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 June 30th, 2024. At this moment, all participants are in listen-only mode. Later, we will conduct a question and answer session. I now hand over the conference to Mr. G. Shivakumar , Executive Director and Chief Financial Officer at The Great Eastern Shipping Company Limited, to start the proceedings. Over to you, sir.
Thank you, Yashashri. Good afternoon, everyone, and thank you for joining us for this conference call to discuss our Q1 results and the markets. So let's go through the presentation first, and then we'll be happy to answer questions. I have Mr. Rahul Sheth here with me, who works with the MD very closely, and we will be happy to answer your questions. First, disclaimer, the usual one. We are not giving projections of earnings. We do not intend to give projections of earnings, so please don't take these as earnings guidance. So let's go through the highlights. First of all, we had a net profit of INR 812 crore on a consolidated basis, a significant improvement from Q1 of FY 2024.
Our consolidated net asset value moved up to INR 1,464 per share, as on the 30th of June, and we declared an interim dividend of INR 9 per share. This is our 10th consecutive quarterly dividend. We have now paid about INR 1,100 crores in dividends over the last, about, what is that? 2.5 years. The reported results, I won't go into it much. You would have seen these results, and you can... If you have any questions on them, we'll be happy to take them. We had a net profit on a standalone basis of INR 668 crores, and on a consolidated basis of INR 812 crores.
We show usually the normalized financials, which is after taking, stripping out the effect of the derivatives and the currency impact, because that used to have a very significant impact on our results. So the net profit after tax for standalone was INR 677 crore, and consolidated was INR 817 crore. We mentioned below our net asset value per share. On a standalone basis, our NAV per share is INR 1,181, up from INR 1,127 in March, so within the three-month period. We won't go through these ratios. That's the EPS history. This is broadly how the markets have done, how our ships have done.
Crude tankers were slightly weaker than Q4, and than Q1 of the previous year, so $46,000 versus about $53,000 in Q4 and Q1. Product tankers were around the same levels as in Q4 and much stronger than in Q1 of last year. Again, this is because mainly due to the Red Sea effect, where the ton mile increase for product tankers was very significant because of the rerouting around the Cape of Good Hope rather than through the Red Sea. LPG carriers were around the same levels as in the previous quarter, but significantly higher than in Q1 of last year. Again, all of our vessels are on time charters. They have got fixed on new time charters at significantly higher levels than they were earlier.
Dry bulk again was higher than it was in both the previous quarter and the corresponding quarter of last year. This is a reconciliation of the change in net asset value between June 2023 and June 2024. We had a cash profit of INR 200 per share. So most of our accrual in net asset value has come from cash flows. We emphasize this every quarter because the understanding of net asset value is that it is a mark-to-market gain. It is, in this case, the INR 200 rupee increase has come from actual cash profit, some of which has, of course, gone out as dividends already to the shareholders. But the mark-to-market portion of this gain is very minimal. It's only INR 19 per share.
In over the last five years and one quarter, the NAV has gone up from 374 to 1,181, which is a CAGR of 24%. On a consolidated basis also, there is a significant amount of cash profit, so the accrual has been about INR 260 per share, of which 248 has come from cash profits. And about INR 50 has come from change in fleet value, and this is on the offshore side. Let's look at the shipping markets. What's been happening with shipping markets? We've already discussed, discussed the TCEs that our ships earned. This is what the broad market data is. So this is not what our ships earn, but this is based on broker reports on market earnings.
So you can see that the Suezmax, which is the crude tankers, have earned somewhat less than in the same quarter of the previous year, about 11% lower, while the tankers have earned about 26% higher than they earned in the same period last year. Now let's look at why this happened. Crude tanker earnings were softer year-over-year, and the big factor was Chinese crude imports, which has dropped by close to a million barrels a day. This is again April to June, over April to June last year. Refinery margins have been weak, and that continues till today. And that was probably the reason for the crude tanker earnings being softer year-over-year. Product tanker earnings, as I mentioned, got a ton-mile boost from the conflict in the Red Sea.
And so, while both seaborne crude trade and product trade declined by 2% and 1% respectively, the product trade had the advantage of having a ton-mile boost, and so the market actually tightened versus a year ago. Supply hasn't been much. There's not been much deliveries, either last year or this year, so the fleet growth was only about 1% to 2%. Asset prices continue to be strong, as a result of the strong earnings. The order book has been building up, in the last six months or so. So, crude tankers, we had seen the order book bottoming out at about 3% to 4%. That's now at a little over 8%.
And product tankers, which were in the mid to high single digits, are now at 17% of the fleet. In dry bulk, we saw the markets being stronger than they were in the last year, both for Capesizes and for the smaller sizes. Here we've taken the Supramax as an indicator. And what led to this strength? Basically, we had Chinese iron ore imports going up. We had Chinese coal imports going up as well. While Chinese steel consumption apparently has not been going up much, iron ore imports have gone into inventories, inventories at ports, which of course is borrowing from future demand potentially. And we've also had strong steel exports from China to compensate for the lack of demand domestically.
Coal imports have gone up because they had a hydropower issue, but this is now starting to reverse. Red Sea disruption continued to support the dry bulk market in a small way. Again, the biggest impact of the Red Sea disruptions was in the product tanker sector, and the other sectors had only small impacts. In fact, in crude, it might have a, might have had a small negative impact as well. The bulk carrier fleet grew by about 3%, and the order book is just under 10%. Looking at LPG, the trade declined marginally, and but still, U.S. exports continued to gain market share.
The spot rates have come off very significantly, so in the same quarter of last year, they were at $75,000 a day for a VLGC, while they've come down to just over $50,000 a day. Again, very healthy levels, even at these numbers. But again, our ships are not in the spot market. We are operating on time charters. Fleet growth has been very, very strong, 12% year-on-year, for the VLGC fleet. The one factor which gave a boost to VLGC earnings about six months ago was the Panama Canal disruption, where, due to a shortage of water, the Panama Canal restricted ships going through. They went down, I think, to 20 ships per day, passing through the Panama Canal, from the peak, which was about 32 to 34.
They have come back now to 34 ships. They propose to take it back up to 36 ships. So that has entirely reversed now. VLGC asset prices are continuing to be at record levels. These are even higher than we had seen in the super cycle of 2004 to 2008. And the VLGC order book, of course, is very high. It's at 25%. Looking at the fleet supply situation, the order book, I've mentioned the order book already, and you see the gas carriers at almost 25% order book. But it's good to keep these numbers in perspective as well. A large part of the order book is tail-ended. The deliveries are tail-ended, so there's very little delivery actually happening in 2024 and 2025.
