlap] Sorry?
Vishal Agarwal — Leo Capital — Analyst
Apologies. I think there is no supply till 2025-2026, but hypothetically if you had to make a booking for that, how much more expensive is fresh supply today versus what an existing ship is trading at in the water?
G Shivakumar — Executive Director & Chief Financial Officer
No, sorry, what was the question, I didn’t follow the question.
Bharat K Sheth — Deputy Chairman & Managing Director
He wanted to know how much more expensive, is it to order new ships versus an existing ship.
G Shivakumar — Executive Director & Chief Financial Officer
So, but is that existing ship just got four categories know. That existing ship can be eco scrubber plus age, the existing ship can be eco non-scrubber plus age, the existing ship can be non-eco scrubber plus age. So how does one compare, it’s impossible.
Vishal Agarwal — Leo Capital — Analyst
I understand the challenge there, sir. My question was more — is there a way to give a directional sense of range being a 20% to 40% lower.
Bharat K Sheth — Deputy Chairman & Managing Director
No.
G Shivakumar — Executive Director & Chief Financial Officer
No, you cannot. That’s the point that because, they are completely different animals, it is chance still possible to compare. All — you see, all I can say is that the ships which are currently in water yeah are going to be much more determined by the one-year rate, the two-year rate and the spot rates. The vessels, which are being built at the shipyard their price points will be determined by the cost of raw materials. The cost of labor and the comfort of the yard in terms of their capacity. Today, the yards are not under pressure, because they are booked out till ’25. Now, if let’s say — and if therefore raw material costs were to come down, say, the cost of steel was to come down, the cost of some other metals wants to come down. There is no need for the yard to reduce their prices right now because they’ve got plenty of business. So all that will happen, their profit margin will go up.
Vishal Agarwal — Leo Capital — Analyst
Understand.
G Shivakumar — Executive Director & Chief Financial Officer
Yeah.
Vishal Agarwal — Leo Capital — Analyst
Makes sense. And one final question from my side, you made a comment earlier that in terms of capital usage you’re focused on buyback which is done and we are also waiting for asset values to be more rational before deploying money into vessels. Can you elaborate a bit more on that, how does one forecast? What’s the right timing on the asset? What are the indicators you are looking for? And what are the segments, you are looking at in terms of how you want to deploy cash in assets as and when the opportunity shows up?
G Shivakumar — Executive Director & Chief Financial Officer
So, we are agnostic. I mean for the businesses we are currently in which is crude oil, product tankers, LPG and dry bulk we are agnostic on whether the money goes in one sector versus the other. We don’t have a hard and fast rule saying that let’s not by dry-bulk, let’s buy only a tanker or less by only LPG etc. So to that extent, we are agnostic. Now as far as price points are concerned, we have determined some basis, which obviously we are not going to talk about where we think the returns will provide us on certain assumptions that we internally make somewhere between 10% and 15% dollar rise the return on unlevered capital.
Now whether that return eventually pans out at 8% or as you know, currently the return has spanned out at 20%. Obviously, at the time when we were buying we did not expect 20% we were expecting less than it has just turned out to be more. So every time we invest our investment guidelines is that we should be able to on the risk we take, we should be able to create a sufficient delta on cost of capital. Even this 10% that we say is not in isolation, it’s a function of where interest rates are. So if interest rates were to go back to what they were let’s say 2% or 3%, let’s say, the long-term interest rate went down to 2%. Right. We’d be happy then to target of 7% or 8% return, because you are still creating a significant spread. Today with interest rates say if you were to borrow a company like ours, if it was to take term borrowing in dollars, I guess it would come in at somewhere between 5%, 5.5%. If we are going to borrow money at 5.5%, we should be trying to target a return of minimum of 10%, 10.5%.
Vishal Agarwal — Leo Capital — Analyst
Understand.
G Shivakumar — Executive Director & Chief Financial Officer
Because I don’t want to borrow money at 5.5% and return on 7% or 6%.
Vishal Agarwal — Leo Capital — Analyst
Understand.
G Shivakumar — Executive Director & Chief Financial Officer
I’m not getting compensated for the risk.
Vishal Agarwal — Leo Capital — Analyst
No, that makes total sense and really appreciate the way you think about and talk about capital allocation, very clearly. So, congratulations on that policy and good luck with it. Those are all the questions. Thank you so much.
G Shivakumar — Executive Director & Chief Financial Officer
Thank you.
Bharat K Sheth — Deputy Chairman & Managing Director
Now, maybe we can take some questions from the chat, people have been putting in questions there. So shall I just read out? So, one – first question is from Mr. Ghansham Bansal, who is an Individual Investor. He says, as we are following the value approach and don’t buy a momentum, so we need to wait for few years to deploy our cash flows. So can we expect further buybacks whenever valuation is below 0.6.
