The Great Eastern Shipping Company Limited ($500620)

Ladies and gentlemen, good day, and thank you for standing by. Welcome to The Great Eastern Shipping Company Limited earnings call on declaration of its financial results for the quarter ended 31st March 2026. [Operator Instructions]. I now hand the conference over to Mr. Shivakumar, Executive Director and CFO. Thank you, and over to you, sir.

Thank you, Yashashri. Good afternoon, everyone, and welcome to the conference call for the results of Q4 and full year FY '26. We'll quickly run through the presentation so that -- and try to leave as much time as possible for the Q&A. Sorry, customary disclaimers apply. We don't forecast the market. We have a lot of our capacity on the spot market. So we don't give earnings outlook. We are discussing what we are seeing in the market. And so please take it as such. The highlights, of course, is that this is our best ever quarter in terms of profits. It is also the best ever year in consolidated profits. For the first time, we crossed [ INR 1,000 ] crores in consolidated net profit for a year. Some of it as a result of the exchange rate movement during the quarter. Our NAV continues to move higher, moving by about INR 200 between end of December and end of March. And we've also declared our highest ever quarterly dividend of INR 11.70 per share, taking the total dividend for the year to INR 35.10 per share. You've seen the results. I won't go too much into the results. Later on, we can -- if you have any specific questions, we can go to them. Yes. Going to -- I already mentioned the net asset value. So you can see on a stand-alone basis, we were at about just over INR 1,100 a share in March last year, and now we're at INR 14.22. That's a INR 300 improvement. So we've had significant movement in asset prices. And of course, we have a lot of cash accruals in the group. Similarly for the consolidated NAV as well. Looking at what's happened with the business, the event -- the big event, of course, which told the headlines was the straight of formers issue. We'll not spend too much time on this. Suffice to say that because of the disruption, trade patterns went -- were all over the place literally and which resulted in a tightness in the tanker markets, which -- and therefore, we saw a spike in rates in March and April for crude and product tankers and also for LPG ships. However, markets were tight even before that. Tanker markets for the crude tankers were pretty strong from -- all the way from December to February, even before this issue happened. So because of the scramble to source cargoes, oil cargoes from wherever they were available, we saw a lot of long-haul trades replacing the Middle East to Asia trades. So we had sourcing from the Atlantic Basin, which is the swing provider of barrels and which had to then come long haul all the way to Asia. And that resulted in a big spike in demand for ships and therefore, a big spike in the freight rates. As a result, asset prices also went up. We're looking at about 10% to 20% increase during the quarter. The order book continues to be at around 20%. We've seen the crude tanker order book build up a lot in the last 3 to 6 months. Dry bulk was while not seeing the excitement of the tanker space in March was steady and had an unusually strong quarter if only in the context of Q1 of the calendar year being seasonally, traditionally very weak. So the rates were quite remunerative during the quarter across the board, especially for [ Capesizes]. Going to LPG. Again, LPG rates have been pretty strong, and they got stronger towards the end of the quarter. Again, the marginal provider of LPG barrels is the United States. And so a lot more demand for LPG to move long haul from U.S. to Asia. I already mentioned what happened to asset prices during the quarter, and you can see that in the charts. The order book, I already mentioned, so we are at around 20% for crude tankers and product tankers plus/minus a couple of percent. LPG continues to be high at 27% and dry bulk is at 13%. This is just a comparison of the order book to the scrapping potential, which is how many vessels have become overage. And you can see that it's -- for the tankers, it's pretty close, tankers and dry bulk. It's only the LPG where the order book is very heavy as compared to the old ships. This is just a year-wise depiction of this. So the supply is actually kicking in for crude tankers and product -- for crude tankers in [indiscernible]. Now scrapping, again, as one would understand, this is -- nobody is scrapping ships really because markets are so strong. Coming to the drilling business. This is the data on jack-up utilization. The March '26 data includes data of all the rigs which are on contract in the Middle East, where rigs were put on standby. They have been taken as continuing on contract. Also, this is what is called -- this is the simple utilization. We have another measure called marketed utilization, which is rigs which are being marketed actively for contracts. That utilization continues to be somewhere around the 84% to 85% mark. This is the usual sheet that we show. There is very little new building activity in the rig space. And therefore, there's a very large old fleet, which is an overhang for the markets. This is the shareholding pattern. I won't go into it too much, also the fleet data and the [indiscernible]. Return on equity continues to be strong. Return on capital employed continues to be strong. You can see what's happened with the EPS for the last 4 years, so in excess of INR 150 per share. And of course, cash generation has always been in our business. Even when the markets are very weak, it's a cash flow generating business. The chart on the bottom left-hand corner shows the movement in net asset value over the last 5 years. Just to depict how much of a contribution has come from cash flows and how much actually from fleet change. And we keep emphasizing this because when we say NAV, the first thought is -- this is because of the hot market where it's a mark-to-market gain. And as the market goes down again, all of this can again be lost. However, this is to emphasize that a lot of the NAV change has come from cash profits from cash flows from the ships and not much of it is actually from the fleet value change. This is on a 5-year basis. Again, share price to net asset value, we were at 0.8% or so on a consolidated basis. We continue to pay dividends even in the weak market, we were paying some dividends, but we have, of course, upped the dividend significantly in the last 4 years. We continue to be heavily net cash, $500 million stand-alone on a net cash basis. We are doing our switch transaction, and you would have seen that in the S&P transaction. We are selling some of our older ships and replacing them with similar ships of more newer similar ships. Those are what we call the switch transactions. We have -- we still have some debt because we can't prepay it, but these are the repayment schedules for our debt. As of March 31, we had $157 million of debt in the group, and that will be out within the next 2 years or so. The repricing of offshore assets and the orange bars are what interests a lot of you. These are our rigs which have to come up for repricing. We have 3 rigs coming up for repricing in this financial year, one of which is already -- has already completed our contract. It was a short-term contract, and she is awaiting her next business. We have 2, which will come off in the second half of the financial year. So we will have to look for business for those rigs. On the vessels front, most of our capacity is locked in for this year. We have -- I think 80% of our days for this year have already been locked on the vessel side. The rest is data for you to look at your leisure. This is not specifically related to this quarter. I'm happy to take questions. I have Rahul Sheth with me and we are happy to take any questions that you may have. Thank you.