So if you see the crude tanker order book, which is at a little over 8%, only about 2% is being delivered in the next eighteen months. In the product tanker order book, which is about 17%+ , about 7% is being delivered within the next eighteen months. And if you look at the dry bulk order book, about half the order book, which is about 4.8%, is being delivered within the next eighteen months. LPG, the 25% order book is 20%, 2026 or later, and only 5% within the next eighteen months. Scrapping, of course, with the strong freight markets, scrapping continues to be very low to non-existent. And, this is resulting in a buildup of a scrapping overhang.
That is, ships which, under normal circumstances or under weaker markets would be scrapped but are not being scrapped and, because the earnings are so high. So if you just look at, we made a grid on two axes. The Y-axis is the aging fleet, where we've defined the aging fleet as 25 years and above for LPG ships and 20 years and above for the other kinds of ships, and you just have to compare that. So if you look at crude tankers, for instance, the aging fleet is more than 15%, which is aged more than 20 years, while the order book is at only about 8%. In dry bulk carriers, it's about 10% old ships versus 10%, 10% order book. In product tankers, also it's about 15% old ships versus about 17% order book.
In LPG, of course, the order book is very high, and the percentage of old ships is much lower at only around 9%. Looking at asset price movements, as one would expect, asset prices are high because of the strong markets. In fact, dry bulk asset prices have been going up despite the markets being nowhere near as strong as in tankers. But money is chasing good ships. Looking at the business in Greatship, we have. There's a gradual improvement in utilization internationally. We of course had the event with Saudi Aramco a few months ago, where they did a few cancellations. Now, we have...
So this is a fleet supply, and we've had this old fleet for a long time now, which constitutes about one third of the rig fleet and about one fifth of the PSV and AHTSV fleet. Let's look at our own contracting. We have two rigs coming off contract in the second half of FY 2025, which is the both of which are working on three-year contracts and will come off after the monsoon. So somewhere around October, November, we will have them coming off contract. We had bid both of these into tenders in India for three-year contracts. Those tenders seem to have been kept in abeyance, and you could even say they've been canceled. So we await further news on new tenders coming out.
In the meantime, we are also looking at other options, including short-term contracts with other customers. In terms of vessels, we have five vessels coming up for repricing in the next three months itself. And we will see, typically, repricings have been happening at higher rates than the previous contracts. The debt repayment schedule for Greatship is that they have a very steady repayment schedule. Now, they have done a refinancing of their debt, which is left, and this is to be paid over the next three to four years. Looking at the financials, and this is again, one of our standard slides, we, this is Great Eastern standalone. We went up to $360 million of net debt.
We are now down to net cash of $350 million. This is a $700 million swing in the last five years, so we peaked in March 2019. And so in the last five years, we've had this $700 million swing. And remember that this is after paying out dividends over this period of about $160 million to $170 million. And this is again a chart of share price to consolidated net asset value. We have now moved close to the consolidated net asset value. This is the details of our CSR activity. We have partnered with 53 NGOs since 2015, mainly in the areas of education, health, and livelihoods. And we are proud of the activities that we have done here.
One of them is somewhat in the news these days, Olympic Gold Quest, with whom we've been associated for quite some time. That brings me to the end of the presentation, and we welcome questions from you.
Thank you very much. We will now begin the question-and-answer session. To ask an interactive question, please click on the Raise Hand icon available on the toolbar, or you may click on Q&A icon to raise hand. The operator will announce your name when it is your turn to ask a question. You may also post your text questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from Rajesh Khattar, an individual investor. Please go ahead.
Hello. Am I audible?
Yes, you are.
Yes.
Please go ahead.
Yes, sir. Good afternoon.
Good afternoon.
You had formed a subsidiary in GIFT City, I think, a quarter ago. So, what business do you intend to do in this subsidiary? Can you give some details on that?
Yeah, I'll ask Rahul to take that. Rahul?
Yeah, hi. So we just set up this subsidiary. The purpose of this was, as you, as everyone is aware, that, you know, the government has given a lot of benefits to set up companies in GIFT City. And the main intention of that company is to conduct in-chartering activities at the moment. We currently have two ships in chartered.
Okay. So, you plan to expand into this line of business significantly over the next few years?
So we will have to see how this develops. At the moment, we've just made a small start. We're taking two ships in. And this is a direct derivative of our existing business, because, you know, when you're buying ships, to just give an example, if I buy a ship which is 15 years old, and she has five years of life left, if I in-charter a ship for five years, I've created the same exposure in the market for five years. Because I have got a fixed rate, and then I may play the spot market, right? I can also fix it out. But if I play the spot market, then you make the spread over and above the in-charter rate and the spot market.
... or if I buy a ship, I make the spread between the spot rate and the break-even rate of that asset.
Okay, so that's great to know. I mean, I think it's after several years that GE Shipping is venturing into a new line of business, even if it's an adjacent line. So that's great to know.
Yeah, uh,
I wouldn't really call it a new line of business, and we have done in-chartering activities in the past as well. You know, at times, we have also won a contract with an oil PSU, where we have, we've had a COA, where basically we make a commitment to conduct a few spot voyages, for which we, at times, in-charter vessels for one, one voyage at a time to facilitate that COA.
It's just a different way of serving our customers. You can either own a ship and provide those services, or you can charter in a ship for a longer period and use those to provide those services to the customers. So again, it's not new. We've been doing it. We, we used to do it sometimes through overseas subsidiaries, sometimes directly. And so it's not a new line of business for us. That's the only thing that we want to clarify.
All right. But, do you have any plans to expand into any adjacent businesses? Do you have any such thing on the drawing board?
No, not at the moment.
Okay, fine. My next question is last quarter, in response to a question, you had said that it is difficult for you to find business with old ships, and that is why you are swapping them for relatively less old ships. But, I just wanted to understand, then how does the buyer of your old ships employ them?
So what happens is that you have a large international market, where certain large... Let's just take the oil trade, right? You've got a lot of oil majors such as Exxon, Chevron, Shell. You've got many prominent ports in the Middle East, in East Africa, in India. For a large percentage of the trade, you will find that they have age restrictions on the vessels they're willing to take in. That does not mean that there is a certain set of people who are willing to take older ships. Like, say, for example, on the coast of China, there is more leeway you can get.
So, say a 20-year-old ship may be difficult, or a tanker may be difficult to ply on the international trade, but on the coast of China or certain other trades, you may be able to run them for a few more years. So the buyers we, that buy from us, will take those ships and ply them on those trades. But those trades are not available to players like us.