G Shivakumar — Executive Director & Chief Financial Officer
So as if I can answer that. The first thing is we don’t know when we’ll get an opportunity to buyback ships, it could be earlier, it could be later, we don’t know. So we are geared up as and when we get opportunities we will be there. As far as buyback is concerned, there is no point considering it now because under the current buyback rules we cannot act on buyback until August of ’23. So closer to that date. We will see what the market is like, what is the liquidity that the company has got, is there a discount to net asset value, where is the net asset value at that point of time. There’ll be a multitude of variables that we will consider and yes, we do think of buyback as a means of capital allocation, particularly when there is significant discount to net asset value, which is the case today. But I don’t know what is going to be in July or August ’23.
Bharat K Sheth — Deputy Chairman & Managing Director
Okay. The next question was from Mr. Rajesh Khattar, who said his mic was not working. He has two questions. While you say that you have operational leverage by keeping capacity in hand for the spot market, but you’ve been selling ships, can you give me more understanding of this dichotomy? And two, any competitive advantages that you have?
G Shivakumar — Executive Director & Chief Financial Officer
Sorry, what is the second question, any?
Bharat K Sheth — Deputy Chairman & Managing Director
Do you have any competitive advantages?
G Shivakumar — Executive Director & Chief Financial Officer
So, the first one is on selling of ships. The one vessel which we are due to deliver very, I think in the next two or two days, which is old or an order gas carrier because of rage she cannot be fixed into multiple trades, which would or at least the multiple trades that we are focused on and consequently her utilization would have been very poor. That’s number one. On the second ship which we have contracted to sell, we — the way we internalize that decision, we were sitting between, the gap between where we are in book value, where we are in terms of the market value of her assets, there is a significant sort of mark-to-market gain of approximately $400 million and we said to ourselves that maybe we should take some money off the table. And so we’ve just taken a tiny percentage of that $400 million potential gain, because anything can happen in our markets and we’ve seen what happened in 2008, there was a black swan event in terms of Lehman, we are all aware of it and asset values came off very, very quickly.
So there are these black swan events which come and impact us and therefore we felt that it was not an easy decision, it was a very difficult decision for us that we said, maybe we should take a tiny percentage of the potential for $400 million profit we are sitting on off the table. And that’s why we’ve done the second ship. I hope that — and on competitive — on, you said the second question on advantage. Again, I don’t know what competitive advantage we really have versus everybody.
Bharat K Sheth — Deputy Chairman & Managing Director
I think to participate in all trades because [Speaker Overlap]
G Shivakumar — Executive Director & Chief Financial Officer
I was about to make that comment that I think we run the vessels very competitively. I think we probably run amongst the best assets globally. We’ve — if you see all the non-financial parameters and it is data which we captured all the time because customers required as the data all the time, and we go through multiple audits from customers from board authorities from our own Indian regulator etc. And we have had the best year — last year for the year ending March ’22 in of the — of since we started the business. So we’re very, very focused on the quality of asset that we maintain and I guess you could argue that is — it gives us a competitive — and we do it in a very competitive manner. So I guess that is a competitive advantage. Of course it’s very difficult to know what every owner does because significant ownership of our industry globally is privately held and getting that data from the privately owned companies is not easy. So our comments obviously is from wherever we can get data, we make these comparisons, and I would say that we are clearly in the top quartile of global ownership.
Bharat K Sheth — Deputy Chairman & Managing Director
Moderator, maybe we can go back to the voice questions now.
Operator
Thank you. The next question is from the line of Vikram Sharma from [Indecipherable]. Please go ahead.
Unidentified Participant — — Analyst
Hello. Yeah, hi, sir. Thank you for the opportunity. I had a just a basic question. What is the mix of spot and long contracts? Actually I wanted to understand the pricing formula, how do we calculate the spot rate and charged to our clients? How it is linked to index like Suezmax?
G Shivakumar — Executive Director & Chief Financial Officer
No, we don’t link it to index. So whenever there is a cargo, we have to compete with what other owners are going to offer, and it’s a negotiation that takes place on the spot and that’s why it’s called the spot market and sometimes our price point is or the price at which we are willing to carry the trade is higher. Sometimes it matches the customer’s requirement and we are able to fix the ship. So we look for every cargo, we look at what is the competition around us, and around that particular cargo and then determine whether we want to undertake that trade or let that cargo and wait for another cargo. So it’s a moving target all the time, we don’t link it to any particular index. So that’s — and what was the first bit of the question was?
