CALCUTTA Nov 2: The Ministry of Surface Transport has asked private-sector shipowners to dilute their promoters' holdings in their companies.

According to industry sources, the ministry feels this is one of the ways to ensure shipowners' accountability to their investors. Apart from the state-owned Shipping Corporation of India (SCI), there are four major players in the private sector, Great Eastern Shipping owned by the GE Shipping group, Varun Shipping owned by the Khataus, Essar Shipping belonging to the Ruias and Scindia Steam Navigation company.

Sources said disinvestment, either in favour of the public or even to foreign institutional investors, would not only bring in more funds, which could be utilised in ships' acquisition, but would also result in the hike in profits and dividends. According to shipping circles, the government is of the view that a large fleet is not enough. Shipowners should have a well-diversified fleet, it feels. For instance, since most of the domestic shipping companies have bulk carriers,the freight rates for dry-bulk carriers, during 1996-97, was depressed, with the result that the bottomlines of most companies suffered during the year.

Great Eastern is a highly diluted company, with promoters holding only 7 per cent of the total shares. The public holds a 36 per cent, while domestic financial institutions, mutual funds and foreign institutional investors collectively hold 37 per cent. Great Eastern is, in fact, the only shipping company in the private sector which is comfortably placed. While it made lower profits in 1996-97 compared with the previous year, an industry analysis has placed it on par with the national carrier SCI, as being a safe bet for investments. According to sources, the ministry has taken this as an indication of the success of the dilution strategy.

The Khataus hold a 35.6 per cent stake in Varun Shipping, which also has a foreign stakeholder, holding 6.7 per cent. The public holds a 1.6 per cent, while the collective holding of FIs, MFs and FIIs is around 17.3 per cent.The Ruias have a substantial holding of 48.9 per cent in Essar Shipping, while the public holds 40.4 per cent. Institutional investors hold about 10.7 per cent. There are some other shipping companies such as Chowgule Steamship and Apeejay Shipping, which are closely held entities and operate in a few select routes.

The ministry is also concerned over the practice of some of the shipowners to utilise a part of their proceeds in the call money market or in the inter-corporate deposit market. "Closely hold companies, where the owners call the shots can get away with such things, but you cannot do that if a number of shareholders are watching all your movements," said the senior official of a shipping company.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.