It's also that we have decided what our market segment is. Our market segment is that we want to be able to operate our ships internationally without restriction. And we don't want to have a significant part of the fleet facing these restrictions due to age. And therefore, we just say that we are out of there. Other players may feel that they feel happy operating under those circumstances, and, you know, that's each individual company's strategy. It's not that they are not possible to... It's possible to run them. It's just that we don't want to be in that, in that market.
All right.
Or we don't have access to the market, as Rahul said.
Okay, and my last question is, what are the triggers for further NAV increase from here? So, do you see earnings remaining firm across all types of ships, at least in the foreseeable future? Can you give some guidance on that?
We don't give guidance because we frankly don't know. There are so many events that can actually bring down the market or take up the market. So at this moment, you know, earnings, by and large, are quite strong, but we can't really say much more than that.
All right.
Because frankly, we don't know.
Okay, but your offshore business, I mean, as soon as the rigs and vessels are repriced, they should contribute significantly to your consolidated earnings, isn't it?
So the offshore vessels, we have repriced many vessels at substantially higher rates compared to the previous, meaning the outgoing rate. They're all up 80% to 100%, and the market is holding quite firm. We have gotten coverage of approximately 70-ish% for this financial year next. And we hope that the remaining, you know, the coverage that we still have to get remain at the same rate. On the rigs, like Shiv just mentioned, we've got two rigs to price, so it depends on what pricing we get for those rigs.
So-
The broader message is that they will start contributing much more to the profitability than they have in the last four to five years, because they've been going through a bad patch, and the market is turning around.
Yeah, okay. So,
Mr. Khattar , may I request you to join back the queue, please, as we have other participants waiting?
Yeah, I don't have a new question. Just a follow-up on, on this same point. I will not ask any new questions.
Sure.
Just allow me one last point.
Yeah, please go ahead.
The vessels that you have already repriced, if I were to take them as a factor or as a percentage of your consolidated earnings for the year that has went by, how much that would be? Will it be like 10%, 20%, or less or more?
No, it's small. No, it's small.
Yeah.
So the contribution, because the numbers in the shipping business are so high. So let me just give you one set of numbers just to illustrate. The average earned by the shipping fleet over the last year is probably $30,000 a day, something like that.
Okay.
Close to $30,000 a day over 40+ ships. And when we're talking of the repricing of the offshore vessels, we are talking of a fairly low base. And there, we're talking of repricing of $4,000 to $5,000 a day and across a total of 19 vessels. So it's not a huge amount to-
... in the context of the overall, it's just a contribution on the margin, and it's a, it'll be a significant contribution. But if you look at it in the context of today's earnings of the shipping business, it's not very high.
All right, yeah. That's very helpful. Thanks a lot. Thank you.
Thanks.
Okay, thank you.
Thank you. We have our next question from Shantanu Pawar, an individual investor. Please go ahead.
Hi, am I audible?
Yeah, hi. Yeah, we can hear you.
Thank you for this opportunity. My first question was about what kind of incentives are you expecting the government to provide for local shipping companies? And do you think these incentives could be structured towards creating a quote-unquote, "national champion," as mentioned in the newspapers a while back?
I think at the moment, you know, all of this is not very clearly defined. So I think we should just wait for the government to come out with something more concrete before we comment on anything.
Right. And my second question is about the freight rates and our PSU clientele. So given that the freight rates-
I'm sorry, could you just speak up slightly? Because it's a bit faint for us.
Sorry, yeah.
Now that's better.
My next question is about freight rates and our PSU clientele. Given that the freight rates have been quite buoyant lately, do you think our PSU clientele will agree for any long-term contracts after their current contracts have ended at these current prices?
Are you talking about the shipping business?
Uh, yes.
Yeah. So, you know, all our ships are, most of our ships are on the spot market, and our business model isn't to rely on PSUs coming up with long-term contracts to keep our utilization up. So at the moment, we're not relying on them, so, you know, if they come out with a tender for a longer-term contract, that's up to them. As of now, we have not seen them coming up with many tenders.
Just a quick follow-up.
Contract, they just try to roll over those, as they try-
Yeah
-to keep a certain proportion of that,
The long term in this business is generally a year or two. If you're looking for something, you know, where there is fixed coverage for the next 5 or 10 years, at least as of now, there isn't that, and I don't think they'll come out with anything. From Great Eastern's perspective, it's not necessary that we may even participate in those. We will look at what comes across.
Currently, the one to two- year timeframe is something that our company is looking at?
No. I'm saying that if, in our business, whenever an oil PSU or any other company comes out with contracts, they are generally one year or two years. At the moment, there is no active tender that we are participating in.
Okay. Thank you so much.
Okay, thank you.
Thank you. We have our next question from Himanshu Upadhyay, from Bugle Rock Capital. Please go ahead.
Yeah, hi. Good afternoon.
Good afternoon.
See, I have a question, means a few data points from the presentation itself, okay? We see order book is low, and it is all backended. Secondly, scrapping potential and order book are at similar level. How do you look at spot versus period charter, you see? And at what point of time would you like to move to more period charter, let's say, even one year or one and a half year type of contracts on the crude product and dry bulk? Or what would be the metrics which you would like to use to move to more period charters? Any thoughts on that?
Yeah, again, this will depend on the view that we take at that time. We have fixed a couple of our product tankers over the last six to eight months on one to two-year charters. So we have fixed out a few ships. Again, this will be, again, opportunistic. You'll find some rates to be tempting and fix them. So there is no particular metric that we are looking for, saying that, "Okay, if this number is crossed, we will look at it." We are-
See, you know, because one thing you have to remember, that the spot market is very volatile, right? So just to give an example, if the spot market is at 100, you may get a rate to fix out for one year at 70. So then your whole call becomes that, do you want to take that backwardation in the rate to fix out and give up the 30? And then sometimes, maybe for a two-year contract, it's at 60. So it may not be as stark as I'm giving, but just to illustrate the example about what exactly happens, is that there is always a push and pull on what is the time charter rate that oil companies or dry bulk companies are willing to offer you.
At points in time, if their view turns negative, they may drop the rate, and therefore, the backwardation is too steep to take cover. So we always take a bit of a call between spot and TC to take a... But we are completely comfortable, even if we remain very close to 100% spot.
Even if, let's say, the order book becomes 30%, and it becomes much more forward, we like to be in spot only. Just hypothetical case.
Yes.
Currently, it is all later dated, but if such a scenario happens, how will we react?
So see, we'll have to see it at that point in time, because you have to also put in context the demand side and see how we are looking at that. If we believe that even the demand side may not hold up, and you know, if the order book is at 30%, people may even cut even the oil charters are going to see the same order book. They may cut the rate even further. So there will be a bit of a give and take over there, and then at that point, we'll have to see what rates also we're getting. And then based on that, we will decide whether or not it's worth taking cover. Although we have seen historically, you are better off in the spot market over the time charter market.
