Great Eastern Shipping Company Ltd (NSE: GESHIP) Q3 2025 Earnings Call dated Jan. 28, 2025
Corporate Participants:
G. Shivakumar — Executive Director & Group Chief Financial Officer
Rahul Sheth — Non-Executive Director & General Manager
Analysts:
Himanshu Upadhyay — Analyst
Vaibhav Badjatya — Analyst
Vikram Suryavanshi — Analyst
Presentation:
Operator
Good evening, ladies and gentlemen. Thank you for standing-by. Welcome to GE Shipping Earnings Call on Declaration of its financial results for the quarter ended, 31, 2024. At this moment, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I now hand over the conference to Mr Shiva Kumar, Executive Director and CFO at the Great Easton Shipping Company Limited to start the proceedings. Thank you and over to you, sir.
G. Shivakumar — Executive Director & Group Chief Financial Officer
Good afternoon, everyone, and welcome to this quarterly — quarterly conference call. We’ll run-through the presentation and then of course we are very happy to take your questions. First usual disclaimer, we make no forecast for our earnings or even about the markets, we are simply giving an opinion of how we think the markets can pan-out. We had a solid quarter again with net profits of INR594 crore rupees for the quarter. Our consolidated net asset value is at INR1418. It’s down a little bit over the September number. And we’ve declared our third interim dividend of INR80 per share. This is now the 12th consecutive quarter where we have declared a quarterly dividend
Operator
Shiva Kumar sir, I’m sorry I’m not audible Shiva Kumar sir Shivakumar sir I’m sorry but we are unable to hear you hello ladies and gentlemen please stay connected.
G. Shivakumar — Executive Director & Group Chief Financial Officer
Hello, are you able to hear me now?
Operator
Yes, sir. I can hear you now, sir. Can you start once again, please, sir? Sorry about this.
G. Shivakumar — Executive Director & Group Chief Financial Officer
Good afternoon, everyone, and welcome to the Q3 FY ’25 conference call. Sorry about that small technical glitch. Let me run you through the presentation and then we’ll be very happy to take questions. I have with me Rahul Sheth, who will also be in the Q&A. Our standard disclaimer, we don’t intend to give any earnings forecast. So please take it that way. Our net profits, we had yet another profitable quarter, net profits consolidated were INR594 crores. Our consolidated NAV came down slightly during the quarter and we’ll look at that a little later. We have declared the third interim dividend for this financial year, making it the 12th consecutive quarter of quarterly dividends. I won’t go much into the results for now. You would have seen the results. Let’s go to the normalized numbers. So the normalized numbers are not very different from the from the reported numbers, slightly lower. The significant factor, of course, as it has been for the last couple of years is that we are net cash. So you can see the net-debt number at the bottom of the screen, which was 4 to 80 negative. So we are net cash to the extent of about $500 million on a standalone basis and therefore well-positioned for any market downturn that may come. On ratios, the return ratios, of course, continue to be good. The significant factor that I wanted to point out is on the net asset value, while it’s up year-on-year. So on a standalone basis, we are 1138 versus 1068 a year-ago. We were in September about INR45 rupees higher than this. So we have had a drop-in asset prices. The fleet value has dropped by about $150 million between September end and December end, which has resulted in this drop, of course, compensated by the earnings that we’ve had, so about INR45 rupees got compensated by the earnings themselves. These are the key ratios and the TCY, we won’t go into them. Let’s look at what really — later on we look at what really went into the earnings, what are the factors that went into the market and our earnings. Here’s what happened with the net asset value from a year-ago. So we went up by about INR70 a share between December ’23 and December ’24, of which INR218 came from cash profits, minus INR114 was from a drop-in fleet value. Let me just also clarify here, the drop-in fleet value also includes when a ship which had a profit, let’s say you sold a ship at INR100 crore profit, which is INR7 per share, that will show us minus INR7 in fleet value and plus 7% in the cash profit. So this minus INR114 includes when some ship is sold at a profit and moves from one column to the other from MTM to realized. And then of course, in the last 12 months, we paid out INR33 of dividends. The standalone NAV is again significantly higher than what it was in FY ’20 with a CAGR of 20% plus. And on a consolidated basis, the story is more or less similar. So we had a cash profit of INR250 a share and the fleet value has dropped off a little bit. This is on the debt repayment schedule and we bring it here because we have been doing some prepayments and we have — so we have done some prepayments in this month and we had a scheduled repayment as well. So our debt will be down to only about — is already down to only about $225 million on a gross basis. Of course, we have excess of $700 million against that debt. Now let’s look at what happened in the shipping markets. The shipping markets are disappointed — the tanker markets disappointed in the winter of 2024, ’25 the much expected awaited winter spike did not come and you can see that in the dotted line for the Suezmax and for the MR. So earnings were pretty subdued for the quarter, even as compared to the summer months and much lower as compared to what they were in the previous financial year. They continue to be pretty low on both fronts, whether it’s the crude tankers or the product tankers. There was some excitement in the market for a couple of weeks when some new sanctions were announced on tankers, but after that, it settled down from that flurry of excitement. Looking at what factors went into the earnings, the general weak sentiment prevailed, the oil demand has not been growing as strongly as was expected. The seaborne crude trade actually went down 2% year-on-year during the quarter, while the tanker fleet, of course, because