Unidentified Participant — — Analyst
What is the mix of sport and long term arrangements?
G Shivakumar — Executive Director & Chief Financial Officer
So, again, so it depends on what you call long and what you call spot, because remember when you fix ship spot, it could be fixed for 5 days, and it could be fixed for 90 days. And even menu fix a cargo for 90 days, it’s sort of often talked about a spot simply because it’s fixed in the spot market, but it just happens to be a longer-term trade, right. Today, if you look at our dry-bulk fleet, the gas fleet is 100% fixed for long. And when I say long meaning at least for one year. On the crude oil side, we have nothing fixed for that period of time. We have all the cargoes are spot, which is 60 days, 50 days, 40 days like that.
On the product side we have fixed one vessel for 12 months commencing September of ’22 and we have two of our vessels or three of our vessels which were fixed earlier before we saw this big rally in the market. One out of the three comes for repricing in September of ’22 and two come up for repricing in December of ’22. So as I said one comes out in September ’22, one goes back in, but at a much higher price in September ’22. And dry-bulk [Speaker Overlap] sorry, on dry-bulk, I’m getting some cross thing. So in dry-bulk, we don’t have anything fixed beyond spot market.
Unidentified Participant — — Analyst
Okay. Thank you, sir.
Operator
Thank you. The next question is from the line of Jayesh Gandhi from Harshad Gandhi Securities. Please go ahead. Mr. Gandhi, may we request you to —
G Shivakumar — Executive Director & Chief Financial Officer
Hello.
Operator
Yes, sir. Please proceed.
G Shivakumar — Executive Director & Chief Financial Officer
No. This is Shiv here.
Operator
Mr. Gandhi, may we request you to unmute your audio and please proceed with your question. As there is no response from the current participant, we move to the next question from the line of Archan Pathak from Centra Advisors. Please go ahead.
Archan Pathak — Centra Advisors — Analyst
Good evening, sir. Just wanted to get an idea of what’s happening in the shipyards. As you know, during the 2010 period, when shipyards [Indecipherable] higher three-digit number and they came down to below three-digits number in the recent times. So, are we seeing the revival in the shipyard capacity as most of them are look for now — can the shipyard capacities come back again?
G Shivakumar — Executive Director & Chief Financial Officer
We don’t think so. Currently, there has been a lot of rationalization in the shipyards in Japan, in China and in Korea, because some of the yards been through very, difficult times. And I think strategically, these three big shipbuilding nations I think will ensure that they don’t go back to a situation where you have overbuilt capacity.
Archan Pathak — Centra Advisors — Analyst
Okay. Got it, sir. My second question would be, as you know, our average ship has crossed almost the age of 15, so is there a possibility that rollover of old ships to new ships can happen by selling few ships near the top is the — high asset value which we are realizing right now, and acquired the [Indecipherable] see more competitor interpret higher price net-net benefiting with zero rollover costs? And if so how many ships can be offloading taking the higher tonnage which are craving right now?
G Shivakumar — Executive Director & Chief Financial Officer
Yeah. So we looked at this exercise whether it makes sense to capture the premium you are today getting on the older ships and swapping it to the premium one would need to pay on newer tonnage and we don’t think that makes well, the selling makes sense, the buying does not make sense. And we have seen from past experience that once you buy a very expensive ship, your dollarized returns are pretty substandard. We have done this in the past. It’s a strategy that did not work out very well. And we would refrain from making that same mistake again.
Archan Pathak — Centra Advisors — Analyst
Okay. Got it, sir. That’s it from my side. Thank you so much.
Operator
Thank you. The next question is from the line of Himanshu Upadhyay from O3 Capital. Please go ahead.
Himanshu Upadhyay — O3 Capital — Analyst
Yeah, hi. I had question, what we are also seeing is the spread between low-sulfur and high sulfur has again increased. Okay. And we had scrubbers. Okay. Or we had ordered for scrubbers, but then we decided not to put all the scrubbers and whatever we had ordered. Okay. Is there scope to use those scrubbers and put on the ships or you think the way it is will continue with the ships?
Bharat K Sheth — Deputy Chairman & Managing Director
No. So, we have placed scrubbers on all the ships. So, whatever we had ordered are now on the ships. So we have no scrubbers which we had ordered, which are not on the ships, right, number one. Number two, as far as the spreads are concerned, they went up dramatically during the course of the calendar year, I think they peaked around close to $550 or $600 a tonne. And now they’re back to 300, maybe a little less. So it’s all over the place. Again, it’s very much fluctuating, what all I can say is that the scrubbers, which at one time looked as a very poor investment, I think now will provide us and in inverted commas an okay return.
