The Great Eastern Shipping Company Limited (500620) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. Thank you for standing by. Welcome to GE Shipping earnings call and declaration of its financial results for the quarter ended December 31, 2024. [Operator Instructions] I now hand over the conference to Mr. G. Shivakumar, Executive Director and CFO at The Great Eastern Shipping Company Limited to start the proceedings. Thank you, and over to you, sir.

Good afternoon, everyone, and welcome to this 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're simply giving an opinion of how we think the markets can pan out. We had a solid quarter again with net profits of INR 594 crores for the quarter. Our consolidated net asset value is at INR 1,418. It's down a little bit over the September number. And we've declared our third interim dividend of INR 8.10 per share. This is now the 12th consecutive quarter where we've declared a quarterly dividend. [Technical Difficulty]

Shivakumar sir, I'm sorry, you're not audible.

Hello. Are you able to hear me now?

Yes, sir. I can hear you now, sir. Can you start once again, please, sir? Sorry about this.

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. Standard disclaimer. We don't intend to give any earnings forecast. So please take it that way. Our net profit, we had yet another profitable quarter. Our net profits consolidated were INR 594 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 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 INR 4,280 crores negative. So we are net cash to the extent of about $500 million on a stand-alone 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 stand-alone basis, we are INR 1,138 versus INR 1,068 a year ago. We were in September about INR 45 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 INR 45 got compensated by the earnings. These are the key ratios and the TCYs, 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 INR 70 a share between December '23 and December '24, of which INR 218 came from cash profits, minus INR 114 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 a INR 100 crore profit, which is INR 7 per share, that will show us minus INR 7 in fleet value and plus INR 7 in the cash profit. So this minus INR 114 includes when some ship is sold at a profit and moves from one column to the other, from MTM to realized. Then, of course, in the last 12 months, we paid out INR 33 of dividends. The stand-alone NAV is, again, significantly higher than what it was in FY '20 with a CAGR of 20% plus. On a consolidated basis, the story is more or less similar. So we had a cash profit of INR 250 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 disappointed -- the tanker markets disappointed in the winter of 2024, '25. And 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. Lower refinery throughputs in Asia and Europe curbed the product trade and also the crude trade because these are importing regions. So seaborne product trade 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 probably doubled in the last 12 months or so. What happened in dry bulk? The dry bulk market also remained fairly weak. Capesizes were not too bad during the quarter, but the sub-Capes 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 a 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 a little over 10% of the fleet. Even dry bulk values dropped during the quarter, Capesizes by about 5%, while the sub-Capes on average by about 10% during the quarter. VLGCs, 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 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 of a 28% order book for VLGCs. The order book, as I mentioned earlier, is about 23% for product tankers and a little over 10% for both crude carriers and bulk carriers. 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 '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, which makes it the third year in which there's 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 6 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 like. The aging fleet 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 dry 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 LR2s, 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 Greatship, there's been a gradual improvement in jack-up -- there was a gradual improvement in jack-up 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 2 rigs for repricing in H2 FY '25. I had mentioned in the last quarter's conference call that Greatdrill Chetna had obtained a short-term contract in India. This has been terminated by the client citing post major, 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 2 vessels which are coming up for repricing in this -- in the next 2 months up to end of March. And we have 3 vessels, which are coming up in H1 of FY '26. All of the repricings that we have seen over the last 6 to 9 months have been at much higher levels than the earlier contracts. So the vessels business continues to deliver good profitability. We also have the [ Greatdrill 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 are very proud of. Thank you. That brings us to the end of the presentation, and we are very happy to take questions now.

[Operator Instructions] We'll take our first question from [ Rajesh Khater ], an individual investor. Since there is no response, we'll move on to the next question from Himanshu Upadhyay from BugleRock CMS.

Shiv, one question was on the product tankers. When we see our Slide #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 -- means higher and crude would be less such fall in prices of assets? Would that be the case or...

That's right. This fall has been much more accelerated for the older vessels. Yes, but the product tankers have dropped off more than the crude tanker. That is true.