there was very little addition during the quarter, the crude tanker fleet remained flat. One thing which affects tanker markets is refinery margins and therefore refinery throughputs. Our lower refinery throughputs in Asia and Europe curbed the product trade and also the crude trade because these are importing regions. So seaborne product rate has been flat year-on-year during the quarter and — but the fleet saw a growth of about 2%. Asset prices have on average dropped by about 15%, more for the older assets, which had gone up a lot in value and less for the more modern assets. And the order book has been building up. So it’s probably doubled in the last in the last 12 months or so what happened in dry-bulk, the dry-bulk market also remained fairly weak. Cape sizes were not too bad during the quarter but the sub have struggled quite a bit in the October to December quarter and continue to struggle even now, mainly because iron-ore trade has not been growing. It didn’t grow during the quarter. There have been slowing demand in China and drop-in Brazilian exports because of some port maintenance issues. The coal trade has grown slightly, but Indian imports during the quarter saw a drop. And that was mainly because of improved hydropower generation in India. Grain trade has seen a sharp decline because of the lack of Chinese demand because there’s improved domestic supply in China, that’s for corn specifically. The order book for dry-bulk is at little over 10% of the fleet. Even dry-bulk values dropped during the quarter. Our cape sizes by about 5%, while the on average by about 10% during the quarter. VLG sees all of our ships continue to be — the LPG ships continue to be on-time charters. They were — the spot earnings were significantly lower and you will recall that last year we had the spike which was caused by the Panama Canal restricting movement through the canal because of shortage of water. That is now normalized so the — so we’ve seen that the rates have come down to more so-called normal levels from the 95,000 plus that we saw in — in the second-half of calendar ’23. Despite the drop-in prices in freight rates, prices remain at very elevated levels and the order book is very-high. We are talking of a 28% order book for — for VLGCs. The order book I mentioned earlier is about 23% for product tankers and little over 10% for both crude carriers and bulk carriers though the one thing to point out is that the orders are rear-ended, so not too much joining the fleet in Cal 25 and Cal 26, a lot more happening in Cal in 27 for whether it’s crude tankers or product tankers. Scrapping of course, given the current market and the earnings that we’ve seen, scrapping has been absolutely minimal and which makes it the third year in which there has been almost no scrapping. So except for calendar ’21, we saw a little bit of tanker scrapping, we’ve had very little scrapping now since 2019, that makes six years of very low scrapping indeed. This is something that we mentioned earlier. While the order book has been building up, we also have to see it in the context of what the current fleet is live. The aging fleet and defined as greater than 20 years for all ships except gas carriers is much higher than the order book for crude tankers. So you have an old fleet, which is more than 20% of the current fleet, while you have an order book, which is only about 10%. For try bulk carriers, it’s about the same. So you have 10% old fleet and 10% order book. While for product tankers, you have an order book of 22% 23%, while the old fleet is about 18%. Here, one must remember that LR2 is the largest product tankers can switch between carrying crude and refined products. So if you see the crude tanker market being undersupplied or much tighter, you could see some of the product tankers shifting to the crude tanker trade. And LPG carriers, of course, the fleet is pretty young. Only 10% of the fleet is 25 plus, but the order book is 28% there. Looking at asset price movements, I mentioned earlier that we have seen prices coming off quite a bit in the last quarter or so. And they continue to be a little bit lower in this month as well. Coming to grade ship, there has been a gradual improvement in jackup. There was a gradual improvement in jackup utilization till early 2024 when Saudi Aramco off hired or suspended contracts on several rigs. So that you can see that graph turning downwards. But let’s look at what’s been — what’s happening with us. So we have — you will see that we have two rigs for repricing in H2 FY ’25. I had mentioned in the last quarter’s conference call that had obtained a short-term contract in India. This has been terminated by the client citing force measure and we have disputed the termination. We are unable to comment further on the matter, so I would request you not to get too much into that. Apart from that, we have two vessels which are coming up for repricing in this — in the next two months up to-end of March and we have three vessels which are coming up in H1 of FY ’26. All of the repricing that we have seen over the last six to nine months have been at much higher levels than the — than the earlier contracts. So the vessels business continues to deliver good profitability. We also have the Great Drill Chitra coming off-contract, a third rig coming off-contract in H2 of next financial year. Finally, we are not just here to make money. We also see that this has a higher purpose and these are some of the details of our CSR activity, which we’re very proud of. Thank you. That brings us to the end-of-the presentation and we are very happy to take questions now.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may click on raise hand icon tab available on your screen. You may also post your text questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles Ladies and gentlemen, please stay connected so
G. Shivakumar
We can start the Q&A if the queue is
Operator
Yes. We’ll take our first question from Rajesh Khatir, an Individual Investor. Please go-ahead. MR. Rajesh, we are on talk mode now kindly unmute your connection and go-ahead, please. Since there is no response, we’ll move to the next question from Himanshu from Buggle Rock PMS. MR. Pad line is on.