We are always evaluating, and like Shiv mentioned, we have taken some cover, but we do prefer to remain on the spot market.
One more thing, we have stated that we want to replace our 20-year-old ships, okay? But it looks fine currently, based on demand, supply, and order book. The only place where valuations make it unattractive. But at what point of time or thought process will we think about not of replacing our old ships or, let's say, only selling, not buying? So any thoughts on that?
Sorry, do you mean of, growing the net?
No, no, no. I am saying that you are, so currently the prices are high, and we see-
Yeah.
The order book is not very high.
That's right.
And again, backward integrated, okay, or it is much later, 26 onwards, okay?
That's right.
But what, what would be the situation when you would like to not replace the old ship, only you would like to only sell the ships, okay? Like in crude, we only sold, we did not add much, okay. So what would be the thought process when you think only of selling, not buying? What would be the thought process or metrics which you would like to use?
So, firstly, on capacity, we have already shrunk. I think we peaked at about 48, 49 ships, now we're down to 42, 43. So we have, as of now, we've taken a call not to go much below this, so we have started some replacements. But you have to remember one thing, that when you're doing a replacement, you're selling an older ship at a relatively high price, and you're then buying a ship which is also at a high price. So therefore, you're paying a premium, a spread between the younger and the older ship. If that spread increases beyond the point we think it makes sense, we may decide to be a net seller. At the moment, at least for the deals that we've already concluded, clearly, we wanted, we thought that the pricing makes sense to do the switch.
Before we do any deal, we look at the premium people are asking for a newer ship vis-à-vis the older ship. Yeah.
Okay. And, can you repeat it, the premium, what you -- how did you judge means, the newer versus old means?
Yeah. So for example, let us take that the older ship, right? I'm just simplifying the numbers. But let's just say the older ship is at $100, right?
Mm.
Now, the ship is close to the end of its economic life, right? In the, at least in the international market. So as time progresses, maybe the 100 doesn't really go up. Maybe it goes to a 100, 105. But the younger ship, which is say at 200, the spread may have increased, whereby instead of paying 200, it may have gone up to 250. So now I have to put in an incremental 150 to get a younger ship versus the envisaged 100 rupees. Now, at 100 rupees of incremental capital, I may be happy to go and do the switch, but at 150, I may think that, you know, it's priced too high. So we always have to look at what that spread is to modernize, and then decide whether it is better to shrink or to modernize.
Because there will be a price point at which people are asking too much for the younger ship, and then we may say it may not make sense on paper, at least, to do the deal.
Okay, thanks.
And Shiv, you know, covered a chart on asset prices. So if you look at the last six months, there's been a greater increase in the younger ships, in the prices of the younger ships, and not so much for the older ships. So the spreads have increased.
And like one more thing, if the business model, what we are,
May I request you to join back the queue, please?
Okay, I'll join back in the queue.
Okay.
Thank you. We have our next question from Jeet Gala, from Centrum Broking . Please go ahead.
Yeah, thank you. Am I audible?
Yes.
Yes.
Yeah. Sir, again, I would want to ask you again on fixation. I mean, like you clearly explained, I mean, remaining on the spot market still makes a lot of sense, given we have backwardation to the extent of 34% to 40% discount over two-year-long contracts. But the same situation was, again, you know, the same way back, you know, three, four years back when we used to do, say, INR 1,200-1,400 crores of EBITDA. Now that our EBITDA has jumped to, say, INR 3,000 crores only for shipping business, I mean, does it now at least make sense to have our proportion more, I mean, to, you know, start fixing more of our ships? Because earlier we used to operate at 15% to 20% spot, 15% to 20% fixed versus 80% on spot market.
So when is the time then we really start switching, you know, start fixing more of our ships onto long-term contracts and, you know, start giving away your spot markets? Because this backwardation is always going to be there, right, in the markets. So, I mean, so how do you really think about this particular thing? Because like you said, backwardation, again, INR 100 earnings is available for 70, if you start talking about, say, one to two-year contracts. But at least you get this visibility for the next two years. So 70 for one year, 70 for another year, at least you have a INR 140 visibility, versus very poor visibility of the 100 for the first year and absolutely no visibility for the second year.
So of course, I mean, when we were in a bear market, you guys had done a lot of back testing, which used to give a lot of, you know, evidence saying that, you know, spot market makes a lot of sense. But at least at the top of the markets, I mean, what is that inflection point that will really make you guys go to, say, 60%, 70%, 80% fixed?
So, you know, actually, it's quite interesting that even in the backtesting, it shows that the higher the spot markets go, it's probably worse to fix out. Because what happens is, let us just take if we had fixed out in January 2023, when we actually, you know, when the rates were probably the highest we had seen in about 10, 15 years. Had we done those deals in January 2023, we would have been significantly underwater on all those time charter rates as of today. So then the call becomes that, okay, I'll fix today, and then what happens over the next two years?
The thing is that, if you see from backtesting, on those deals also, you end up maybe you do 10 deals, right, at what we call relatively high points in the cycle, and you lose money on eight deals, but you make up probably on the last two or three deals before the market comes off. And so therefore, what one needs to keep in mind is that are you willing to, you know, for the-- just for the security of cash flow, which we don't really need, considering our debt is very low, we are net cash. We have the ability to take this operational leverage. The data and our own views say that it is probably best to remain on the spot market, predominantly, at least on the spot market, not to say we will not take some cover.
And so therefore, to take a view that we will, you know, at some point there is a market level we are seeing to go 80% fixed, and we're just waiting for that moment to be hit before we do those kind of transactions, that's not really in our DNA.
Yeah, it's not. It's unlikely that we will do that. And again, it is not in our planning. So it's one of those things where, I can't tell you what is it that you need to see to do that. It's just that we'll know it when we see it. At that point, based on what the market is doing and if we take a certain market view, even then, I don't see a scenario where we go to a majority fix. So it's, yeah, again, it's a hypothetical, but it's unlikely to happen.
Okay. And, sir, even from a mental mapping, I mean, it will give you a kind of a hedge, right? I mean, of course, if the market keeps going up, then it's a loss to our company. But whenever the market comes up, at least you'll have a good two- to three-year visibility on your earnings, and then you have a lot of cash to do the next CapEx cycle whenever the market comes off.