And any specific reason? Because the last quarter when you gave the commentary, it was something like a large order book is for LR2s, which can move to Aframax also, so we don't know.

The asset value correction, which has been on product is also in line with how the charter rates for the product tankers have also fallen off. So they're in line with that. It has been less than 20,000.

Okay. And one thing, what we have seen is last 3 years, China has been -- has shown pretty low growth on the construction activity. Are we -- what is yielding to good returns on Capesizes, because generally, majority of cargoes on Capesizes are iron ore and coal, and Supramax and all those categories, which are more wheat and all those things. So some thoughts on that will be good.

Yes. So on the Capesizes, you're right, predominantly it's iron ore. 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 don'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 a 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 to 120 million tonnes. 120 million tonnes 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 -- maybe getting capped out. The amount of manufacturing to other countries like U.S. and Europe may also face an issue with Trump's tariffs. So -- and the amount of iron ore, the production that was lagging and therefore, they required imports, that also may be tapering off, which may lead to the current weakness we're seeing on the spot market.

But can you give an...

The sub-Capes which had less support from iron ore, they started correcting before the Capesizes.

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...

No, the $150 million was only shipping.

Okay. So offshore remains constant.

$150 million I mentioned was only shipping. Offshore, yes, no change in that. We do that valuation only once in 6 months. So we didn't get an update, but I don't think there's a change. We haven't seen any transactions recently.

Okay. And one last thing. In terms of attractiveness of markets, okay? How are you looking at the crude, 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.

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. There have been certain, 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 Shiv did mention that the freight rates are now closer to probably the long-term averages. So the asset values have not really corrected at all. So now it becomes -- as of today, 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 future, we will have to see. And then we will be able to say which one is the most attractive to take a call.

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 this? What can be your plan B? And are we increasing to hire more ships on, let's say, period charters, what I would say?

Yes. 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 values still remain high, right, it will take time, but they will end up correcting. Now one can -- one will then have to decide on outlook, whether one wants to wait exactly for those prices either 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.

So currently, we'll have only 2 ships in charter or there are more?

No. As of today, there are 2 in in-charter.

We'll take our next question from Vaibhav Badjatya from Honesty and Integrity Investment.

So on this -- so on the recent sanctions that have been imposed, 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 how -- where 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 overall thing is going to impact in your assessment?

Yes. So good question. So about 180-odd tankers have been sanctioned. Predominantly, they are 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 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 U.S. sanctioned ships in the past after the war was declared. And all those ships that were sanctioned eventually ended up not carrying any cargo. And at least that's the data that we have. So of course, if they're unable to find any alternate, it becomes difficult, right? I mean the market will become very tight. So how they will eventually do something else is difficult to say. Having said that, 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, all these sanctioned 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? 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 the sanctions actually were put in place, we did see the VLGC rates spike up as people try to secure some cargoes of crude, especially from the Middle East to other places in west of the Suez. 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 it initially expected. We should also keep in mind that the sanctions 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 the net demand of crude also comes 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 ban.

Got it. Understand. So I think I might have missed your comment. You said that the ships, which were sanctioned in the earlier rounds, not the latest one, they have not been able to put to use broadly.

They've not been able to put to use. That's the data we have.

Okay. Got it. And is it possible -- it might be a very basic question, but is it possible that Russia load the oil and then somewhere in the sea, the coal tankers gets emptied to another tanker and then get transported somewhere closer to another port. Is it practically possible to do?

It is possible. 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 Shandong 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 filed, then all of this is may be possible, we don't know. But if someone shows that a sanctioned vessel carried it from Russia to another ship and then the another ship brought it to China, that would be probably a breach of the U.S. sanction. And therefore, that could not be allowed. Yes. Therefore, that becomes a very risky activity now that they know that the U.S. is taking this very seriously. This step of the U.S. is showing that they are taking it very seriously.

Right. Got it. And so -- I mean, as a percentage of the crude fleet, how many would these tankers be?