Himanshu Upadhyay
Hello.
Operator
Yes.
Himanshu Upadhyay
Yeah, hello. Good afternoon. Shiva, one question was on the product tankers. When we see our slide number 32, it seems the price of product tankers have fallen much sharply than crude tankers. When you gave the commentary, so even in — so that 15% fall in MR would be — it means higher and crude would be less fall in prices of assets, would that be the case or
G. Shivakumar
That’s right. For — this fall has been much more accelerated for the older vessels? Yeah, but the product tankers have dropped off more than the tanker. That is true.
Himanshu Upadhyay
And any specific reason? Because last quarter when we gave the commentary, it was something like a large order book is for LR2s, which can move to FRAMX also, so we don’t know.
Rahul Sheth
So the asset value correction, which has been product is also in-line with how the charter rates for the product anchors have also fallen off. So they are in-line with that.
G. Shivakumar
And it will be less than 20k.
Himanshu Upadhyay
So okay. And one thing, what we have seen is last three years, China has been — has shown purity, low-growth on the construction activity, okay. And are we — what is yielding to good returns on cape sizes because generally majority of cargoes on cape sizes are on iron-ore and coal, okay, which and Supramax and all those categories, which are more meat and all those things. So on that will be good.
Rahul Sheth
Yeah. So on the cape sizes, you’re right, predominantly it’s high now. Now we have seen that the data from China has been weak for a couple of years on the real-estate sector side. So what has actually happened is that even though some of the data was weak, export and basically when China exports, they have to consume a lot of steel in manufacturing, it’s packaged into some good and then exported. So that was holding up the demand because steel manufacturers in China, they all get quotas from the government and they won’t prefer to cut production unless they really need to. So they were always finding some end-use for that steel. And the iron-ore production in China has also been a bit weak. So because of that, it gave little bit support to iron-ore imports for the steel manufacturers. Also on the flip side, Chinese steel manufacturers kept exporting steel. So if you see the steel exports from China, they’ve doubled from 60 million tonnes or 120 million tons. 120 million tons is a — it’s larger than the Japanese steel market. Now what’s probably happening is that the amount of steel that one can export is getting — may be getting capped out. The amount of manufacturing to other countries like US and Europe may also face an issue with Trump’s tariffs. So — and the amount of iron-ore that the production that was lagging and therefore the required imports that also maybe tapering off, which may lead to the current weakness we’re seeing on the spot market.
Himanshu Upadhyay
Okay. And can you give us in the
Rahul Sheth
Which had less support from iron-ore, they started correcting before the cape sizes.
Himanshu Upadhyay
Okay. Okay. And can you give an idea of the fall in fleet value, how much would of that 150 million, how much would be on shipping and offshore — are offshore values also coming down or
Rahul Sheth
No number the 150 million was only shipping?
Himanshu Upadhyay
Okay. So offshore remains constant.
Rahul Sheth
INR50 million I mentioned was only shipping. Offshore, no change in that. We do that valuation only once in six months. So we didn’t get an update, but I don’t think there’s a change. We haven’t seen any transactions recently. Please.
Himanshu Upadhyay
Okay. And one last thing. In terms of attractiveness of markets, okay, how are you looking at the accrued product and dry-bulk? And any thoughts on that? And we made a transaction recently also on dry-bulk some thoughts on that will be helpful.
G. Shivakumar
So even though crude and product prices have corrected, there’s still probably a long way to go before it becomes in a very attractive buying zone. But what we’ve seen in the past is that it can — prices can correct very fast. Now we don’t know whether it’s going to correct very fast or not. You know there have been I don’t know whether you picked-up on the news, where there have been sanctions from just before Biden left on certain ports in China from carrying on certain ships carrying Russian crude to ports in China. Now that may be a big positive. So we don’t know whether the prices will eventually correct to our levels or not, but today they are still quite elevated. Dry-bulk itself, while the freight rates have corrected, the asset values are still taking time to fall in-line. And on gas and if you see the gas market, the shift did mention that the freight rates are now closer to probably the long-term averages. But the asset values have not really corrected at all. So now it becomes — so as of today, all the three the — all the three sectors, the asset values are quite high, relatively quite high to the earnings. But whether they will correct sufficiently or not in the futures we will have to see. And then we will be able to say which one is the most attractive to take a call.