Uh, but-
Even-
No, you're right. You know what Rahul mentioned, that rates were already high in June, in January 2023, and you would have lost a significant amount of money if you had fixed out any of your tankers in January 2023. This is what happens, that the... And what is it a hedge against? We already are underexposed to the market in the sense that 50% of our, of our balance sheet is ships and 50% is cash. So we are underexposed to the market. And to then say that I'm going to reduce the exposure even further, exposure to the spot market, to a smaller part of the balance sheet, your P&L gets a little, you know, it's fine, and it's... But our objective is not to smooth profits. We recognize, and our shareholders recognize, our investors recognize, that our P&L will be volatile.
And so long as over a significant period of time, this model outperforms just fixing, large part of the fleet, I think our shareholders will be better served, and we will be able to produce more profitability. It's tough to call the market in the short term, and, that's why we will not try to do it, to say that, "Okay, we think the market is going to drop, now let's fix 50% of our fleet or 60%." That's a tough call to make, and we don't really think that we have the capability to do that either, because the market is just... And again, Rahul mentioned, it's driven so much by small events that are happening, and so it doesn't make sense to try to second-guess the market.
Okay. And, sir, would you, would you call the present earning-
May I request you to join back the queue, please?
Sure.
Thank you. We'll read a text question from Prathamesh Diwar from Tiger Assets. The question is: By when our five vessels are getting repricing, will it be in Q2 FY25? Second question is: How much increase in price will the repricing have? And third question is: How much increase in realization and margins will come after getting repricing?
So the first question-
In Q2.
Right. Yeah, they are broadly in between Q2 and Q3 FY25. And how much of the increase? So, you know, if you look at, you know, compared to the previous rates, probably at similar levels, but if you see what the kind of rates these vessels were being fixed at a few years ago, like I mentioned earlier, they are all up 70% to about 80%. And the third one-
Yeah, we don't know.
Yeah, we don't know this.
We don't know what-
Yes
... what pricing we will get. Again, a lot of these are competitive tenders, so we don't know what pricing we will be able to get here.
Yeah. Okay.
Thank you. We'll take a live question from Rajkumar Vaidyanathan, an individual investor. Please go ahead. Mr. Vaidyanathan, can you please unmute your line?
Yeah. Hello, can you hear me?
Yes.
Yes. Hello.
Yeah, thanks for the opportunity. Sir, I have asked two text question also, so maybe you can answer that later. So, I have two more question. The first one is, given the repricing of vessels and rigs, expected in the second half of FY 2025, so can we expect about 30% to 40% increase in top line of the offshore segment? Is that a reasonable expectation?
We cannot comment on that. We have to see how the next two rig contracts get priced and when they get priced, and then we will see how that plays out.
Okay. Okay. And also the second question is on the container market. So given that that segment is also doing well, so is there any plans of entering that segment at some point of time, given the you know good amount of cash in the balance sheet?
We will evaluate the container space. It's clearly in our radar, but not at the moment.
Just on a slightly lighter note-
Yeah.
We are more likely to enter the market when it's not doing well.
Yes.
And that is our track record. So we are countercyclical investors, typically.
Yeah.
We would tend to buy when the market is weak, not when it is strong.
Okay. No, because you just now commented that we are looking at entering that market. So do you think the market is going to give you some opportunity in the near, short term?
So at least at the immediate moment, the market is very hot because of the Red Sea crisis. You know, the, I think the container space is probably the one shipping sector that's benefited the most, even more than the product tankers. So it... You know, and, you know, you don't know how that Red Sea crisis will play out. If it reverses, there could be a change in the earnings of that sector. But like Shiv mentioned, we are countercyclical players, and right now the cycle is very high. So we'll probably be cautious to any decision we take towards this sector.
Okay. Okay. Sir, lastly, I just want to know if you see, if you foresee a cliffhanger kind of a situation, so will you folks be willing to go 100% in cash by selling all of the ships, or you would rather face the storm and stay put in the market?
Sorry, what kind of situation? I didn't-
I missed that, yeah.
No, if you see a kind of a cliffhanger kind of a situation, where you see that the war kind of gets over and the markets are not going to be volatile and, you know, the kind of shipping market is kind of going to become more supply.
No, we are not going to take a position of going 100% in cash and having no ships. Eventually, we are a shipping company. And also, too, you know, we have 40-odd ships on the water. To actually replace, you know, to have all 40 ships out and recreate that position again in the market is not that easy. And there are a lot of soft issues also one needs to keep in mind when you're running a business. So I think that's ruled out.
Okay. Sir, this Q&A, the question that you will answer later, or should I ask that also now?
You can ask it now.
I can see it, but the question is not. I saw the question.
Okay.
One is on the drilling in the U.S. Again, this is, we don't know whether the drilling will be offshore or onshore, so that's speculative. The second is, we don't give any guidance on whether- because, as we have mentioned earlier, a large part of our fleet is spot, and we don't know what rates they'll earn, and therefore, we don't know our profitability. So we don't know what kind of ROEs we will be able to do. So both of those-
Okay
I think we won't be able to.
But what would be... you would have some kind of a target ROE, you know, right?
No, no, we would like to make a significant return on equity, and that is what we believe we need to do with our shareholders. But if the market collapses next year, we would welcome it, even if it means that our ROE drops significantly, because we are looking for opportunities to invest. So, yes, we do have targets, but we don't forecast what these could be, because it could happen next year, or it could happen five years from now.
Yeah. Shiv, see, maybe I would put my question differently. So if I am an investor, if you want to stay invested in GE Shipping for the next-
Yes
... say, five to seven years, so I would be comfortable if this company makes over a seven-year period, a return on equity of, say, average about 15%. So from that standpoint, I'm asking you, is that a reasonable expectation? An investor who wants to stay put for seven years, can he expect a ROE of around 15% from this company?
Yeah, I'm sorry. I just can't do that because we don't know those numbers. We would target to-
No, I'm asking average, Shiv. It's not-
No, no-
I can understand that-
So the question is, I don't know what next, next quarter or next year's numbers are going to be. So the average is a guess. Now, if I say the next five years, then it's a even more of a guess, Rahul.
How will we price it if we had gone back a few years, whether the Russian war would have happened and taken up the market? How are we going to price in whether the Israel crisis is going to lead to vessels being diverted around the Red Sea? How are we going to make these forecasts to predict what exactly is going to transpire in November with the elections, and what Trump is going to do with those two wars?
Yeah, I completely understand that.
See-
You can't forecast... Yeah, you can't forecast the short term, but what I'm asking-
But what we want is the return expectation.
If I-
I find it complicated of how anyone in any business will give a minimum average return target over five years.
Okay. Okay, sir.
Thank you.
Thank you.