[Operator Instructions]. First question is from [indiscernible] from [ Honesty and Integrity Investment ].

Go ahead. Just the important things that [indiscernible]. So I know you know the outcome of whatever is happening, nobody can -- but in goodness gracious [indiscernible] in probable come where everything normalizes whenever it happens. Do you think the markets will -- are likely to pan out in terms of whether these inefficiencies might continue for some time or do anything the situation can normalize pretty quickly. And in the other scenario where things do normalize, how do you think the markets will be here because ultimately [indiscernible] the inefficiencies will come out in the [indiscernible] that there will be data so we'll find ways to come out of the Strait of Hormuz to be available on the other routes slowly and steadily. So do you think the [indiscernible] will -- might behave after some time the situation continues on the other side [indiscernible] out. So what's your assessment in both the scenarios, what we [indiscernible]?

Okay. So if I can just recap your question, so we've got it correct because you are not very clear at the start. You want to know what can happen under different scenarios of a reopening of the Strait of Hormuz, right?

And it doesn't -- if it doesn't do, what's the outlook? What -- how do you chase the outlook? How it's going to [indiscernible]?

To provide an outlook on exactly how the markets will behave in either situation is very complicated. As you can imagine, we are also witnessing this probably for the first time since maybe the [indiscernible] days. To just give you a bit of a perspective, the closing of the Strait where a large percentage of especially the oil trade and the LPG trade comes from, has resulted in a lot of disruption in the market because countries have relied on the cargoes coming from the region have to now source cargoes from other regions. So just to give you a simple example, if India was procuring LPG or oil from the Middle East. Now if they have to procure it from either U.S. or Latin America or some other region. The distances go up significantly which is what led to a tightening of the market after the Strait had shut. And even if you look at it even if you take a scenario where the Strait opens up, then you will have a flurry of Middle Eastern cargoes. A lot of the ships are not in the Middle East anymore because they've moved out to get cargoes from elsewhere. So generally, the rates will have to strengthen to pull ships back into that region. Now all of this is difficult to really forecast because as you can imagine, there are many, many factors to consider to give such a scenario. And therefore, we believe that given this exact scenario analysis and saying, if it remains shut, this will happen. If it opens up, this will happen, is honestly a very difficult game to predict. So I think we will not be able to provide such a -- maybe the kind of [indiscernible] answer or the kind of outlook that you wish to see.

Yes, it's in the nature of guesswork and everybody get -- so you mentioned inefficiencies when you asked your question, yes, this is going to be very inefficient. Now how that plays out in terms of rates, it's tough to say.

I can just give you one more perspective after sourcing a lot of LPG cargoes from the U.S., there are so many LPG vessels and not just for India for many other countries. There were so many LPG vessels and other category of vessels that we're trying to pass through the Panama Canal that the congestion in the Panama Canal has gone up because now everyone needs to pass through to get American cargoes to come to the East because it's a shorter route to go through the canal. Now all these factors to forecast, which are not clear to what level of strength or negative, it's very difficult to actually put down and give you, okay, this is exactly what may happen eventually like how [ she ] mentioned, this is in the area of just guesswork. And our guests will probably be as good or bad as yours.

And the way we approach it, while you have not asked a question, the way we approach it in such a volatile situation is, we are prepared for whichever scenario happens. We have a very large proportion of our fleet in the spot market as always. So we are in a position to take advantage if there is one [indiscernible] strength. And as we have collected so much cash, and we are waiting to invest, if the markets go the other way, we are there to invest as well as an opportunity.

So connected to this, let me ask you more specific questions. So in terms of the capacity of crude and product tankers that are stuck in almost and not able to [indiscernible] versus the barrel that has been cut out from the market because of the supply are going or pulling off. I mean do they match or they are larger? I mean, the cargo that for the vessels can carry the task much larger than the metals that are [indiscernible]?

So the capacity of crude tankers, which is but inside is about 5%. The capacity of product tankers stuck inside maybe 2% and similar for LPG. The proportion of cargoes, which are stuck because of this closure is much higher than this. So while it reduces the impact slightly, it is not similar in numbers.

Remember one thing, it's not just on supply demand. If you also look at ton-mile impact, which is what I was alluding to earlier. Because now ships are sailing much longer distances to get the cargoes from further away. And remember, because of the changing trading patterns, at least up until now, we have seen a lot of inefficiencies in that, which is what has supported the market.

We'll take the next question from the line of Dhruv Jain from Ambit Capital.

I had 2 questions. The first question, with respect to shipyard capacity. So if I'm not wrong, there was new slow around at the start of the work with respect to shipyard are delaying the delivery of ships, which could obviously help on the supply side. So A, is that true? And B, how should we look at the shipyard capacity now versus what it was earlier? So what this order book could look very high, but or to think about the slippages that would happen. It would be very good to [indiscernible] your perspective.

At least as of now, we have not seen any significant data on the slippages. So meaning yards have taken a lot of orders, and they're still to be delivered, and it is possible slippages do happen. But at least as of now, we don't envisage such big slippages that it may change the dynamic of the market. Was there a further question to this?