Himanshu Upadhyay
See interesting commentary but see what will be the plan B if you say we don’t know the, they will fall to our levels or not? So it may fall, it may not fall, but then if it does not fall, any thoughts on that and how do you look at the markets in — what can be your plan B? And are we increasing to hire more ships on, let’s say, period charters, what I would say?
G. Shivakumar
Yeah, sir. Yeah. So see there are multiple options if there is — so if the freight rates are high and the current yields are good, it doesn’t mean that we already have a certain exposure. And as you’ve seen in the last few years, the profits have been quite good, right? So you always have an opportunity to get that. If the freight rates have come off and the asset value still remain high, right? It will take time, but they will end-up correcting. Now one can depend — one will then have to decide on outlook, whether one wants to wait exactly for those prices that make it very attractive or there is somewhere in-between you can enter. And also — and you did mention that we also always evaluate whether we should in-charter because like I mentioned, the freight rates have corrected, right, versus buying a ship. Eventually, you end-up taking exposure to the market. But instead of putting in the capital at a price at which you may not get the return that you want. If you in charter it and you get the exposure in the market, you may be able to generate the returns from there.
Himanshu Upadhyay
So currently, we’ll have only two ships in charter or there are more
G. Shivakumar
As of today, there are two in.
Himanshu Upadhyay
Okay. Thank you from my side. Thank you.
G. Shivakumar
Thank you.
Operator
Thank you. We’ll take our next question from from Honesty and Integrity investment. Please go-ahead.
Vaibhav Badjatya
Yeah, hi. Sorry. Thanks for providing the opportunity. So on this — yeah, hello, can you hear me?
G. Shivakumar
Yes, we can hear you loud and clear. Please go-ahead.
Vaibhav Badjatya
Yeah. So on the recent sanctions that have been imposed, so if you can help us firstly quantifying it in terms of as a percentage of the total fleet, how many crude and product tankers have been sanctioned and secondly whatever these sanctioned tankers are, I mean if they can be put to use and do you see a case where these tankers will not be able to put to use and that’s why might create some tightness in the market or how this oral thing is going to impact in your assessment?
Rahul Sheth
Yeah. So good question. So about 180 odd tankers have been sanctioned, predominantly there in the crude space. There are some ships out-of-the sanction list that can carry both crude and product. But what we are seeing is and it becomes difficult to know whether they were carrying crude or product at the time. But if you look at the fleet that has been sanctioned, they carry — they have predominantly carried Russian crude and they totally carry about half the exports from Russia. So Russia exports roughly 3 million, 3.5 million-barrels of crude. Half of that is carried on these newly sanctioned ships. We have seen the US sanctioned ships in the past after the war was declared. And all those ships that were sanctioned eventually ended-up not carrying any carbon. And at least that’s the data that we have. So of course, if they’re unable to find any alternate trade, it becomes difficult, right? I mean the market will become very tight. So how they will eventually do something else is difficult to see. Having said that, you know, I think it’s a bit too early to see how the market develops. And I think the market somewhere feels that maybe they will — Russia will manage something. We have seen some amount of crude going to a very nearby port in China, which is outside the Shandong province and they are importing crude from Russia on these sanction ships. They are a fraction of what Shandong to import, but they have gone there. Now will it be possible for all the vessels to carry all the crude that they were carrying and go to other places? You know, this is a trade where a lot of things are obscured and therefore it’s very difficult to say exactly this or that will happen. But the number of ships that have been sanctioned are quite large soon after sanctions actually were put in-place, we did see the VLCC rates spike up as people get to secure some cargoes of crude, especially from the Middle-East or other places in West of the. But those rates did start coming off. So when you start reading from the market, maybe some of the buyers of oil felt that the market may not have a sudden shortage as-is initially expected. We should also keep in mind that the sanction ships have roughly until the end of February to discharge their cargoes. So I think we will see how the market settles down in the month of March. And this period — it does weigh on the market because it’s Chinese New Year and China being the largest buyer also has refinery maintenance. So it’s a seasonally or not a seasonally, but at least for the next couple of weeks, a low period for refinery runs. So you know, the net demand of crude also comes off, off, so maybe the market can absorb a bit less of crude moving. But I think in a couple of months, we will come to know-how the market reorients itself to this bank.
Vaibhav Badjatya
Got it, understand. So I think I might have missed your comment. You said that this ships which were sanctioned in the earlier rounds, not the latest one, they have not been able to put to use broadly.