Maybe about 5%, because [indiscernible] maybe 3%, 4%, maybe 3%, 4%.

Okay, 3%, 4%. And the product would be much lesser you're saying.

Yes, product would be slightly lesser, yes. Like I mentioned, some of the tankers are also have the capability to carry product, but the crude exports from Russia are much larger. So it has a greater impact there. So another data point that we have seen is that Russia has increased the refinery runs, which means that they're processing more of their crude, treating 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 very difficult. And then one can again presume that maybe they have the product tankers to do that [indiscernible] info from this data because it's not all very clear.

Correct. Right, right. Yes. And just -- if you convert this 3%, 4%, 5% into probably tonne-mile, it might be more because Russia -- because of this straight to India and China, Russia might -- there were more -- I mean, in terms of miles on an -- average, average mile on these tankers might be higher than the other tankers, and that's why it can be more -- it is more in terms of [indiscernible].

Yes. So when the war broke out -- so when you have to compare the tonne-mile, you have to compare the change. The first Russia was sending it to Europe versus that when it sends it to India, the tonne-miles increases. And if India need crude, we have to determine where that crude is coming from. So it's tonne-mile, but if it is coming from the rest of the Suez, it's equally the same or more tonne-miles. The other thing is 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 trade. So there will be actually more volumes. There will be additional volumes to the legitimate trade because the number of tankers being the legitimate trade is static, right? And now there was some trade being done with illicit tankers, which will now come to the legitimate trade. So even if the crude comes 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 4 of that has gone out. And those ships doing that 4 have also gone out. Consumption is still 100. Therefore, now you have to still carry 100, which makes the market -- and if those 4 ships have gone out, then the market becomes a little tighter. Of course, then you have to adjust for the tonne-mile impact of Russia [indiscernible] Middle East to India or whatever else it is. But net-net, a tightening of sanctions on tankers is a positive for the trade -- for the supply-demand balance. Because it will effectively remove ships from the supply.

We'll take our next question from Vikram Suryavanshi from PhillipCapital India.

Okay. Sir, what would be your net cash balance in offshore business?

Net cash, meaning net of the debt?

Yes.

So net of debt, the cash balance there is $40 million.

Okay. Understood. And this asset price correction, is it what we discussed as a market fundamental impact? Or does it also have some impact of dollar strengthening?

Not really. I would not think so that -- 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 the currency.

Okay. Understood. And in case of a weak, how would be opportunity for, say, mobilizing it into international market or priority will always be a domestic market first?

So we continue to explore opportunities everywhere. But currently, we have bid into 2 other tenders in India.

Okay. So we'll wait for that clarity basically.

That's right.

Okay. And last one on Red Sea normalization. How do we see it impacting going forward?

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 broad cut. Maybe on crude, it's a neutral impact. And on products, it's probably a negative impact. On dry bulk, it never had a major impact to begin with.

Okay. Got it. And historically, we used to have some of the data where crude tankers were used for storage purpose and all that. Is that trade, 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 ships will play out? Or can they change the ownership and come back to the system just to get some idea on that?

Yes. So on this -- I think there were two questions there. But on the storage front. So basically, we see this happening when the spot price of oil is relatively lower than the forward price. That's what we call contango. So let's say, if the current price is, say, $80 and the forward price is, say, $100, it makes sense for traders to buy oil today, fill it up on a ship, pay the either charter higher, sell it forward in the oil market and capture the spread like an arbitrage. 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 math has to work out, then the traders would do that. But today, 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?

Yes. Second question was on basically changing the ownership of these vessels and can that sanctions removed or...

So the sanctions typically follow the ship.

We'll take some text questions now. We have a question from [ Surendra Yadav ], 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 newbuild program also being considered?

So we don't give out any capital expansion plans in detail. But generally, our preference is always for secondhand ships over newbuilding. Can we go to the next question, please?

Next question is from [ Rajesh Khater ], 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 INR 900? And the third question is, there seems to be no growth triggers for the business at all. Where will the growth come from?

Okay. So on the first question, 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 plan. 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 5 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.