Himanshu Upadhyay — O3 Capital — Analyst
So how many ships out of our 45 are having scrubbers?
Bharat K Sheth — Deputy Chairman & Managing Director
6, am I right Shiv?
G Shivakumar — Executive Director & Chief Financial Officer
That’s right. We have 6 scrubbers on our ships, yeah.
Bharat K Sheth — Deputy Chairman & Managing Director
Yeah. And remember, just when you have a scrubber also the returns are determined by where you are trading the ship, because there are many trading areas where you’re not permitted to use of an open-loop scrubbers. And therefore whilst the ship may have a scrubber itself you all may land up in a situation where for multiple weeks or months, you are not getting a benefit of the scrubber.
Himanshu Upadhyay — O3 Capital — Analyst
Okay. And just one thing our offshore fleet, there are number of boats which can — which will get re-leased over next one year. Okay. Seven or eight.
Bharat K Sheth — Deputy Chairman & Managing Director
Yes.
Himanshu Upadhyay — O3 Capital — Analyst
Can we go out of India on these because in the call also we stated that there has been much higher movement outside India on the offshore side than in India or you think those will remain in India?
Bharat K Sheth — Deputy Chairman & Managing Director
No, we have already started moving boats away from India. We started this process a few months ago, recognizing that there is potential more business globally, currently we have an operation going on in West Africa, we have some operation going on, is it, I think it is in South Korea or Philippines — South Korea, which we have an operation going on there. And we are happy to take our boats outside as and when they come up for repricing, we will decide where we think the price points are going to give us the best returns. So we have, I mean it’s not we are bound to limit our operations to India and plus I do believe that even in India the rates will go up. So it will be a function of assessing whether would we get a better rate outside of India or would we get a better rate within India. The one benefit of India is that it is business that you get for a longer duration. So again, it will depend on the rate. And if you get a good rate and you get a decent duration, why not.
Himanshu Upadhyay — O3 Capital — Analyst
New contracts also which are coming outside India the rate may be higher. The duration are still small.
G Shivakumar — Executive Director & Chief Financial Officer
Yeah.
Bharat K Sheth — Deputy Chairman & Managing Director
No. So, what we are now finding is the duration is also going up overseas. But it is not as much as it is in India.
Himanshu Upadhyay — O3 Capital — Analyst
Generally, what would be the age for boats, means not the age, sorry, the duration of the contracts in outside India currently?
Bharat K Sheth — Deputy Chairman & Managing Director
So, what happens is outside of India, they run for a few months with multiple — with some options thrown in. In India, as you know it is for approximately three years. So there is still a big difference between what you see overseas and what you see here. Now, if you are likely or if you believe that these markets will reprice up as time goes on, then you are not that inclined to do the three-year business and you would rather do this six-month business at time and keep repricing. So I think eventually we will have a mix and match, because again just like shipping is difficult to forecast, oil and gas or offshore is equally difficult to forecast. So we will do an eventual mix and match where some assets of ours will try and fix out for three years and some assets we will run for the shorter duration in overseas markets.
Himanshu Upadhyay — O3 Capital — Analyst
Okay. Yeah. Thank you from my side.
Bharat K Sheth — Deputy Chairman & Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Rajesh Khattar, an Individual Investor. Please go ahead.
Rajesh Khattar — Individual Investor — Analyst
Hello, am I audible?
Bharat K Sheth — Deputy Chairman & Managing Director
Yes, Rajesh.
Rajesh Khattar — Individual Investor — Analyst
Hello. Yeah, hi. I have a few follow-up questions earlier my mic was not working and you took my question on the chat. So, I have a few very short questions like what is the highest capacity utilization ever achieved by GE Ship, let’s say way back in the bull period of 2003 and 2007, what is the highest capital utilization we ever achieved?
G Shivakumar — Executive Director & Chief Financial Officer
On shipping, you mean?
Rajesh Khattar — Individual Investor — Analyst
Yeah, yeah. On shipping.
G Shivakumar — Executive Director & Chief Financial Officer
No. So shipping, we have always achieved full utilization. We have never not achieved full utilization. So it’s the issue is not utilization in shipping. The issue is the rate or the price point at which you achieve full utilization.
Rajesh Khattar — Individual Investor — Analyst
So, when you say you have a lot of capacity on spot. So, even both ships you mean to say are utilized, but for short voyages, is it.