Rahul Sheth
That’s the data we have.
Vaibhav Badjatya
Okay, got it. And is it possible — it might be a very basic question, but is it possible that Russia load the load the oil and then and then somewhere in the sea, you know the whole tankers get — get to another tanker and then get transported somewhere closer to another port. Is it practically possible to do possible.
Rahul Sheth
But what has happened since the war and the rules have become tighter over the past few years, whereby they ask where say a port in Chandor would ask for where the crude originated from in Russia and how it reached China. Now if someone along the supply-chain obscures the data flow and incorrect information is, then all of this is maybe possible, we don’t know. But if someone shows that a sanctioned vessel carried it from Russia to another ship and then the other ship brought it to China, that would be probably a breach of the US sanctions and therefore, that could not be allowed. Therefore, that becomes a very risky activity now that they know that the US is taking this very seriously.
G. Shivakumar
Yes, the step of the US and showing taking it very seriously.
Vaibhav Badjatya
Right, got it. And so I mean as a percentage of the crude fleet, how many would these tankers be?
G. Shivakumar
Maybe about maybe about 5% because of 40%, maybe 3%, 4%, maybe
Vaibhav Badjatya
3%, 4%. And the product would be much lesser, you’re saying products would be.
G. Shivakumar
Yeah, products would be slightly lesser, yeah. Like I mentioned, some of the plankers are also — have the capability to carry product, but the exports for are much larger. So it has a of impact there. So another data point that we have seen is that Russia has increased the refinery runs, which means that they are processing more of their crude, creating it into products. And again, it’s too soon, but one would expect that now they will export or try to export more products because the crude is getting out. And then one can again presume maybe they have the product tankers to do that. You have to inflow from this data because it’s not all very clear.
Vaibhav Badjatya
Correct, right, right. Yeah. And just if you convert this 3%, 4%, 5% into probably turmoil, it might be more because Russia because of this trait to India and China, there were more turn, I mean in terms of mine, but on an average, average mine on these tankers might be higher than other tankers and that’s why it can be — it is more in terms of
G. Shivakumar
When the war broke out, the — so when you have to compare the ton mile, you have to compare the change. So first Russia was sending it to Europe versus that when it sends it to India, the ton miles increases. And if India, we have to — we have to determine where that crude is coming from. So I that mine. But if it is coming from rest of the sewers, it’s equally the same or more ton mines. The other thing you have to keep in mind is that if these vessels truly are out-of-the system completely, right, that 3%, 4% of the trade that those vessels are not doing. And therefore, there will be a net increase into the legitimate rate. So there will be actually more volumes, there’ll be additional volumes to the legitimate trade because the number of tankers being the legitimate trade is static, right? Now there was some trade being done by illicit tankers which will now come to the legitimate trade. So even if the crude from some places like in the Middle-East or West, the overall trade will increase. So you have just to put this in numbers, let’s say that the overall trade was 100 and now four of that has gone out and those ships doing that four have also gone out. Consumption is still 100 therefore, now you have to still carry 100, which makes the market — and if those four ships have gone out, then the market becomes a little tighter. Of course, then you have to adjust for the ton mile impact of Russia towards to Middle-East to India or whatever as it is. But net-net, a tightening of sanctions on tankers is a positive for the trade, for the — for the supply-demand balance. Right. Because it will remote — effectively remove ships from the supply.
Vaibhav Badjatya
Got it. Understand. Yeah, that’s it from my side. Thank you.
G. Shivakumar
Okay. Thank you.
Operator
Thank you. We’ll take our next question from Vikram Suryavanshi from PhillipCapital India. Please go-ahead. MR. Vikram Suryavanshi, kindly unmute your microphone and go-ahead with your question, please.
Vikram Suryavanshi
Okay. Am I audible now?
Operator
Yes. Please go-ahead.
Vikram Suryavanshi
Okay. Thank you. Sir, what would be your net cash balance in offshore business?
G. Shivakumar
Net cash, meaning net of the debt?
Vikram Suryavanshi
Yes.
G. Shivakumar
Net of debt cash balance there is $40 million.
Vikram Suryavanshi
Okay, understood. And this asset price correction, is it what we discuss as a market fundamental impact or does it also have some impact of dollar strengthening?
G. Shivakumar
Not really. I would not think so. But any factors can go into it, but typically these are linked with — I see where you’re coming that dollar strengthening means other things drop-in value in dollar terms, but not really. It’s probably more to do with the earnings than currency.
Vikram Suryavanshi
Understood. And in case of, how would be opportunity for, say, mobilizing it into international market or we stick priority will always be a domestic market first.
G. Shivakumar
So we continue to explore opportunities everywhere. But currently we have to two other tenders in India.
