Chambal Fertilisers had said it plans to demerge its shipping division into India Steamship to streamline operations and also infuse 3.38 billion rupees in the unit through equity.
The proposed listing "should be through by the end of the financial year. That is what we have targeted", M.S. Rathore, vice-president, legal, at Chambal Fertilisers told Reuters over telephone.
Chambal Fertiliser's stake in India Steamship will come down substantially as the latter will issue new shares to shareholders of Chambal diluting equity, he said.
The firm currently owns 100 percent in the unit.
Chambal has mandated Enam Securities for the demerger of the shipping business and subsequent listing.
India Steamship shall issue one share to Chambal shareholders for every eight shares held.
"Shipping is a volatile business, if we look at industry forecasts, the international scenario is not very encouraging both in 2011 and 2012. Capacity availability is rising and freight rates are not very encouraging," Rathore said.
Ship owners went on an ordering spree before the economic turmoil in 2009/10 , and the oversupply hit the market hard.
Indian shipping firms such as Shipping Corp of India
Essar Shipping and Great Eastern Shipping are still reeling under margin pressure due to soft rates in the dry bulk and crude carrier segments.
Shipping Corp, the largest shipping firm in India posted a net loss for the quarter ended March, while Great Eastern Shipping is planning to redeploy cash from its shipping business, where it is cutting exposure by selling three large vessels, and focus on offshore segments.
Chambal currently has six Aframax oil tankers, but does not have an exposure to bulk or offshore segments. Rathore said there were currently no plans to diversify into the offshore and bulk segments.
Tariffs for Aframax ships, oil tankers smaller than 120000 metric tons deadweight, are volatile and varies between $9,000 and $18,000 per day, he said.
The baltic dirty tanker index, a gauge of tanker rates, has fallen about 12 percent since January this year.
Crude oil tanker earnings on world's benchmark VLCC export route from the Middle East Gulf to Japan fell to their lowest in nearly two months in July as players looking to hire vessels cut bookings to get cheaper rates.
Of 46.6 bln rupees turnover Chambal Fertiliser recorded in FY11, the shipping business' contribution was about 2.84 billion rupees. Rathore declined to give an outlook for the shipping division or the expected valuation of the company after its listing. (Reuters)