Yes. 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 -- 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, 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.

The next text question is from Riya Mehta, Equitas Investments. Will we be increasing in-charter ships? What is the time frame for which they are contracted? How do we earn from scrappage, fleet which will go in scrappage in the next 2 years?

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 2 years to 10 years. Generally, they don't cross 5 years, but we have seen contracts go longer than that. We don't earn scrappage from these in-charters because you are not owning the assets. You are basically taking them in for 3 to 4 years period of time, not related to -- relating to our fleet.

Yes. So yes, we don't earn from -- when we scrap ships, we have not scrapped a ship for quite some time. When you scrap ships, basically, you sell it for scrapping. You receive whatever is the market price for the steel -- for the scrap steel. And when we -- and very often, we do sell ships above scrap. So we end up selling it to someone else who may trade it for a few more years.

Next question is from Amit Khetan from Laburnum Capital. Does the last quarter's offshore earnings reflect only 1 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?

So in this quarter, Q3, we had 3 rigs operational. Only 1 rig was not employed. And we cannot give anything on the timelines because it depends on how fast the tenders are processed. So currently, just to clarify, we have 4 rigs, of which 3 continue 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 3 rigs were working. As it stands today, we still have 3 rigs working. The Chaaya, Greater Chaaya comes off contract sometime soon in the next couple of weeks. But the other 2 rigs will continue on their contracts even in this quarter. So it's not just 1 rig being employed. Last quarter, it was only 1 rig which was not employed. And as it stands, there is one rig which is not employed.

Next question is from [ Rajesh Khater ], 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 [email protected] remains unanswered till now. To which mail ID should we send questions and can we expect response?

Yes. 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's 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.

Next question is from [ Shrikanth Maniar ], retail investor. Company trades at 4 or 5 PE 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?

No, we are not currently looking to buy any companies and diversify. We will continue to invest in the shipping business.

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?

So yes, on the product tanker side, we are seeing increase in deliveries. We have to also keep in mind that the age profile of the tanker fleet is also very old. And how many ships -- 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.

Next question is from Rajesh Khater, an individual investor. Can you explain the profitability metrics of your leasing business? And second question is, if the mail is sent in any other month after the results are already declared, can we expect response?

Yes. So the profitability metrics of the leasing business or the in-chartering business is that we take in a ship on a long-term contract, maybe 2 years, 3 years, 5 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 -- 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 Instructions] There's a text question from Rajesh Khater, 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?

I think it's impossible to draw this conclusion to say that where the freight rates will land 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, which is 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 apprized 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 tonne-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 3 years. So I think just taking this one point is too narrow.

We have a question from Riya Mehta from Equitas Investments. Why will be 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?

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-chartering at -- just to take a base, say at $100. When you are -- let's say you buy paying $100 a day to in-charter a ship for, say, 5 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. Shiv, can you take?

Yes. 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.

Yes, we can move on.

The next question is from Surendra Yadav, an individual investor. What's the succession planning with reference to promoter family?

Yes. 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.

The next question is from Riya Mehta from Equitas Investments. In the next 5 years, do we have any ship which will be due for scrappage?

So there are always ships which will be aging and which may fall. If you just do a forward look at the next 5 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 them. We operate in the international markets typically, where the age restrictions are much more stringent. But other players can operate 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.

Next question is from [ Shrikanth Maniar ], a retail investor. We are still not interested for bidding on Shipping Corporation of India?

No.

Next question is from [ Rajesh Khater ], 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.

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 look at the asset values, if you're able to do a large part of your expansion at that point in time, you can become -- 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 we are benefiting from the earnings that have been generated in the last few years. So 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're able to trade in a manner in which you can take benefit of the higher freight market. So you have to prepare for both types of markets. And you are 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.

Ladies and gentlemen, I now hand over the call to Ms. Anjali Kumar for closing comments. Over to you, ma'am. Sir, any closing comments from you?

Yes. Yes, no closing comments. I can see one more question from Mr. Khater. 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 our -- 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 to '18 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. 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.