Vikram Suryavanshi
Okay. So we’ll wait for that clarity basically.
G. Shivakumar
That’s right.
Vikram Suryavanshi
Okay. And last one on normalization, how do we see it impacting going-forward?
G. Shivakumar
Firstly, maybe too soon to talk about whether it will definitely normalize right now, there is only a ceasefire. But if it does normalize, I’ll just give you the broadcast. Are maybe on crude it’s a neutral impact and on products is probably a negative impact. On dry-bulk, it never had a major impact to begin with.
Vikram Suryavanshi
Okay. Got it. And historically, we used to have some of the data where crew tankers were used to for storage purpose and all that. Is that trade, look, how is that because we have not really looked into that angle for a long-time. So with the sanctions and all that coming up. So probably how these shifts will play-out or can they change the ownership and come back to the system just to get some idea on that side?
Rahul Sheth
Yeah. So on this, I think there were two questions there, but on the storage front, so basically we see this happening where the spot price of oil is relatively lower than the forward price. That’s what we call contango. So let’s say the current price is say $80 and the forward price is say $100, it makes sense for traders to buy oil to refill it up on a ship, pay the charter hire, sell it forward in the oil market and capture the spread like an arbitrage spread. Today, the oil price is in backwardation, which means the forward price is lower than the current price. So that opportunity is not there. If that opportunity does arise, then I’m sure — and the match has to work-out, then the traders would do that. But today, you know, if the Russian oil is impacted, you’ll actually have a shortage of oil or a tighter oil market today. So it’s very unlikely for you to see it in Contango in that case. Sorry, did you have a second question?
Vikram Suryavanshi
Yeah. Second question was on basically changing the ownership of these missiles and can that sanctions removed or
Rahul Sheth
The sanctions typically follow the ship
Vikram Suryavanshi
Okay understood, sir. Thank you very much.
G. Shivakumar
Okay. Thank you.
Operator
Thank you. We’ll take some text questions now. We have a question from Yada, an individual investor. What’s the strategy for capital allocation for coming year? Given sizable cash position, will second purchase be the preferred strategy or any new-build program also being considered?
G. Shivakumar
So as a — so we don’t give out any capital expansion plans in detail. But generally our preference is always for secondhand ships over new building. Can we go to the next question, please?
Operator
Sure. Next question is from Rajesh, an individual investor. First question is, asset prices dropped by 15%, are they still not attractive to buy? Second, is the company still not keen to do buyback through market purchase method when the share price has dropped to INR900 and the third question is, there seem to be no-growth triggers for the business at all. Where will the growth come from?
Rahul Sheth
Okay. So on the first question is, the asset values have risen quite a bit. So while it has dropped 15%, there still could be a long way to go. The second question is on the buyback. So we always evaluate whether we should go for ships or do a buyback. So we will evaluate that, but in the immediate future, we have no plans. On the third, on growth, so in this business, you have to be patient when the asset values are on what we believe to be on the higher side. But when they do come to the levels we can see that is the period to grow substantially. So even if you see in our last growth phase, which was in 2016, ’17, we have taken the fleet from about 30 ships to 50 ships in a very short window. And the benefits of that we have seen over the last five years with the profits that the company has generated, of course, the market has been on our side. But when you buy wisely and then you are able to get the market timing right, that is what gives you the outsized profits. So the growth will come, but it will come in a relatively narrow window at some point in the future.
G. Shivakumar
So just adding on to that point that Rahul made, we did buy-in 2016, ’17, ’18, and we did a significant capex and we made a — those are very profitable investments. But for a few years before that, we did not invest because we did not see those as being very attractive investments. And it turned out to be right because we got the opportunity to make those attractive investments. We believe that is what we do best and that is how we have managed the cycles in the past and therefore, we will continue to do that.
Operator
Should I take the next question, sir? The next text question is from Riya Mehta, Equitas Investments. Will we be increasing in chartership? What is the timeframe for which they are contracted? How do we earn from scrappage, fleet which will go in scrappage in the next two years
Rahul Sheth
So again, whenever we are deciding to in-charter ships, we decide between whether we should in-charter or buy a ship and that is a calculation we have to keep doing at the time of investment. These contracts that you in charter, they can range from about two years to 10 years. Generally, they don’t cross five years, but you know we have seen contracts go longer than that. We don’t own scrappage from these in charters because you are not owning the asset, you are basically taking that in for three to four years time, not related to — relating to our fleet?
G. Shivakumar
Yeah. So we — yeah, we don’t earn from — when we scrap ships, we have not scrapped our ship for quite some time. When you scrap chips, basically you sell it for scrapping, you — you receive whatever is the market price for the steel, for the scrap steel. And when we — and you know, very often we do sell ships above scrap. So we end-up selling it to someone else who may traded for a few more years. Okay. Can we go to the next?