Or that -- that was Yes. And the second question that I had was with respect to the oil demand stock that's there with various countries. So given the fact that we've seen so much cargo actually being stuck in Strait of Hormuz. So even whenever it opens, right, is it safe to say that because most of the countries are at the lower end of their inventory of crude we will see a continued demand through the [indiscernible]. So whichever the scenario, it's only -- yes.

So again, we can just guess that countries may want to replenish their stocks. Having said that, the [ U.S. SPR ], which has been talked about a lot, it used to be at the [ 700 million ] mark that comes down to maybe [ 4 -- 450 million ] just before this current war. Now they're drawing down on it. But they never took the [ 400 ] back to [ 700 ]. But counter to that, countries like China had built up stock. So one would have logically expected U.S. to go back up and China not to build more because they already have a lot of stock. But U.S. didn't go back up, but China built a lot more stock. So just to take it -- just to use common sense, I would assume that countries will go back to stock building, but we'll have to see how they play it.

Yes, when the container [indiscernible] happened in '21, just after COVID, people were saying that consumer -- consuming countries will move from just in time to just in case. So trying to build resilience. Maybe that's something that commodity consuming areas will want to do as well.

Next question is from Amit Khetan from Laburnum Capital.

So if I look at your Slide 25, right, where you have the revenue days, that looks about 5% to 6% lower than what it should have been. I'm guessing we've lost some revenue days on account of our ships being stuck in the Strait of Hormuz. Is that correct? And what is the situation currently?

So we had revenue days also is a function of a little bit of a dry dock. We have ...

We have a similar revenue days. Are you looking at this data? Is this a slight --

I'm talking about this data, the own tonnage number?

Yes. I think this is just fleet changes during the period because the fleet might have changed a little bit during the period. Also, you could just have timing differences in dry dock. If you have a couple of extra dry docks this year versus last year that could be -- I mean 1 extra drydock can easily account for this 20 days because we haven't really grown in capacity, right? You'll find some changes. You'll find these movements on a quarter-on-quarter basis.

Got it. And currently, do we have any ships stuck in the Gulf?

We do have 2 ships that are waiting to come out. One is an own ship and 1 is an in-charter ship that are waiting to come.

Okay. And [indiscernible], would these be earning revenue or not?

We don't want to -- one of them is on [ void ] charter, one is on time charter. Some of these are -- some of these are sensitive so we won't go into that. But typically, time charter ships will continue to earn revenue because it depends on the time. A voice charter shift, the time is on our count.

Okay. Okay. Fair enough. Secondly, given the rates that we've seen, especially on the product tanker side in April, have we done any sort of period fixing or the time charter hasn't moved as much as this quarter?

The time charter rates did move, but we have not done any period fixing because the time charter rates were very different from the spot rates.

So why we've not done it in the month of March and April, our product fleet does have a certain amount of coverage on that.

Okay. Okay. Okay. Got it. And lastly, we have 3 rig pricings coming up this year. Given the situation in the oil market where prices have gone up substantially. What is the current day rates on -- in the market looking like any recent fixings in the market? What data have they come [indiscernible]?

So we haven't had any recent pings happening here in our market. The -- not in -- since the oil price went up, obviously, because these are long lead tenders. The fixing that we have seen recently in Nigeria seems to indicate that pricing remains firm. We saw a recent contract of one of the international [ deli ] companies there. So it's -- the rates remain firm. But again, each market is to be seen by itself. So we'll just have to see what happens in the next [indiscernible].

Got it. Got it. Got it. Lastly, just one question on the LNG segment. Now we've not operated historically in this segment. But given the disruption in LNG infrastructure that has been seen in Qatar, and there could be a potential oversupply of ships when the market sort of normalizes. Is this a segment that we could be looking at?

[indiscernible] honestly, I don't think we will look at the segment.

Is that got to do with the large sort of capital allocation needed to operate in this segment?

Yes. Generally, the ticket size is quite large. And when you get into this business, you'll do a few ships. I think it will take too much capital from us. I think we've got -- for at least for the sectors we are looking at, I think we'll be better placed and also these projects are generally backed with long-term charters. So the -- so the returns on these kind of projects tend to become more like project financing.

And it's sort of the other end of the spectrum from what we do in shipping wages, we like to run in the spot market, highly liquid assets operating in the spot market rather than in a long pipeline-type assets, which are long-term contracts, cost of debt-based projects.

Got it. Got it. And all our LPG tankers are currently on fixed on time charter, right?

Yes, that's right.

We'll take our next question from Vikram Suryavanshi from Philipcapital. Since there is no response, we'll move to the next question from Siddharth Chauhan from 360 ONE Capital.

First of all, congratulations on good set of numbers. Now 2 questions I have. Firstly, how are the day rates shipping up currently versus the previous quarter, both in the shipping and dry bulk segment?

So the driver segment remains very strong. On LPG also remains extremely strong. The crude even if you look at the crude segments, while they've come off a bit as an absolute level, they are still at a very strong level. Our products have come off a bit more. But again, the thing is in products, it's very volatile. So I think it will be too much to just draw a conclusion from just looking at today's rate.

But again, everything, while it's come off from very high numbers. So there's a very big spike in March, April. And I think it's settled down from that spike, but still at very high numbers.

Historically, those are very, very high.

And any sense particularly in dry bulk because it seems that they have firmed up in the last few weeks?

Yes. Now there are a multitude of factors. If you just [indiscernible], there's been more coal trade because certain countries in Southeast Asia have been trying to buy more coal because the Strait is shut and there's less LNG, there's less oil. Iron ore has also been decently strong. Grains has been very, very strong because China has been continuing to buy [indiscernible]. I think all the commodities across the board have just been tightening up. And the Strait has not really affected the dry bulk trade much. It's a very small percentage of the overall trade. We're seeing certain delays also at parts of congestion has also been built up a bit.

