It seemed as if the market was welcoming the news that GE Shipping had shown its disinclination to bid for SCI, as the scrip's mast was raised 3.3% to Rs 35.30 on BSE in afternoon trades on Wednesday.
Volumes too were reasonable, at 235,000 shares. The stock has been rising since the lows reached around mid-October 2002. But it recently came off highs due to disappointing Q3 results.
The company has announced its decision not to pursue anymore the matter of acquiring government control over PSU shipping major Shipping Corporation of India. Prior to this, the company had said, on 21 November 2002, that in the light of the continued uncertainty on the timing of the sale proceeds, the company had decided not to pursue the acquisition of SCI for the time being. But G E Shipping has now decided to withdraw from the race for SCI altogether.
Analysts say G E Shipping's decision not to bid for SCI augurs well for the company as funds that were blocked for the purpose of acquisition could now be used for other fruitful purposes. Earlier, G E Shipping had built up more than Rs 400 crore (Rs 4 billion) in cash reserves in line with the decision to bid for SCI. This capital was earning returns of around 6-7%, less than returns usually got from core operations (12-14% in shipping). Analysts feel that G E Shipping's decision not to bid for SCI makes sense as SCI did not bring any strategic advantage other than capacity, which anyway could be built organically.
GES has been effecting a number of investor friendly measures over the last two years. These include exiting from unrelated and diversified areas of commodity trading, financial markets and property development.
For Q3 ended 31 December 2002, G E Shipping reported a 17% fall in sales to Rs 235.70 crore (Rs 2.35 billion). Net profit dropped 32% to Rs 47.74 crore.
Post 11 September, demand for oil has dried up. This coupled with the slowdown in the US economy led to a sharp fall in freight rates. However, of late, bulk freight rates have recovered from the lows and are steady at $9,000 a day from $6500 per day a few months back. Even in the tanker segment, freight rates have improved. Thus the coming quarters are expected to be better.
BSE Code: 500620
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