Shipping Corp. of India Plans to Purchase Stake in Shipyard to Diversify

Shipping Corp. of India Ltd., the nation’s largest sea carrier, plans to purchase a stake in a shipyard to diversify its business after profit and sales slumped last year.

The state-owned company has asked shipbuilders to submit proposals, Chairman and Managing Director S. Hajara said in a phone interview today without elaborating. “Without shipyards, there will be no shipping companies,” Hajara said. “It’s a backward integration for any shipping company.”

Shipping Corp.’s net income plunged 60 percent in the year ended in March to the lowest in seven years, after the global recession cut trade. A.P. Moeller-Maersk A/S, South Korea’s Hanjin Group and STX Group, and China Ocean Shipping Group Co. are among companies that own both liners and shipyards.

“It’s a good long-term move for Shipping Corp. to acquire a stake in a shipyard, as the shipping industry has stabilized from the downturn in the last few months,” said Param Desai, an analyst with Mumbai-based Angel Broking Ltd. “They may get a stake at a low price, as shipyards are faced with no order inflows for over a year, as well as deferrals and cancellations for existing orders.”

The shipping line’s shares rose 0.8 percent to 167.45 rupees at the close of trade in Mumbai today. The stock has gained 13.3 percent this year, compared with a 6.8 percent advance for the benchmark Sensitive Index.

Shipping Corp.’s profit declined to 3.8 billion rupees ($81 million) last year after revenue for the Mumbai-based company slumped 17 percent.

To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net

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