Understood. And secondly, on the offshore segment, what's your sense on the overall [ OPC ] tender cancellation situation because we were also reading reports that [ ADAS ] shelf drilling is evaluating whether they want to keep their assets in India or take it back some place else. What's exactly happening as [indiscernible]?

On [ shelf ], that's a different thing because our shelf has now merged with [indiscernible]. So they've now become a very large company of jack-up rigs. And so -- and they also do run a fair bit of old rigs, so they're probably looking at it at a corporate level. I wouldn't read into them removing the rigs from India to what [ ONGC ] is doing. I can't comment on their corporate strategy though. But in [ ONGC ], they have not processed a few tenders, but we have seen the number of rigs that they have currently employing come down to one of the lowest levels they've ever had. So we would assume that now at a certain point, they will now process all these tenders. We currently have an active tender going on. And given the world right now, oil is -- to secure your own supplies is quite the focus right now, where we under [indiscernible].

Next question is from [ Himanshu pad ] from [ Stanford ].

Yes. So we have these 2 in-charter ships, if I remember correctly, both are same. And what is the time --

Himanshu -- just to correct you, one is a [ Suezmax ], one is an MR tanker.

Okay. And when does the period end?

We've still got some time between 1 and 3 years, depending on which charter.

And is the lease rates also increased quite dramatically because at one point of time, the thought was a, we would like to have more lease holder tankers where the fleet is pretty low. How is the [indiscernible] lease rates have you moved in the last 3 months or 2 months?

Yes. So it hasn't moved anywhere near as dramatically for these kind of vessels it hasn't moved anywhere near as dramatically as the spot rates did. So maybe a few thousand dollars a day, while the spot rates probably moved $30,000, $40,000 a day. So it hasn't really moved that much at all. Maybe in the [ Suezmax ] is a little bit more for some time. But in the MRs, certainly not. It hasn't moved much at all.

And one more thing on the LPG, where generally, we have been on the period charters with spot rates improving, would we like to at some means whatever repricing or renewals are to happen in this year? Would we like to be on spot or we'd like to maintain our LPG focus on period only?

Yes, we would like to run more on spot. We have made a small step in that direction with the floating -- with a floating rate -- part floating rate charter on one of our vessels. That will start this month sometime.

Okay. And one more thing on the offshore space logistics space, I think we have around 8 ships getting repriced this year. How is that repricing on the offshore support vessel is moved? Or is the strength continuing in that market? Or some thoughts on it because that space has done pretty well for us in last 2 years.

Yes. So now all the offshore rates are broadly very strong. I think for FY '27, we still have about 80%, 85% of the days covered. So some of those repricing will be more closer to the end of the year. So what's also happened, and you're right that the space has been pretty strong because that business has shown its best profit since FY 2016. And that's mostly contributed by the offshore vessels business here.

And one thing on the [indiscernible], okay. See, one of the liking or reference for us for Indian market was that we get a period charters, okay? And a 2-year, 3-year type of contracts, okay? But see, on the order cancellations, what ONGC has stated that the price has moved quite high and hence, we are canceling the orders, okay? So the thought process still remains with that in last 2 years, we have seen continuous cancellations, 2, 3 years, 4 cancellations have happened, okay? So is it really making sense to be in this market only or we would like now to move outside of India also because -- in good times, we don't have the rates or ONGC does not give long-term rates. And in the spot, we are already losing out. So how does it look -- how are you thinking about that segment now?

See, as of -- now out of our 4 weeks, we have not really idled any of the rigs, sometimes been contracts. We actually had 2 out of the 4 rigs with parties under the [indiscernible]. So we still see that the market is going to -- or at least as of now remains strong, and there is a focus on it. So I think it is worth holding on to our expectations.

So we are -- you're right that ONGC canceling, et cetera, is causing a little bit -- so it requires a little bit of change in our strategy of just focusing on getting those 3-year contracts. And that's why last year, we consciously took 2 short-term contracts for 2 of our rigs to -- and these were in India itself. And we have done very well on those contracts also. So again, these are new relationships that we are building and if these customers have more work, we are sure that they will come to us because of our track record with them.

And one more thing, the private contractors or private companies, which are giving shorter-term contracts on the [ jackup ] bricks, are those pricing near to international spot rates or they remain depressed in India market, the spot rates?

No, no. I think they are reasonably good. The international spot rate it's difficult to assess because each region is -- has its own cost structure and very different cost structures. These are just not comparable at all. At least for say, a 3-year contract, you can assess the cost structure and you can make those adjustments. On short-term contracts, it is very difficult to do that comparison. So we won't even -- I always say is that these are decent rates and they are quite remunerate. Not high. But they are reasonably remunerated.

The means -- would they be nearer to the global rates or would something like that?

Yes. Sorry, that's the point you're making, Himanshu, that we can't -- that there is no global rate. So for -- first of all, the liquidity in the short-term contracts is not very high of a number of fixings. Sometimes they don't get reported. So our contract itself may not have been reported elsewhere. So -- and the second thing is even if you get a rate reported, it's very difficult to know what is the cost structure in that contract on the MOB and TMO, et cetera.

Sometimes in those local markets, you have to share some of the top line rate with local partners -- sometimes there is -- you have to -- when you get on to these contracts globally or even in India, there are certain specific requirements by the charters. So you have to spend some money upfront to get those rigs ready for those contracts. So every time you get into that, you have to look at that entire process to really understand what does the headline rate lead to a comparable rate for India.

And one small question. Are all the logistics ship on the offshore side in India or there are a few outside India also currently, how are they positioned?

There are a few ships outside India and a few -- but most of them are in India. So we have 4 -- we had 5. We now have 4 vessels operating outside India. And this is all across the world.

Next question is from Vikram Suryavanshi from PhillipCapital.