Operator
Thank you. Yes. Next question is from Amit Khettan from Laburnum Capital. Does the last quarter’s offshore earnings reflect only one-rig being employed since one of the contracts was terminated. How should we think of the timeline for the rest of rigs being reflected in revenues?
G. Shivakumar
So in this quarter, the Q3, we had three rigs operational. Only one-rig was not employed and we cannot give anything on the timelines because it depends on how fast the tenders are processed.
Rahul Sheth
So currently, just to clarify, we have four rigs, of which three continued through their — through Q3 in their contracts — on their contracts and contributed to profitability, revenues and profitability. Only the Chetna finished her previous contract in October and then she did her work preparing for the next contract. So the other three rigs were working. As it stands today, we still have three rigs working. The Chaya, Greater Chaya comes off-contract sometime soon in the next couple of weeks. But to — the other two rigs will continue on their contracts even in this quarter. So it’s not just one-rig being employed. Last quarter it was only one-rig which was not employed and as it stands, there is one-rig which is not.
Operator
Thank you. Next question is from Rajesh Khatir, an individual investor. If the war ends, a hypothetical scenario, where do you see the freight rates moving for the different classes of ships? And second question is mail sent to Anand at remains unanswered till now to which mail ID should we send questions and can we expect response?
G. Shivakumar
Yeah. The war ending is, again, as you said, a hypothetical scenario. And there are many different scenarios which can be drawn there for freight rates with very widely varying outcomes. You can have a very strong market and you can have a very weak market as well. If you have all the ships continuing to be in the trade and the trade patterns reversing to where they were in 2021. So it’s — there are so many variables here that there is no point getting into forecasting the freight rates in that situation. With regard to the mail, the intention is that we have a quarterly conference call. We are in the month of January, it is quite a sensitive time to be discussing anything with regard to the markets. And since there is a quarterly conference call, which was expected immediately after the Board meeting, we felt that it is better to answer the questions in a conference call
Operator
Thank you. Next question is from Manya, retail investor. Company trades at 4 of 5pe and price NAV of 0.6, which is not valuing the company as it should. With substantial cash-in hand, are we also looking for acquiring some companies and diversify or we will wait for ship prices to come down?
G. Shivakumar
No, we are not currently looking to buy any companies and diversify those. We will continue to invest in the shipping business.
Operator
Thank you. Next question is from Dhruv Jain from Ambit Capital. In Cal ’25 and Cal ’26, we are seeing increasing product tanker deliveries. Does this mean that rates continue to be weak across CAL 25 given weak crude demand environment? What could change this equation.
Rahul Sheth
So yeah, on the product tanker side, we are seeing increased deliveries. We have to also keep in mind that the age profile of the tanker fleet is also very old. And how many ships you know if scrapping picks up or not, whether terminals will accept the ships or not and of course the impact of the sanctions. We don’t even know whether the sanctions will increase because if Trump wants to put more pressure on Russia, there could be additional sanctions as well and I think that sanctioning regime has also gotten tighter over the past few years so that can also restrict the supply
Operator
Thank you. Next question is from Rajesh, an individual investor. Can you explain the profitability metrics of your leasing business? And second question is, if the mail is sent in the month-after the results are already declared, can we expect response?
G. Shivakumar
Yes. So the profitability metrics of the leasing business or the in-chartering business is that we’ve taken a ship on — on a long-term contract, maybe two years, years, three years, five years at a fixed-rate and we run that ship taking the risks and benefits of the spot market and therefore maintaining our ability — maintaining our capacity and our ability to service the customers. This one would do in a high market where the worry is about the capital value of the ships falling and that’s where you would — so let’s say you take-in at $30,000 per day and you earn a spread of maybe — maybe or you earn $33,000 a day-on that ship, that $3,000 a day is earned for — without putting in too much capital except for the working capital which is associated with the ship. Coming to the next question yes so long as there are no the question does not ask for any sensitive information there will be a response.
Operator
Thank you. Ladies and gentlemen, to ask a question you may click on the raise and icon tab available on your screen or you may also post your text questions. There’s a text question from Rajesh, an individual investor. Considering the high order book for fleet supply, even though most of the new fleet will come in sea by 2027, it seems the best hope case for freight rate increase is this year and next year only. Is the understanding correct?
Rahul Sheth
I think it’s impossible to draw this conclusion to say that you know where the freight rates will end-up. I think just seeing one-side of the equation of supply is too narrow. Just to give you an illustration, in the gas market, in the LPG market. We have seen a very-high order book for the last 10 years and the earnings have been very good even for the last 10 years because the demand has always surprised to the upside. Of course, there have been years of weakness in-between. But demand is sometimes very difficult to gauge. And we have to also keep in mind the ton mile impact. So if you see even the impact of the Russian war, a lot of that has to do with disruption in the trade. So the demand — the absolute demand numbers may not have changed substantially, but the trading patterns have and that caused the market to be where it has been for the last three years. So I think just taking this one point is too narrow.
