- Shreyas Shipping & Logistics Ltd, has struck a unique and mutually beneficial vessel chartering agreement with Transworld Feeders Pvt Ltd, subsidiary of the Unifeeder Group.
- It will acquire the container vessel operating business of Shreyas as part of a global deal announced on August 19.
- Unifeeder Group is a unit of Dubai-based global port operator D P World Ltd.
- Shreyas will receive cash of about Rs208 crores subject to customary adjustments for net debt and working capital.
Shreyas Shipping signs a “unique and advantageous” ship chartering deal with Unifeeder, writes P Manoj for the Hindu Business Line.
The ship chartering deal
- Shreyas will also retain all its fixed assets besides its vessels worth at least Rs 400 crores.
- It will be left with the container ship owning division and bulk cargo ship operations.
- Shreyas removes the risk of this threat and the potential value erosion for its shareholders.
A longer tenure
Shreyas secures a long-term container ship chartering arrangement with a tenure significantly longer than the typical market standard.
It participates in the upside of the growth in the coastal trade market. As its charter pay-outs will be performance linked to the earnings of Transworld Feeders.
Right of First Refusal
Shreyas will also have a ‘Right of First Refusal’ provision which will ensure it is never unfairly disadvantaged.
The framework chartering agreement with Unifeeder is also non-exclusive, which means that Shreyas reserves the right to charter vessels to third parties who can offer terms more beneficial to the Company.
“Post-transaction, Shreyas will charter vessels to Unifeeder which is a bigger and more creditworthy customer for the long-term. Unifeeder’s expertise and scale, combined with DP World’s extensive network, will bring earnings stability to Shreyas while at the same time retaining the potential to share in the future growth of Indian coastal trade,” V K Singh, Managing Director, Shreyas Shipping told BusinessLine.
“The charter income and profitability of Shreyas will grow in-line with the growth in the operating company’s revenue and profitability. Unifeeder expects to grow the operating revenue over the medium and longer term on the back of significantly higher volume of the combined businesses” Singh stated.
The deal maximises value
“This is a unique opportunity for the Company to release capital, de-risk the remaining business and deliver stability by partnering with a leading global operator during a challenging business environment that has seen a few transactions collapse within the logistics sector,” Singh observed. Against this backdrop, the Company has successfully managed to secure an attractive valuation, which is at a significant premium to Company’s current market valuation, he said.
“Another key benefit is that the Company will utilize the proceeds from the sale to repay some of its debt and replace old vessels with newer, more efficient vessels. This will further improve the Company’s cash flows and debt equity ratio”, he added.
“Overall, it’s a value maximization solution with attractive valuation upfront and a de-risked business model in the long term,” Singh asserted.
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Source: The Hindu Business Line
