Shipping Corporation of India (SCI) was established in 1961 by the amalgamation of Eastern Shipping Corporation and Western Shipping Corporation. Two more shipping companies, Jayanti Shipping Company and Mogul Lines Limited were merged with SCI in 1973 and 1986 respectively.
SCI owns and operates about 35% of the Indian tonnage and operates in practically all areas of shipping business servicing both national and international trades.
The company has sketched out plans to infuse about US$ 4 billion for acquiring 72 vessels in the next five years. It is already spending US $ 1 billion to buy 12 vessels, which will be delivered between 2008 and 2010. Resources for the acquisition will be raised through a blend of debt and equity. The company is looking at a debt-equity ratio of 80:20 or 75:25.
Financially, it is one of the most profitable PSUs though, its performance for the first half ended 30th September 2007 slipped down a bit. On a total income of Rs.1904 crore, it posted a net profit of Rs.388.43 crore. Last fiscal, the profits were higher mainly on account of the profit it made on sale of ships.
On an equity of Rs.282.30 crore, its EPS works out at Rs.13.76 for H1 FY08, giving a PE of around 10 on the current price of Rs.295.
The company is sitting on a huge reserves of Rs.4,800 crore, making it a ripe bonus candidate. Moreover, with so many acquisitions and expansions planned, with such huge reserves to dip into, surely this is financial management at its best.
Another major positive factor is the low floating stock. The Government of India owns 80.12% of the shares, the total public holding is 19.88% of which, 16.08% is held by the banks, MF and FIIs, leaving just 3.79% with the Indian public at large. Such low float has seen a good run up in many PSU stocks.
The share at Rs.295 is an excellent bet which could give decent returns over the next 10-12 months.
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