We'll take a text question from Amit Khaitan from Laburnum Capital. First question is, we used to have VLCCs many years back. Any reason we currently don't operate in this segment now? Is it because these vessels are less flexible in terms of routes? And second question is, what would be the remaining average useful life of our rigs?
... So there is no particular reason why we are not in the VLCC segment. When we are in the market to invest, and let's say we decide to invest into crude, we are agnostic to running VLCC, Suezmaxes, or Aframaxes. It depends on which type of ship we are offered, at what price, and what we see as the best deal. And no, there is no flexibility constraint on the VLCC, that prevents us from entering that segment or rather, reentering that segment. What is the average useful life of our rigs? We depreciate over 30 years, but, you know, we have seen, I think, like Shiv mentioned earlier, about, I think a third of the fleet is over the age of 25, and we are seeing rigs operate even to the age of 40, 50 years old.
It eventually just depends on how the charterers are willing to take in the rigs.
The average age of our rig fleet is about 12.5 years.
Thank you. We have a live question from Anuj Sharma from M3 Investment. Please go ahead. Mr. Anuj Sharma, kindly unmute yourself.
Yeah. Yeah. Yeah, thank you. Shiv, just a question. So there was a rig or tender, which was canceled in H1, that I think got rolled up in H2, and that again has been canceled along with a fresh tender. So two tenders, both are canceled now?
So the first tender didn't get rolled up into the second tender, but that's right, two tenders were not awarded by ONGC.
Okay. Now, what is the reason for these sort of cancellations or deferment? And historically, I have there been similar precedents as to how these have evolved?
So we can only speculate on why ONGC was unwilling to-
Yeah, so there's nothing... We don't know why they were canceled. So we will wait and see. We. It is expected that they will come out with a replacement tender. So we will wait and see now, because they, we assume they still have a requirement for rigs. Most of the rigs which were to be taken under these new contracts would have gone into contracts only in 2025, except for our two rigs. So I think they will come out with tenders soon enough.
Okay. No, sir-
But we don't know, because they haven't communicated the reasons to us.
No. No, I'm just trying to understand in terms of implications, these were generally back-to-back contracts.
That's right.
We are also now exploring overseas contract, but we have always said there is mobilization time and charges, which made the domestic-
Yeah, I'll just stop you there for a moment. I mentioned other options, not necessarily... These are not necessarily overseas contract, they could be in India as well.
All right. All right, but just one last point, does it increase the competition for us? So maybe there will be other rigs which will be open and, pricing in the same bid. So does that, does that increase competition when it opens for retendering or rebidding? That's, that's the last one.
See, it depends. It depends also in the ONGC contract or even for the other contracts that we may bid into, about the specifications they want, because sometimes ONGC wants more modern, more high specification rigs, for which there are fewer rigs that can compete. So it again depends on the type of tender that comes out.
All right. All right, thank you so much.
Okay, thank you.
Thank you. We'll read a text question from Prince Chaudhary from Pink Wealth: How was the demand for LPG gas from China?
I think the demand is going fine. It is, these are typically used in petrochemicals, in the propane dehydrogenation plants. So the demand is going fine. So there is no issue in, demand for LPG in China.
Thank you. Next question is from Vikesh Kumar, an individual investor. Please go ahead. Mr. Vikesh Kumar, can you please unmute yourself? Since there is no response, I'll take the next text question from Rajesh Khattar, an individual investor. What are some factors that can lead to an increase in the trade for different types of ships that you have, and consequently, freight earnings increase as a result of the trade increase? And second question is, what are the products that you carry in your product tankers? What are the kind of grains that you carry?
So, there are a lot of factors which go into increase in trade. The first one, and at a very macro level, is global economic growth, which results in an increase in demand for various commodities. On the second question, we carry all kinds of products. These are refined petroleum products, to be clear. So naphtha, gas oil, which is like diesel, and gasoline, are typically the cargoes that are carried in the product tankers . And the kinds of grains that we carry, whatever the customer requires, so we have soybean , which we've carried often, or corn.
Thank you. We have a text question from Surender Singh: What is expected growth till year-end in terms of GE Shipping valuation?
Yeah, sorry, we can't comment on that, on valuation.
... We have Rajesh Khattar, an individual investor. Mr. Khattar, please go ahead.
Yeah, so, so thanks for taking another round of question from me. So, in your backtesting, and you always continue to, you always do backtesting for all kinds of scenarios. So in your backtesting, after such a buoyant market that has been over the last one, two years, when the downturn does start in your model, like, how severe it can be and how long can it last? I mean, do you have in your backtesting, what impressions you have got?
So, in the backtesting, typically, we have seen that strong markets don't last for more than 12to 24 months, in most strong markets. There's been one outlier in the last 30 years, which is the super cycle period from 2004 to 2008, which lasted for more than four years. So it depends on how long the upcycle lasts, because sometimes, freight rates can drop off very quickly. For instance, Capesize rates in the super cycle, that's in May, at the peak in May 2008, went to $200,000 a day. By November 2008, they were down to $3,000 a day. So that's how fast they can drop.
And again, you can have these events, and that potentially was triggered by what happened with Lehman triggering the global financial crisis in September 2008. So each cycle is different, and much like in the stock market, each time it happens, it's different, in the way that it plays out. So it's not easy to tell, and the only thing is that it's rare to have a two-year plus strong market. The last time we had a strong, tanker market for more than a year, that was in 2015, and, rates dropped off within the next 12 months. So by end of 2016, rates were pretty weak and prices had also dropped significantly. But that doesn't mean it'll happen this time.
Okay, I just have two more questions. One is a very short question on the share price valuation. So what is the historically highest price to NAV in the listing history of GE Shipping?
This is about, it's about here. We were around one or marginally above one in 2007. Yeah, in price to NAV, we were probably 2007 was, I think we were around marginally above net asset value. We are around that now. We are just a little below, but we have in the past been at NAV on rare occasions.
Yeah. Okay. So when you do decide to expand your fleet, as you said, that you will, you are contrarian buyer, so you will obviously buy during a downturn.
Yeah.
If you do expand during a downturn, isn't it likely to be a few years of pain before the gains start following in?
This happened. In fact, you don't even have to speculate on it. 2018, 2019, we declared a loss after we did a fantastic expansion, which has paid off phenomenally in the later period. But in 2018 and 2019 - FY 2018 and FY 2019, after we did some purchases at very, very cheap levels, we were just about breaking even in the shipping business. So that happens.
But today, you're reaping the benefit of all those investments you did five years ago, because you have the capacity for this.
And-
But this is part and parcel of the business, you know, where you will invest at the lower point, maybe you get a pain for a few years, and then you, hopefully, you've invested at the correct time to take advantage of when the rates have gone higher.