Sir, what we are seeing is that the order book has now started building up. So how is that capacity is available for further [indiscernible]? And probably, are we seeing that cycle of order book increasing going again because we -- the kind of money shipping up and have made in the last 3 to 4 years and from the situation that we are looking in terms of continuous demand restructure. So if you can comment on, I think that in terms of order book and changing capacity would be helpful.

Yes. So the order book is building up, especially for crude tankers in the last -- and that especially for [ VLCC ] product in the last few months. The yard capacity has not grown that much. It's just that the slots are getting filled up. The slots were not available for building these ships in this period for, I think, 3 to 4 years because all the slots were -- or the large slots were getting taken up by the big container ships and by LNG ships. Now that, that ordering is not as extreme, these slots are becoming available. So it's not a huge increase in shipyard capacity, it's just a movement that more of it is available for these large crude tankers. It's -- yes, it is building up. There is -- as we showed, there is still a significant part of the fleet, which is old. So that's something to consider. But yes, having more of an order book versus 6 months ago, makes you maybe a little more concerned about what can happen to the market balance. But this is, again, 27, 28 kind of deliveries.

And now if you probably need in [ '20 ], you will get a ship in '29.

All right. And in the offshore side, are we seeing some [ cold ] second cities coming back?

Not really, not [ cold ] sale. No, not really. We've not seen any movement on [indiscernible].

Okay. And just a last clarification on one of your comments because I think our preference is always to keep capacity over and spot. But however, if you -- are we open to short the market at some point in the time or our preference will always be to play through the cycle innovation market. Because I think probably the way we are seeing the cycle probably asset play would come with a much longer lag. So that's the reason I was asking.

So we predominantly remain spot. Of course, opportunistically, we do take time charters. But from what we have seen that even when the markets are very high, generally, when you go for a time charter rate contract, the backwardation. So which means that just as an example, the spot market is earning 100 and you want to time charter, say, for 1 or 2 years, the longer you go, the lower the rate becomes. You may get it for 80% or 70% or some lower number. So upfront, you're giving up something to take that cover. So we generally don't prefer to take that. And as we have mentioned on these calls, the markets especially in shipping are so volatile that very often, you can believe you can -- that maybe 100 will average 60 and so you should take the cover at 70 and eventually the market ends up 120. So when the markets are this volatile, I think sometimes shorting it can maybe do more harm than good.

We have a next question from [ Vivi Agrawal ] from [ FICO Family Office ]. The first question is, could you help us understand the reason behind it? And also, what is the fleet exposure between spot market and time charter contracts? Second question is, should we expect the benefit of higher freight rates to be reflected more meaningfully from Q1 FY '27 onwards?

So we are generally -- our time chartering activity will be below 20%. Like I just mentioned, we always prefer to remain spot. And still a long quarter to go. We're not going to forecast the Q1 numbers.

Next question is from [ Harsh ] and investor. What parameters does management take into account while doing the switch transactions, the vessel value seems to have increased when compared to last year, despite that company acquired higher amount of ships. How much impairment would have to be recognized on new vessels as market corrects?

So we look at the timing of the switches is dictated by the ships that need to be sold. When the ship needs to be sold, that is we cannot use it to service our customers in the international market, we look to sell the ship. If we are looking to sell a ship, we will also look to replace the ship with a more modern vessel, which can be used to trade in the international market with our customers. So the timing is more decided by the ship that needs to be sold. The price is actually just a function of how many transactions we did last year. And if you're looking at how much we spent in FY '25 versus FY '26, it's because 2 bulk carriers, which we sold last year, we did not replace in FY '25. We actually replaced them in FY '26 because it was just a question of timing the purchase of those ships and getting some good ships to buy. So that's one factor which can happen, which is just a timing mismatch between 2 years. As to the impairment, we don't know whether we will have to recognize any impairment at all because this is a function of what happens to the market price of the ship. It is also measured by the earning capacity of the ships. So there are a lot of factors which get into the impairment calculation. And so it's difficult to comment on whether we will have at all and how much if we do, how much will have to be recognized.

We'll take our next live question from [ Rajiv Shan ], an individual investor.

So I just joined late. So if the question is already answered, you can let me know. I mean I can go through the recording again. But I just wanted to know that when the ships got stuck in the Strait of Hormuz, okay? So did [ GE Ship ] lose any revenue for the stock days or was the trip on a per day basis and it continued to earn for the stub days?

Okay. We have one ship, which is not on a per day basis and which -- where the time is on our account. So the lost days are on our account. So we lose revenue on that.

Okay. So that is on one ship, but I believe there were a few other ships which we are stuck for a few days.

Yes. All other ships are on time charter, so they continue to earn in that time.

Okay. So they would have continued to run on per day basis even for the [indiscernible]?

Yes, that's correct.

Okay. And sir, I have a strategy question. So if the company wants to be in spot market, which is your preferred mode, right? And that would be to take advantage of the disruptions or volatility, right? So shouldn't you be more positioned on the longer-haul routes instead of the regional routes because I think the longer routes give more volatility and more upside and are more prone to disruption rate?

No, there's no pattern between the short- and long-haul rules. It all depends on how the trade is evolving. And then based on how the trade is evolving, we evolve our trading patterns accordingly.

And also, it is not that we trade only on short-haul routes, we do long-haul trades as well.

Yes. We are agnostic to which route we take. We change it based on our view on what which routes would be better to trade in.

Yes. But I was looking at your fleet competition. So for example, you own, let's say, 2 capsize, but you own a number of [ Kamsarmax ] or the shorter distance type of vehicles, right? So you are positioned more on the shorter routes. By looking at your fleet profile, you got that impression basically.