Operator
Thank you. We have a question from Riya Mehta from Equita’s Investments. Why will we in charter when asset prices reduce? Should we not buy then? And second question is the asset prices of product ships have reduced, how much will this impact us since this was our growth trigger?
Rahul Sheth
So when we are balancing between an in-charter and buying a ship, let us just take an example. Let’s say we are in charging at just to take a base at $100, when you are, let’s say you buy paying $100 a day-to in-charter a ship for say five years, when you’re buying a ship, eventually you have a breakeven because you’re investing capital and you have to make a return on that. So you have to value the two and see which one is the better deal. Of course, at points in time, you may not get sufficient in chartering deals, you may not get sufficient or attractive enough purchase deals. So then you may have to choose the deal you have on the table. But broadly, that’s the math one does. The asset price of ships have reduced, how much? Sorry, I didn’t understand your second question. Can you take?
G. Shivakumar
Yeah. So the asset prices have reduced. This will not really impact us I mean if it reduces more we will have an opportunity to buy yeah we can move on.
Operator
Okay. The next question is from Surendra Yado, an individual investor. What’s the succession planning with reference to promoter family?
G. Shivakumar
Yeah. In this case, I think this is a very significant question, which I don’t think we can answer here. But the fact is that the company is — while there is a promoter group, the company is run by a group of professionals below the promoter level and all plans are in-place. And these are regularly discussed as well with the Board.
Operator
Thank you. The next question is from Ria Mehta from Equitas Investments. In the next five years, do we have any ship which will be due for scrappage?
Rahul Sheth
So there are always ships which will be aging and which may fall. If you just do a forward-look at the next five years, there will be ships which are aging and which might have to be scrapped. As I mentioned, it is a long-time since we scrapped a ship itself because we sell them to other players who continue to run there. We operate in the international markets typically where the age restrictions are much more stringent. But other players can operate in — in specific niche markets where they can operate for longer periods. We typically sell our ships, older ships there. So it’s unlikely that we will be actually scrapping ships ourselves.
Operator
Thank you. Next question is from Shrikan Manyar, retail investor. We are still not interested for bidding on Shipping Corporation of India?
G. Shivakumar
No.
Operator
Thank you. Next question is from Rajesh, an individual investor. When asset prices eventually drop, they may drop due to drop-in freight rates. Can bad times be good times for GE ship in the sense that that’s the only time you will buy ships, but during that time the freight rates may not be good.
Rahul Sheth
That’s actually probably the best time to buy ships because what happens is the spot market or the freight market may be bad for a certain period of time. If you get the asset values, if you’re able to do a large part of your expansion at that point in time, you can become a — you will have much lower breakevens. And your assets will last much longer than the period at which the freight rates are poor. So all the ships we bought in ’16, ’17, ’18, which are the lower-end of the cycle, they are all there today and you’re benefiting from the earnings that have been generated in the last few years. Yes, basically you have to place yourself well to take advantage of the low market where you can expand or the high market where you are able to trade-in a manner in which you can take benefit of the higher freight markets. So you have to prepare for both types of markets.
G. Shivakumar
And you’re absolutely right, the freight rates — if the freight rates are not good at that time, your profitability will be affected. And we have seen — our shareholders have seen this in the past. After we did that massive expansion in 2016 to ’18, we actually had a year where we declared a loss because the rates were not good. But eventually it makes a lot of money and makes good returns for the shareholders. But you’re absolutely right. That’s the time when we will hopefully be looking to do our capex.
Operator
Thank you. Ladies and gentlemen, I now hand over the call to Ms Anjali Kumar for closing comments. Over to you, ma’am. Any closing comments from you?
G. Shivakumar
Yeah. Yeah, no closing comments. I can see one more question from Mr Katel. Eventually yes, we plan to have a much larger fleet. We will not put a number to it. It depends on how much we are able to buy and at what prices. So eventually our plan is to grow. It’s just that the business does not lend itself to growing on a linear basis. So you will have some periods where we will have quick growth as we had in that period, 2016, 2018 and some periods where we will just be consolidating and collecting the cash for the next round of opportunities. Thank you everyone for joining us on this call. As always, the transcript and the recording will be up on our website in a couple of days. Thank you. Thank you very much.
Operator
Thank you. My pleasure, sir. Ladies and gentlemen, on behalf of GE Shipping, you may now exit the meeting. The call has been concluded for today. Thank you.