G Shivakumar — Executive Director & Chief Financial Officer
That’s right. Correct. You are absolutely right. So what, so let me explain to you, right. Let’s say that I have say five ships that are available for repricing in the next one week, right. Those five ships will either benefit or will get hit depending on what the market is in that period of time, right. Now, some ships I may fix 5 days or 10 days, because that’s the cargo. I can’t let — I can’t say I will only take a 50-day business, I will let go the 10-day business, correct? So we will look at what are the cargoes available for that particular ship and you will then decide, okay, maybe I have got a 10-day cargo, so I’ll take the 10-day cargo. On some other ship you may say that instead of taking all five ships on 10-day cargos only, one ship I will take for 50 days, and one ship I may take for 20 days.
So it’s a continuous, it’s almost a daily decision, if you look at our data for Q1, we did 100 and plus different voyages. So that means we are pricing some business or the other on a daily basis. Every working day we are doing some price point.
Rajesh Khattar — Individual Investor — Analyst
So, if your capacity utilization has never been not 100% and today you have 45 ships and potentially the capacity is 45 ships into 365 days.
Bharat K Sheth — Deputy Chairman & Managing Director
No, no. Let me come in here. Every year we will have approximately one-third of your fleet that has to go through statutory docking, right, because every five years you’ve got to do a full docking and then you have what is called an intermediate survey. So roughly, every 15, I mean, every year you have one-third of the fleet that goes into dry-dockings. Each of these dockings, let’s say from that, because we have to even position the ship to dry-dock, right. So if you take the total off hire time for each docking i.e. the time from when you have last turn to when you are likely to next turn could be between 35 and 40 days, right. So 15 into let’s call it 40 whatever that mathematics is, that’s out of your revenue days.
Rajesh Khattar — Individual Investor — Analyst
Okay. So if I reduce 40 from 365. So you’re saying that for almost 320, 325 days your entire fleet gets to one, you’re about to utilizing.
G Shivakumar — Executive Director & Chief Financial Officer
No, no. That is only the dry-dock ship. Yeah.
Bharat K Sheth — Deputy Chairman & Managing Director
No, no. Only the 15 ships. See you have some ships, which we have already finished docking, right. So, say you have 45 ships. Out of 45 ships, 15 ships at an average don’t turn for 40 days right, so that you have to knock out. Now, that leaves you with whatever the mathematics is 30 ships. On 30 ships, sometimes you have what you call unplanned downtime, right. Unplanned. It could last for one day something is not working, some equipment on the ship is not working, and you need to take time off, you might need to take two days off, one day off, a fewer hours off, five days off, like this, right.
So, let us say for those 30 ships at an average you might take two days in a year. So, we calculate everything basis threes on the ships, which are not docking we will take an average of 360, 362 days.
Rajesh Khattar — Individual Investor — Analyst
Okay. And for the ships which is getting docked. Yeah, yeah, I understood. So basically the ships, which are getting docked for that probably 40 or 45 days will be reduced and for the other ships you are saying that for the unplanned days maybe two days?
Bharat K Sheth — Deputy Chairman & Managing Director
Yeah, three days. Above three days will be reduced on the other ships.
Rajesh Khattar — Individual Investor — Analyst
Okay. Okay, understood. So how many net new ships you have added since 2008, because you have also been selling a few ships. So what is the net additions since 2008?
Bharat K Sheth — Deputy Chairman & Managing Director
Shiv, I don’t have an open answer.
G Shivakumar — Executive Director & Chief Financial Officer
I think that fleet is more or less the same. Went down to 28 at the lowest levels, we were at around 45% 2008. We went down to about 28 and we are back to 44, but of course with lot of ups and downs in between.
Rajesh Khattar — Individual Investor — Analyst
Okay. So there is no net new addition as such.
Bharat K Sheth — Deputy Chairman & Managing Director
No, no. So let me answer this for you in a different way. Don’t look at 45 versus 45 that’s a wrong way of looking. You have to look at kind of view, I could have 45 ships, let us say, which have an earning capacity of $3,000 I could have 45 larger ships whichever earning capacity of $100,000 right.
Rajesh Khattar — Individual Investor — Analyst
Right, right.
Bharat K Sheth — Deputy Chairman & Managing Director
So what you have to really look at what is the earning potential in a low market, in a mid-market, in a higher quartile market of these different ships. So just looking at ships has no meaning.
Rajesh Khattar — Individual Investor — Analyst
So, if I were to compare the earning potential of 2008 versus the variety of ships that you have today, will it be like 30%, 40% higher or like, can you give me some percentage like what comparison?
Bharat K Sheth — Deputy Chairman & Managing Director
See, there is actually, honestly you cannot compare because some time, so let me give you an example of a capesize bulk carriers. Okay. This capesize bulk carrier in 2008 we had one that ship at peak earned $150,000 a day, at trough earned $2,000 a day, right?