Yeah. So long as you can hold on to your investments, you make your investments at the right price, and you have the strength to hold on through a bad market, eventually the market will turn, and you will make money on those. And just, as a reminder, and I used to mention this in the past, those investments we did in 2017, 2018, all of them are doing better than 20% IRRs in dollar terms, without taking leverage into account.
Okay, can I ask one more question?
Sure.
Sure.
So, I had asked about that increase in trade in the text chat, and you have replied on that. I just wanted to understand that how does the increase in trade correlate with freight earnings increase? Because your ships are almost 100% occupied, right? Irrespective of from whichever segment you get the business.
Yeah.
So is it right to correlate that an increase in trade will result in an increase in your earnings, or there is no such correlation?
Typically, an increase in trade, so you'll have to see it. This is a demand side that you are talking about. All else being equal, an increase in trade with the same number of ships, it's a simple demand-supply curve. If the demand goes up, the supply cannot go up because the supply is inelastic in the short term, and therefore, the price will go up. And that is what can happen. However, that is an oversimplification of our market because it's not just an increase in trade, and you can see that we said that the product trade has actually dropped 1% from the year ago period. That's Q1 FY 2025 over Q1 FY 2024. So the trade has actually come down.
However, the ton-miles went up because of what is happening in the Red Sea, and therefore, rates are significantly higher than they were a year ago. So it's a complicated picture, but in general, an increase in trade is good for ship owners and for earnings. There is no formula out there, however.
Because if India imports oil from either the Middle East or the U.S., clearly you need more ships, because it takes much longer to bring oil from the U.S. to India than from the Middle East to India. So even if you had a slight reduction in trade in oil import from the Middle East, but that was compensated by the U.S., you can actually have an increase in the rates.
Okay, nice. Yeah. Okay, thank you. That's helpful. Thank you.
Thank you.
Thank you.
Thank you. We'll read a text question from Shivan Sarvaiya from Humevision Investment Advisors LLP . First question is: Would the rigs require retrofitting or upgradation to be eligible for the new short-term tenders that the company is looking to bid for? If yes, what is the cost for the same? And second question is: Could you please provide the dry docking schedule for the shipping and the rigs business for FY 2025, and the cost for it?
Yeah, for the first one, they will require some... Every contract requires some upgradation and has some very specific requirements. Even when you are going with the same customer from one contract to the next, there's always some work which needs to be done, okay? So it depends on each individual contract, and we are not going to get into the cost for that. It's $2 million, usually. Now, with regard to the dry docking schedule, sometimes it's, you know, typically, you should assume that one-fourth of the fleet will get dry docked in any given year. And some years it can be a little bit more, some years it can be a little bit less. And you would typically cost maybe $2 million on average for a dry dock.
Thank you. We'll take our next question from Himanshu Upadhyay, from Bugle Rock Capital. Please go ahead.
Yeah, hi. My question was on jack-up rig market. You also stated that Saudi Arabia has canceled certain orders. What impact is it having in the markets or prices? Are we seeing the your rates having come off in the market or the rates have continued to go?
If you actually see the global drilling market, the rates, at least some of the, contract that have been awarded in the last 6 months, there's been no material negative impact on the rates. In fact, we saw some rigs being sold also in the month of April. There was a block deal of three slightly modern rigs and, one sale that has been announced a few weeks ago, actually, a few days ago. And even on asset prices, it looks like the asset prices have been holding.
One more thing. In terms of logistics, offshore logistics, how far away we would we be from the peak rates or—which we saw last time?
Maybe the ultimate peak, it's only 30% or-
Yeah, probably still 30% below those numbers.
Yeah.
20-30, depending on the vessel type.
Yeah, yeah.
So the PSV is probably not so... from the peak, maybe 30%.
Maybe just take as an average, 30%.
Yeah.
Okay. Thanks very much.
Thank you.
Thank you.
Thank you. We have our next question from Jeet Gala, from Centrum Broking . Please go ahead.
Yeah. So in ordering, I mean, we are seeing an increase in the order book. So for example, in product tankers, the order book has reached to 17%. Most of it is back-ended after a couple of years, versus our scrapping potential is also close to 15% to 20%. I mean, and what is the order levels that probably GE Shipping would be scared and, you know, probably start looking at fixing at least the product tankers, if I'm talking about product tankers right now? Because 17%, does it... Do you think it's in euphoric levels, or you would still wait for some, again, you know, some frenzy ordering to happen? I mean, so at what levels will you be starting to get scared or probably, you know, start fixing? If you can just give us, yeah-
You have to also keep the order book in context of the fleet aging profile. So if you see, Shivu is just moving to that slide. I hope you can see it.
Yeah.
So if you see on this slide, right, the product tanker order book, as you can see, is 17%, but even the fleet, which is above the age of 20, is also close to 17%. It's actually about 15%, right? And as you-
You remember that vessels are aging as we speak-
Yeah
to deliver this full 17, we haven't put in there.
Very nice.
Yeah. So that also is, vessels are aging because you had a lot of new building happening in 2004, 2005, 2006, 2007. So you have to see the order book in the context of the fleet age itself-
Yes.
the fleet profile. And, yeah.
The other point is also, you have to keep in mind the demand. Because, you know, just to draw a parallel from the LPG sector, if you analyze the order book over probably the last 10 years, I think almost at any point in time, the order book would have looked high. And there was very minimal scrapping because the fleet was very young, and those vessels also run till older age. Despite that, you've had a very, relatively a very strong 10-year period for the LPG sector. So you can't just look at the order book alone to guide all your decisions on when to fix.
Okay. If this order book were to jump to a particular number, what that number would be for you guys to be a bit scared? I mean, everything else remaining the same.
It's actually impossible to, give you an answer because everything else is not the same. And so therefore, you have to always evaluate that in context of what else is happening. Because it will not be a binary outcome, that if the order book hits X percentage-
Mm-hmm.
You're just going to start fixing out. It doesn't work like that.
... Okay, okay. But at least you're comfortable right now with the 17% order book, at least for product tankers?
At least as of now.
It's not scary.
No, not at the moment.
All right. And so my second question is, I mean, are we exploring any demerger of our offshore businesses into a separate entity? I mean, anything on that front is on the cards, at least in the next one or two years?
No, not at the moment.
All right. Thank you, sir.
Okay, thank you.
Thank you. We'll read a text question from Vikesh Kumar, an individual investor. First question is: Could the management comment on the refinance in Greatship (India) Limited? The INR 800 crore loan from foreign bank was backed by letter of comfort and INR 65 crore of loan from GE Shipping. What was the reason for these related party transactions?