No, it's -- you're seeing the size of the ships, right? Because there's [indiscernible] [ 80,000 ] and keeps a [ 180,000 ], but that doesn't mean that they do shorter routes. [ Kamsarmax ], for example, do routes from China to Latin America and back, that can be 100 days. [ Capesizes ] can do those routes for different cargos. But they can also do Australia, China, which is about 30, 40 days. So even [ Capes ] can do shorter routes. So there is no linkage between the size of the ship and the root size. If you take on the [ Suezmaxes, ] which are large crude tankers, they can do route from Middle East to [ Jamnagar ], those round voyages are 20 days. There's no linkage between the size of the ship and the length of the route.

Okay. And sir, in this -- I mean, post Iran war, were the tanker rates attractive enough from the clean 2 [indiscernible] switchover. Did it actually happen? And if you as did ship actually do the switch over from clean to dirty, was it a profitable proposition?

So we have seen ships trade, many shipowners have converted a lot of the [ LR2s ] into [ Aframaxes ]. Generally, the switching only really happens on this sector where the [ LR2s ] and [ Aframaxes ] are switch being clean and dirty. And we also have switched a couple of vessels to dirty.

Okay. And I believe the time when you want to switch back from 0 to clean, there is some cost of that, right? I mean so overall, it is a very profitable even after accounting for the cost of switching back, right?

Yes, that's right.

Okay. Fine, sir. And just one more question. So now your [ consol NAV ] is close to 1,800. And do you feel it is sustainable for the next few quarters? So even if the fleet value drops, okay, but your earnings will keep propping up the NAV, right? So at a very high level, the NAV should not drop significantly even if it doesn't increase, right? I mean, the chances are more of increasing [indiscernible]. But even if the cycle turns or these disruptions go away, still be would more or less sustain at least the current levels, right?

So let's look at this. It depends on how a drop in value of ships whether it happens in a short period or a long period. What you're describing is when the drop -- let's just say, a drop of $200 million happens in the fleet value. Now you know what our earnings were in the last year. Our cash earnings were more than $300 million, okay? And therefore, it can absorb this drop of $200 million in a year. This we are talking about a year. Now if the same $200 million drop happens in 1 quarter, then you cannot absorb that if your run rate is $75 million a quarter. But yes, the advantage in our business is this NAV and the point you've identified is correct. The NAV keeps converting into cash because the ship earns cash. And therefore, a significant portion of the ship price or the NAV will keep coming in as cash flows, which is a point we made in the presentation that a large part of it is NAV improvement is actual cash earnings intense.

Okay. My last question, so I was going through the [indiscernible] of some U.S. listed shipping companies, [ Scorpio Tankers ] and there are quite a few more, okay. They are also trading at a similar price , okay, maybe [ 1.1 ] or a similar range. But they have announced very large buybacks, okay? So I think in the last quarter, they did buyback of $100 million. And I think this quarter, they have announced $500 million, right, if I'm not wrong. So when they see value in announcing buybacks at a similar price to NAV, why does ship not see value in announcing buybacks at a similar point? Yes, this is my last question.

So I won't comment on -- because different companies have different approaches. Our approach is of a value buyer. They are also companies. So first is I don't know who's done this $100 million and $500 million buyback. I haven't really seen but different companies have different approaches to investment. Our approach is a fairly conservative investor where we buy at certain levels. This goes for whatever it is, whatever capital allocation we make, we buy only at certain prices even in ships. Different companies just -- some companies just -- will just keep buying irrespective of the market, buying ships I'm talking about. So everybody has different investment philosophy. And we really wouldn't like to get into whether ours is better or theirs. This is something which has served us well over many decades, and so we stick with this.

Can I see in one more question or should I --

Quick one.

So compared to March ending rates, I mean we have been hearing or reading in the industry that tanker rates subsequently shot up significantly in April and May. And even the dry bulk -- the [ antis ] spectrum of ships across the drive bulk, they have also started participating in the right movement. So your comment on that and whether gas-based ships, okay? They are the only ones which are not participated in this freight increase and have all other sectors seeing significant increase compared to the March rates.

No. In fact, actually, LPG has done one of the best. The rates are still extremely high. LPG has done --

Yes, close to all-time high.

Close to all-time high. No, probably all time highs.

That's great. Okay. And the tanker and the dry bulk, they are also at higher levels compared to much -- and significantly higher levels -- can I say that?

Our dry bulk is crude and our products are not as high as the peak we saw in March and April, but they're still very, very strong.

Next question is from [ Anuj Sharma ] from [ Stetfold Investment Managers ].

So my question is on the offshore rig. Is there a possibility that ONGC comes out with a tender but due to our short-term engagement, rigs are not available for those auctions?

Yes, it's certainly a possibility. It is not so currently we have a rig available. And generally, [indiscernible] gives 180-day period for delivery of the rig into the contract. So that's not something which is likely to arise. I mean it could happen. But because it's a short-term project, by definition, it will hopefully get over in 180 days.

And my next question is on the jack-up rigs in the order book continues to be low. Is it due to uncertainty in demand or the shipyards are not ready with capacities to deliver? What's more of the probability?

Maybe a bit of both.

Yes, a bit of both. Yard capacity has got completely --

[indiscernible] because since 2014, we have not really seen any real orders for the jack-up. But having said that, we've always seen in our business that if there was sufficient demand for those jack-ups, someone will come to build it. There could be yards, which we've not heard of, but China does have a lot of other capacity. And I'm sure someone would build it. But at least as of today, we have not seen a lot of interest in trying to even go and ask those yards to build. I think the rates will be substantially higher before that level of optimism comes to go and build more rigs.

All right. And just on ONGC auctions, any time lines, any new time lines for the auctions or nothing?

No, they're not given -- not doing tender, but how long it takes to be processed, we are not sure.

We have a text question from [ Nira ] [indiscernible] from Emkay Global. What is a better option? First, running ships on long-term time charter with debt or second, running ships on spot without debt? Over the long term, what gives better ROE?