Rajesh Khattar — Individual Investor — Analyst
Oh my god. Okay, okay.
Bharat K Sheth — Deputy Chairman & Managing Director
Yeah. Now today we have two of those. Will we get the next peak of $150,000, I have no idea, will we get a drop of $2,000, I have no idea. All that you should really be focusing on and this is really to everyone listening on this call. That this company has built with operational capability and the balance sheet strength to benefit from whichever way the market goes. If the market is weak we have tremendous firepower that we have built up to take advantage of it. If the market is strong, we have Huge operational exposure to this market, huge but our standards. So whichever way the market does this company will benefit.
Rajesh Khattar — Individual Investor — Analyst
So, can I just take this question in a different way, like instead of going by the earning potential of the number of ships, is there a unit like the carrying capacity of the ships what it was in 2008 versus what it is today.
Bharat K Sheth — Deputy Chairman & Managing Director
Yes, carrying capacity, I’m — we can give you offline. I mean it’s [Speaker Overlap] on our website, it’s on our website. So that’s easier, I mean if you can work it out yourself, then we can get somebody from our investor relations team.
G Shivakumar — Executive Director & Chief Financial Officer
Or maybe you can just take that offline if you can contact us.
Bharat K Sheth — Deputy Chairman & Managing Director
Yeah, yeah. It is there on the website. So that’s not a challenge.
Rajesh Khattar — Individual Investor — Analyst
Okay. But in very short —
G Shivakumar — Executive Director & Chief Financial Officer
I mean, just one bit of advice, and I guess you are trying to work out our earning capacity or capability, we can’t do it and I have not met a single human being who can do it.
Rajesh Khattar — Individual Investor — Analyst
Yeah, all those up are just projections.
G Shivakumar — Executive Director & Chief Financial Officer
Don’t waste time on all these things, right, because nobody can do it. Just try and understand the way the business is positioned that here is a company that will benefit weak market and that will benefit in strong markets.
Rajesh Khattar — Individual Investor — Analyst
Okay. I have just three very small questions, very, very short questions if you can just take them. One question is like, what is your inquiry to order conversion ratio, like how many inquiries you’re able to convert to order and how many you end up losing? Like you have any data on that?
Bharat K Sheth — Deputy Chairman & Managing Director
No. So we don’t have, yeah, there is basically no data on — there is no data on this that like we track, or we are concerned with. All I can say is that since we are much more dependent on the second hand market for acquiring ships as opposed to the newbuilding market for acquiring tonnage. We have to inspect a fair number of vessels because sometimes you don’t get vessels in a very or ships in a very good condition and then we tend to reject it and sometimes we get lucky and the one-ship you inspect and you want to buy.
Rajesh Khattar — Individual Investor — Analyst
So, my question was — my question is not on you buying the shares, my question was more on you getting an inquiry for carrying of a cargo.
G Shivakumar — Executive Director & Chief Financial Officer
Sorry, if I may, just take this? See, our market is not like you keep bidding for business like that, it is a market — it is like asking someone who is an investor in the stock market mutual fund for instance what is your ratio of filling me your orders. We get — if you take into account that we are there in the market, we look at several options. Mr. Sheth mentioned that we look at several options when we had to fix ships, whether to do a 10-day voyage, you have to do a 50-day voyage. We look at all the options and decide on which one to take. And we price it, at the end, the price is a function of what the market is paying, we are price takers
Rajesh Khattar — Individual Investor — Analyst
Okay.
G Shivakumar — Executive Director & Chief Financial Officer
So the inquiry, it’s not like you are bidding for business, it’s a tender. Yes, there are some business which go by tender, but there are very few and far between in the shipping business at least. Normally, you’re just negotiating on a bilateral basis through a broker or directly and that’s how the business gets done.
Rajesh Khattar — Individual Investor — Analyst
Okay. My second last question is, I mean you have tremendous experience of so many decades in the shipping industry, so why have we never explored diversifying to the adjacent areas like container shipping or inland cargo, or any other adjacencies? I mean I’m sure that if you put your interest rate you will be able to, I mean, you have the competencies as a company, so why has it never interested you?
G Shivakumar — Executive Director & Chief Financial Officer
I think that’s a very good question. We are now in the process. I think we first wanted to build up a lot of knowledge in the four sectors and we built [Technical Issues] time, because if you remember in the, I mean or if you are aware, not remember, but if you are aware, we were a very domestic oriented business where I would say a significant majority of our revenues came from Indian customers. Gradually we started trading internationally, and for the first quarter if I’m not mistaken, 80% of our revenues has come from international customers and 20% has come from Indian customers. So we’ve now got the confidence of being able to build up on our operational expertise.