So this is just to clarify, Greatship (India) Limited is a wholly owned subsidiary, and we stand by our wholly owned subsidiary. One of the requirements of the refinancing, which helped us to reduce the cost of the borrowing, was to give a letter of comfort from the parent company, which has obviously a much stronger balance sheet, and therefore, we provided it. It's a standard part of what we can do to reduce the cost. It comes at no cost to Great Eastern Shipping, and therefore, we provided those. With regard to the INR 65 crore loan, it was a short-term. We said that we'll do a short-term financing to meet a specific requirement. And that will be repaid in the normal course of business over the next couple of years.
Thank you. We have a text question from Rajkumar Vaidyanathan, an individual investor. Any plans for buyback in the near term? What other levers the company has to improve its profitability other than higher freight rates?
Yeah, we are, there are no plans for a buyback, and, you may be aware that, there's some changes in the tax treatment, which make it even more expensive to do a buyback, potentially. So there are no plans for a buyback, and we have no levers to improve profitability, apart from earning better rates on our ships, improving the utilizations in terms of, not having any unplanned downtimes. That's, that's what we look for, for improving the profitability, and hopefully we earn better rates.
Thank you. We have a live question from Rajesh Khattar, an individual investor. Please go ahead.
Yes, sir, just a valuation question. So in the shipping sector, a lot of market participants say that shipping companies are valued at price to NAV, and you also use that metric frequently in your presentation. So can you throw some light why it is not valued at P/E? I mean, being from the industry, maybe you can throw some light on that, why P/E is not the right metric.
No, I, we don't have an opinion really on, on whether P/E is the right metric or not. We are not saying it's not the right metric. It's part of our disclosures that we make to say that this is the intrinsic value of the company, which is the bare minimum value. Again, this is the... NAV is the bare minimum value of the company, which is the value of the fleet, at current levels. So if you want to buy this fleet, this is what you have to pay per share. If you want to buy the exact same balance sheet, fleet, et cetera, at current prices. Yes, it is a commonly used metric in the international markets, and that is why we also started disclosing the net asset value.
So we have no view on whether it's better than price equity, sorry, price earnings ratio. But this is a number that we give. Again, to reiterate, in our mind, this should be the bare minimum value because it is the value of the steel in the company. It does not take into account everything else that goes into running a shipping company. It is also, and let me point out, as Rahul did in an answer to an earlier question about whether we would sell our entire fleet if the prices were very high, it is not easy to create a fleet like this or an operation like this. It's not just ships. First of all, you just have to buy the ships, and it's not just ships, and we run very good ships.
It's not just ships, it's the people and the skills that go into running these ships and running this business, and enabling this company to earn a superior return. And you can see it in our results, and since you said international shipping company, then you can see it in relation to how our results have done vis-a-vis the international shipping companies, in terms of the return on equity that we have done, return on capital, return on equity that we have done. So NAV is a number which is merely an indicator of what the current value is, current value of the fleet is.
Okay, and, since you track the entire sector, what is the price to NAV that is a benchmark for other international, the top international shipping company? Is it at 1.2, or like, is it even higher than that? The range.
Currently, trading at a small premium to net asset value. It depends on the company, actually.
Yeah.
Some are trading at a significant discount also. Again, this varies with the specific company, right? Some of them-
It also varies depending on which company you're analyzing.
Yeah.
Because some of the companies in the listed space are either pure tanker companies or pure dry bulk companies. We are diversified across different sectors, so it's difficult to even compare.
Okay. But just, like 1.2, 1.3, I mean, you cannot give any number.
... Now, typically, they are, currently they are trading at a slight premium to net asset value . And again, as I said, it is- I can't even say that it is for a sector, because there are tanker companies which trade at a little below net asset value , some trading significantly above net asset value , depending on how, you know, the individual circumstances of that company.
Okay, fine. Okay.
It's like getting into a stock valuation, so we shouldn't get into that.
Okay, sir. Okay. Thank you so much.
Thank you.
Thank you. We have a text question from Surender Singh: In government budget presented by Finance Minister, ownership, leasing and flagging reforms in shipping industry, does these reforms helpful in business growth of GE Shipping?
Like I mentioned earlier on this call, we need to just wait for some of these policies or reforms to come up with more detail before we can comment.
Thank you. Next question is from Harsh C., an individual investor: In FY 2024 consolidated balance sheet, we see current investment of INR 350 crores in listed equity investments primarily in NYSE, OSE. Is this a departure from the past stated position of investing surplus cash in safest instrument? How are these investments faring on IRR target of 10% to 15%?
Yeah. So the past stated position of investing surplus cash in the safest instrument is with regard to Great Eastern Shipping itself. We continue to hold that position. Our investment in Great Eastern Shipping, which has the predominant, the largest amount of cash, currently at about $650 million to $700 million, all of which continues to be invested in debt instruments only, without even taking any credit risk. These investments were made by our overseas subsidiary, which had made significant profit from chartering and had surpluses, could not find an opportunity for investment or find opportunity for chartering in vessels, and therefore decided to do these investments, using their expertise in this area. These investments have done significantly better than the 10% to 15% IRR target.
Thank you. Next is from Pritesh Chheda from Lucky: Did you guys say that rig rates are down 30% from recent peak?
No, we did not say that. We answered a question which asked us that, what are the rates today as compared to the peak rates we have seen in this business? And compared to that, it's 30% lower, and also it was referring to the offshore vessels, not the offshore rigs. But it would be broadly applying to the offshore. Yeah, but I think I get where Pritesh is coming from. Yeah. He's wondering whether from last year's rates were down 30%. No, there have been no repricings. We're talking about rates probably before 2014. That's correct. Yeah.
Thank you. And the next text question is from Vikesh Kumar, an individual investor: Despite GE Shipping being a net cash company with ROA, ROIC in mid-teens and significant operational history, what was the reason for CRISIL not awarding AAA rating? Is any portion of GE Shipping debt rate sensitive in nature, and would benefit from reduction in cost from AAA rating?
First, I'll take the last bit first. There is none of our existing debt would have benefited if the rating had changed, because that has already been issued. Now, coming to why our rating is at a particular level, that is a question best put to the rating agency rather than us.
Thank you. That was the last question for today, sir. Over to you.
Thank you, everyone. Thank you for a very interesting call. As always, the transcript and the recording will be up within a few days. We welcome any other opportunities to interact, and we're always happy to take questions from you. Yeah. Thank you.
Thank you.
Thank you. Ladies and gentlemen, you may now exit the meeting. Thank you for joining for the call today.