This is a good question. We have actually studied history and try to see that which model would work better. We've always found this latter to be better. And it's not without debt. It's with less debt. So it just depends on your level of debt. We have shipping companies. If you look at global shipping companies, there a lot of companies run largely spot, but the amount of debt they take varies. And one can always debate what that level of debt should be. If you want to compare that to the first model, what we have seen and what I mentioned earlier on this call, that we have seen spot rates tend to outperform time charter rates for a variety of reasons. And so then to compensate for that, you will have to take a lot more debt. We find that a riskier strategy. And I think we're just better at playing the second auction.

Next question is from [ Met Park ] from [indiscernible]. Previously, management had guided that the buyback was not [indiscernible] due to adverse taxation. Now that the tax norms have changed, why not consider a buyback?

It's a function of the price really. And as with everything, the -- in this capital allocation as well, it's a [indiscernible] the price. So you're right that one of the biggest impediments have been removed. But again, everything is at a price and when appropriate.

Next question is from [indiscernible], he's not mentioned his company name. Can the management confirm the outstanding loan from [ GES CEO ] to [ GIL ] for March 26? As for financials, there was a loan provided from INR 425 crores and repayment of INR 125 crores, but the outstanding loan seems to be more than INR 425 crores which was the original loan. What's the time line by when GIL plans to become debt-free?

There were 2 loans. One was INR 65 crores and INR 425 crores as of 31st March, the loan outstanding was INR 392 crores. There were also an old preference share, which was subsequent subscribed by the parent, which is INR 272 crores as of March 2026.

We'll take our next question from Rajesh Jain, an individual investor.

So any particular reason you have never bought in the last few years since I started packing your company, you have never purchased a VLCC because we keep hearing in the news a very sharp spike in VLCC. Sometimes they are probably the major beneficiary of some price increase in compared to the other vessels. But you have never owned a VLCC till now.

We have owned VLCC in the past, and there is no particular reason that we have chosen not to stay out of that segment. And I'm sure that in the future, we will be in that segment. But if you see from 2022, when the Russian war took place in the market significantly tightened. That was a [ Suezmax ] and [ Aframax ] story. So for the first few years, from '22 until maybe '25 end, the [ Suezmaxes ] and [ Aframaxes ] have outperformed the [ VLCC ] considerably. The [ VLCCs ] really came into their own -- in the last 6 to 9 months, yes, something like that. And since then, those rates have gone up a lot. But if you take over this 4-year period, it has been better served to be in these -- the other 2 segments.

But this is not to say that we don't want to own [ VLCC].

Yes, I'm sure in the future, we'll get into liquidity of the ship and what you're buying. If you get better deals in the [ Suezmaxes], we may buy more [indiscernible].

Okay. But by not owning a [ VLCC ], would you lose out on -- I mean I just wanted to correct my understanding -- so are there certain routes on which VLCC are more suitable and you lose out -- or you don't participate in those -- I can fulfill that trip basically -- is it like that or not?

No, not exactly. Like so say, for example, VLCC, please do a large amount of trade from the Middle East. But the [ Suezmaxes ] also do somewhere else, this -- but what you've seen over a long period of time, you have to look at the price at which you vendor each one of the sectors. That is more relevant than saying, okay, I need to be participating in one particular trade over the other.

And what also happens in the case of [indiscernible] is that they hit the headlines more often. But [ Surmax ] also tend to move in tandem with VLCCs because typically, a VLCC carries 2 million barrels of crude oil, while the [ Suezmax ] carries 1 million barrels. If there is too much of a differential between the two, customers will tend to -- will try to split the cargo between -- from 1 VLCC to 2 [ Suezmaxes ]. So then the price will become more or less the pricing, the freight rate should become closer then. So it can't be too dislocated for too long.

Okay. Sir, 2 more short questions. So when are the gas carriers coming up for replacing? I believe all your gas carriers are on time charter, right?

That's right. [indiscernible] mentioned earlier on this call, we are fixed and shall be delivered shortly. The other one is in the next few months. So we have some time to decide.

Okay. And is it safe to say that they will be repriced at least maybe -- I mean, assuming current rates, they will be repriced at least 50% higher than the earlier time rates?

We can't comment on what REITs we will get once [indiscernible].

Okay. So in other words, are the current time rates today, 50% higher than the time rate they were contracted for earlier?

No, no, no.

Okay, they are lesser than 50%.

Okay. Yes. They were contracted at very --

Okay. That's great. Okay. Sir, any detail you can give on your in-chartered ships because we see that line item, but that's a black box. What are the ships you have been chartered, okay? What are the categories and what are the tonnages? I mean any details on the in-charter ships? And do you plan to grow this segment?

So we have 2 ships on in chapter, both our tankers. One is an MR product tanker, one is as [indiscernible] crude tanker. There are only 2 vessels on in-charter. It was done to -- because there was a certain opportunity as part of a switching strategy, instead of buying a ship in charter. And yes, we could look at it. We used to have a significant in-chartering operation, 15-plus years ago. And if the opportunity arises, certainly we'll look at doing more. Everything is subject to price, of course.

So your operating margins on owned ships versus in-chartered ships. Obviously, there will be quite different. But can you give some idea what is operating margin in chartered ships?

There is no number here. So let's say you in charter a ship at $30,000 a day. Now the ship would earn 25% or it could run 35 or it could run $50,000 a day. So because we don't have a fixed -- it's not that we have --

Sorry to interrupt you. I'll replace my question. So I was asking about the actual operating margins, let's say, for the March quarter. I mean --

[indiscernible] much, much lower for an in-charter chip because in the operating margin of an owned vessel, basically you only deduct the operating expenses, correct, when you're looking at the operating margin. When you're looking at an in-charter chip, you have to deduct not just the operating expenses of the owner, but also his capital recovery, his interest is depreciation, maybe his loan repayment cost as well. And therefore, the cost base itself becomes much higher. So the quick answer is the operating margin profile of an in-chartered ship is very different. The operating margins will be much lower than for an owned vessel because by definition, they would not be chartering to us at operating at OpEx.