Having said that, there are two areas that we look at, so it could be containers. Today we are all aware that container shipping is at an all-time high, it’s not just at a multi-year high, it’s at an all-time high, and prices are obviously very elevated. So, we are building up internal knowledge on that. We will build up knowledge on LNG if an opportunity presents itself, we will look at that. So it is work-in progress. I must admit that had we done this exercise 5 or 10 years ago, we would have been in a much better space, but it also means that we would have had to then invest less in our current sectors. And because we had greater comfort in the current sectors, we focused on the current areas where we have built up knowledge over multiple years, but it’s not as if we have built up this knowledge over seven decades, because the first 30, 40 years. We did not trade that much internationally.
Rajesh Khattar — Individual Investor — Analyst
Okay. Okay, understood. And my last question now. So you’ve already answered it partially when I asked you about the competitive advantages, but I could not follow a few things. I think you said something like you provide data continuous data to customers. I could not hear that part correctly, if you mentioned anything. So my question is, if a customer has two choices, if a customer who is bringing the business. He has two service providers. One is, GE Shipping, and there is another who offer the same price and probably the same asset quality. So do we have any competitive advantages if price and asset qualities are same?
Bharat K Sheth — Deputy Chairman & Managing Director
So if everything is the same, when I say, so let me give you on a tanker, for example right. They have — you have the oil companies and all coming inspecting the ships and they give you what is called a SIA report. They will look at your last SIA report, they will look at the number of observations when they last inspected the ship, how good has been your safety record. So there is a lot of data that is fed into the customer. There is a whole form that gets fed in every time you are trying to do a business. And the comfort that you have built with that customer is very important. So if there are two ships on the same day offering the same rate, if the customer saying we have dealt with Great Eastern, we know Great Eastern well, we know that they are a very reliable organization. I think we will get the business.
If they have a greater comfort with the other customer then that other customer may get the business, you can have equal preferences to the customer. So say they’re agnostic, saying we don’t care whether it is customary, I mean a ship owner A or ship owner B, then they will decide on whom they wish to support on any given day. So your operational performance is most important to the customer because the customer does not want headaches. He have said, I will pay you so much money, I want you on time to deliver this cargo from A to B without any challenges. And therefore your operational performance and the fact that your vessel is going to perform as described to your customer that is the key.
Rajesh Khattar — Individual Investor — Analyst
Okay. So do we measure our on-time performance and EPS?
Bharat K Sheth — Deputy Chairman & Managing Director
Absolutely. Everything is measured. Of course it’s measured. And that is why you might have read in the Chairman statement in an Annual Report that we have actually made a statement to say that this year on non-financial parameters, i.e., for the year ending March ’22, we’ve had our best year ever. That’s all operational performance.
Rajesh Khattar — Individual Investor — Analyst
Okay. Okay, understood. Okay, sir. Thank you so much for patiently taking almost six, seven questions. Thank you so much. That’s all from my side.
Operator
Thank you. The next question is from the line of Jayesh Gandhi from Harshad Gandhi Securities. Please go ahead.
Jayesh Gandhi — Harshad H Gandhi Securities — Analyst
Hello, can you listen. Can you hear to me?
Operator
Yes.
G Shivakumar — Executive Director & Chief Financial Officer
Yes.
Jayesh Gandhi — Harshad H Gandhi Securities — Analyst
Okay. So my question is on Slide number 18, which talks about revenue coverage. Does that mean that out of 90 days crude carriers in revenue generating more, deployed only about 15%?
G Shivakumar — Executive Director & Chief Financial Officer
No, no. So this is for the remaining part of the financial year. You have nine months remaining from first July ’22 to 31st March, ’23. Out of these days, which is about 270 days, 15% of that capacity has already been tied up out of those dates. This is for the future, not for the past. The past is 100%. It’s already on, the ships have already earned in that period. This is an indicator of how many of our — how much of our operating capacity of the remaining part of the financial year has already been tied up and how much is still open.
Jayesh Gandhi — Harshad H Gandhi Securities — Analyst
Okay, I get that. And one last question. Sir, in your crude carrier or the product carriers, if I — if you just want to look at the trend in which the prices are moving. Is it fair to say that Baltic Dirty and Clean index will give a fair idea on where the trend is?
Bharat K Sheth — Deputy Chairman & Managing Director
Sorry, what was the question?
G Shivakumar — Executive Director & Chief Financial Officer
He wanted to know the Baltic clean tanker index and the Baltic dirty tanker index, a good indicators of what the markets are doing? Right.
