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Essar Shipping to refinance $30-m debt, save on interest
Business Line - July 23, 2003 Abhrajit Gangopadhyay, C. Shivkumar  
ESSAR Shipping Ltd (ESL) plans to refinance $30 million of its debts tracking low interest regime worldwide and save close to $3 million as interest payouts.

Speaking to Business Line, Mr Sanjay Mehta, ESL's Managing Director and Chief Executive Officer, said, "Whether the refinancing is to be done in rupee or in foreign currencies is still being studied." The estimated savings would be in the region of about 3 per cent. However, the effective savings was likely to be much more, if the refinancing was done in foreign currencies if the current trend in the foreign exchange markets continued, he said.

The refinancing was not likely to make any big impact on the debt-equity ratio. ESL's debt-equity ratio is currently in the region of about 0.54:1. But the reduced interest costs would have an impact on the bottom lines, he added. The company expects to grow its top line by close to 10 per cent in the current fiscal even as net earnings are likely to stay flat year on year, Mr. Mehta said.
The company, in its bid to reduce volatility towards freight rates, plans to focus increasingly on logistics package solutions that include lighterage (transhipment from large vessels to smaller vessel) and storage facilities. This business, which currently accounts for 5 per cent to Essar Shipping's revenue, is likely to grow by at least 6 per cent per year, Mr Mehta said. However, carriage of crude would continue to remain the mainstay of its business, he added. Currently, Essar transports about 94 million barrels (7.4 barrels to a tonne) of crude to the US accounting for about one quarter per cent of that country's oil imports.

Regarding domestic transportation, ESL would have the preference for crude and products transport for the group's refinery venture, Essar Oil Ltd. Such shipment would involve transportation of 18.5 million tonnes of crude This contract, however, would comprise only a small portion of its revenues, he added.
But ESL was keen on meeting the transportation requirements of the four oil companies in the country, Mr Mehta said. For the last month alone, ESL had transported about 4,20,000 barrels of oil for IOC, HPCL and BPCL.

Referring to ESL's, bid for the public sector Shipping Corporation of India, he said that the due diligence was still underway. ESL is one of the shortlisted bidders for SCI. ESL's advisor, KPMG, is likely to submit the report in few days, Mr. Mehta said.

Financial bids would be framed and finalised following the report, he added. Since, SCI's fleet consist mainly of tankers, ESL would be interested in taking over the company as it offered significant synergies, he added.
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