Correct. So for example, your operating margin for the own vessels was, let's say, 58% or 60%, something like that. So for intranet, would it be like 15%, 20%.

Again, it depends on the rate. If you charted it in 1 quarter, it could be injured at INR 30,000. One quarter, it could earn 25,000 in the next quarter, it could earn 40,000. So there is no number -- so it is very difficult to put a number to answer your question.

So I'm asking only about the actual numbers of the March quarter, not a projection post --

So they are positive. Let's say that you have a [indiscernible], -- in our own so as [indiscernible] let's say we have 2. So we have an in charter to tmax. We have an own Suezmax. The own [indiscernible] expenses could be maybe between $6,000 and $8,000 a day. the in-charter rate is not $6,000 to $8,000 a day. They would earn very similar rates. It's not very different. One is an ecoship, so there may be a marginal difference in their earnings. Let's say, both of them earn $60,000 a day. In the case of the owned vessel, the operating margin is 60,000, minus $8,000 a day. In the case of the in-chartered vessel, and I cannot mention the actual rate at which we have in chartered the ship, but let's call it $30,000 a day. So your margin is only $30,000 a day only in chartered vessel. So that's a difference between the 2 because the cost base of an in-chartered vessel by definition is higher than the cost base of an owned vessel.

I was going through the cash breakeven level of some of the U.S. companies, U.S. listed shipping companies, they disclosed it was close to $11,000 per day for their entire fleet. So can you disclose your cash breakeven levels for your entire fleet today?

Our book breakeven levels are probably around $12,000 a day, between $11,000 and $12,000 a day. Our cash breakeven is probably in the [ $9,000 ] a day, something like that, because we also have a lot of other income from the treasury. Yes.

So anything beyond that $10,000, $11,000, $12,000 a rate? I mean, primarily, it flows to the bottom line, right? I mean, us --

Yes, this is cash breakeven. It will flow to cash flows. But yes, our book breakeven will be maybe $12,000 a day for the fleet -- across the fleet.

Okay. So beyond INR 12,000, the entire number flows to the bottom line?

That is correct.

Okay, sir. Okay. And that is across the entire fleet, right?

This is a blended rate for the entire fleet.

Next question is from Karan Bhatelia from MAIQ Capital.

So congratulations for a [indiscernible] results. So you have reached a significant cash position this quarter but we are also seeing the freight rate staying at multiyear eyes and which in turn has also increased the vessel rises. Now given the parts of the fleet are aging, I'm just trying to understand a philosophy as to whether you are comfortable to buying tonnage at these levels to capture the current yield? Or do you feel the IRR is too thin? Or if you decide to wait for a correct [indiscernible], maybe what is the plan for the excess cash, which you are generating?

So see, if it is a question of switching where if we had to sell a ship and replace it, then we will do it to maintain. So that is something that we will continue to do. Your question, I take it is on buying an incremental shift that is for growth. Is that right? Switching, we will do because we have decided not to go back below a certain level.

Okay. Either with -- either increasing or maybe replacing it. I mean, we have been replacing a lot at least we will then term?

Yes. And as we will not do for current [indiscernible].

Because when you're doing the switch, it's a very different thing from doing increment when you're switching or buying at a high level, but you're also selling at a high level, very deficiently.

Correct. But sir, don't you think --

Yes, but Yes. So you have to see what best serves you more in the long term. We've -- I think we've done best on the projects where we bought when current yield was close to 0.

We'll take one next question from [ Meet Parikh ] from [ Mirchin Company ]. At what level of discount to NAV would the company consider the value of buyback to be attractive? Also would a lower fleet age lead to better TC wise?

We can't comment on the first part of this question. And the second one would a lower fleet age lead to a better? No, not really. There is something on the fuel economics, but I think the price at which you entered and the segments which you enter, I think that's the most important.

Thank you. We have [indiscernible] on the line. Is your question been answered?

Yes, my question has been answered.

Thank you. There's one more text question from [indiscernible] like to understand the management's thought on reasons because of which the spot market outperforms time market over a longer period. Is spot market better suited to be the vessel to marginal commodities traded, which usually balances demand and supply and hence, have better pricing power?

A bit of a difficult question to know why it outperforms. It's just that in the spot market, because our business is driven by a multitude of events and sometimes those events can take up the market up significantly. So as you can see, when the Russian war took place, the freight rates changed 2, 3x. So when you can have that kind of change in the underlying market, then when you are generally taking a time charter activity, they will be within an arrow band. And if the market moves that dramatically, then it will be caught short. And so of course, we can't say every time that happens, but if you look at a longer period of time, when it does happen, because the markets move up that significantly, then over a longer period of time, we see the spot outperform the time chartering market.

So on a slightly more philosophical note, maybe because the person who is fixing out on time charter is taking less is the charter is helping him to reduce his risk, maybe then that leads to slightly lower returns overall. So we see that in very long-term charters. Now whether it's true for 1-year charter is a different matter. But the spot market operator typically tends to be taking more risk.

As there are no further questions, I now hand the conference over to Ms. Anjali Kumar for closing comments. Over to you.

Thank you, everybody, for joining in and for those very insightful questions and answers. As usual, the transcript of both the audio and the text transcript will be there on our website very shortly. Thank you so much for joining us. And for any future questions, please feel free to e-mail to us and we'll be happy to answer them. Thank you.

Thank you.

On behalf of The Great Eastern Shipping Company, that concludes this conference. Thank you for joining us, and you may now exit the meeting.