Bharat K Sheth — Deputy Chairman & Managing Director
No. It’s a good indicator of [Speaker Overlap]. Yeah, so let me explain that. It’s a good indicator of the direction of the market, but not necessarily a good indicator of what any particular vessel will be earning and the reason I say that is because the index is a culmination of various routes across the world. Now you are not going to have a ship across every route in the world, right. So what does happen sometimes is you can get an index going up and let’s say the index has gone up because say some of the Atlantic cargos or whatever the Atlantic trades, as we call them, have moved up. But your fleet may not — you might have no exposure to the Atlantic, you might be only in the Pacific or you might be in the Indian Ocean.
So the index is only a broad indication which you can say over a long period of time means over say 12 months, not on a daily basis, but on not 12 months will give you some indication of the direction of the market, but not on a daily basis.
Jayesh Gandhi — Harshad H Gandhi Securities — Analyst
Okay. So, for understanding, your business trend for the crude carrier or product carrier, can an investor look at these two rates or [Indecipherable?
Bharat K Sheth — Deputy Chairman & Managing Director
Well, if you’re trying to forecast something based on that, it is fatal exercise. If you want to know is the business healthy, is it sort of challenged, are the rates strong, are the rates weakening, it’s a good exercise. But to try and forecast anything from that in terms of what is this company likely to earn, it’s a fatal exercise.
Jayesh Gandhi — Harshad H Gandhi Securities — Analyst
Is there any other index which we can track to maybe understand?
Bharat K Sheth — Deputy Chairman & Managing Director
I’m desperate for me to understand.
G Shivakumar — Executive Director & Chief Financial Officer
Maybe you can contact our Corporate Communications Department offline. And they may be able to guide you in this as to what sources are information there about them.
Jayesh Gandhi — Harshad H Gandhi Securities — Analyst
That would be helpful. Thank you. Thank you very much and best of luck for future.
G Shivakumar — Executive Director & Chief Financial Officer
Thank you.
Operator
Thank you. Members of the management that was the last audio questions we can move to text now.
G Shivakumar — Executive Director & Chief Financial Officer
Yeah. There is one text question which is from Mr. Ghansham Bansal, who asks how many of our ships will get affected from the new regulations expected in 2023?
Bharat K Sheth — Deputy Chairman & Managing Director
The answer is none. We will be — we have done an internal review across the fleet and we will be fully compliant well in time to meet the new regulations of ’23.
G Shivakumar — Executive Director & Chief Financial Officer
Yeah. Somebody has asked, what is the market value to NAV of international shipping companies? I think that would probably be between 0.8 and 1.2 in general.
Bharat K Sheth — Deputy Chairman & Managing Director
Yeah. At the moment. It again depends on which sectors you’re looking at, currently I think the average price to NAV is somewhere closer to 1.1, but it again it varies every day, because as you can imagine equities change up and down daily, but approximately it is 1.1.
G Shivakumar — Executive Director & Chief Financial Officer
And Mr. Samraj N has asked, what is the impact of rupee depreciation on financial and other expenses? So I’ll take that question. Basically the interest costs are all in dominant. So when the rupee depreciates, the interest costs go up. So, that’s the simple answer. Again just to remind you that this is more than compensated by a higher income because our incomes are also dollar denominated.
He’s also asked what are VLCC’s spot rate figure?
Bharat K Sheth — Deputy Chairman & Managing Director
Sorry, just to answer on the rupee-dollar, I guess if we are EBITDA positive, which we are that means your long dollars effectively.
G Shivakumar — Executive Director & Chief Financial Officer
That’s correct. Yes.
Bharat K Sheth — Deputy Chairman & Managing Director
As far as the VLCCs rates are concerned, again, I mentioned there are four different categories of ships, at the top end, which is a vessel that is eco as well as scrubber fitted, I would say the average earning because it depends on the route you’re in, but the average earning is 30,000 to 35,000, at the bottom end, which means a non-eco non scrubber ship it will be under 10,000, it will be somewhere between 5,000 and 8,000.
G Shivakumar — Executive Director & Chief Financial Officer
I think that brings us to the end of the questions that were there in the chat.
Operator
Thank you. As there are no further questions, I now hand the conference over to Mr. G Shivakumar for closing comments. Over to you, sir.
G Shivakumar — Executive Director & Chief Financial Officer
Thank you everyone for attending and for asking such thought-provoking questions, as always the recording of the call and the transcript will be up on our website in a couple of days. We are always open for communication with investors who are interested in us, feel free to reach out, the contact numbers of Corporate Communications team are — the contact details of the Corporate Communications team are on the website. Thank you.
Operator
[Operator Closing Remarks]