Asia/Pacific News
Court Approves Varun Shipping Demerger
Mumbai-based shipping company, Varun Shipping Co. Ltd (Varun Shipping) has said that the company will be split into two separately listed entities - Varun Global Limited (VGL), and Varun Resources Limited (VRL) - after high court approval of a demerger scheme, local media reports.
Although Varun Shipping did not disclose details due to regulatory norms ahead of listing two companies, it did say that VGL will run the ship management and ship investment business, while VRL will run the shipping business.
Varun Shipping, India's largest owner of vessels for liquefied petroleum gas (LPG) transportation, was said to have a debt of Rs.1,022.91 crore ($160 million) as of September 30, 2014 and recorded a net loss of Rs.489.94 crore ($77 million) on net sales of Rs.175.31 crore ($27 million) for 2013-2014.
"As part of the scheme, the debt related to the shipping business has been transferred to Varun Resources Ltd, which has successfully restructured its debt through a joint lenders' forum (JLF) mechanism mandated by the Reserve Bank of India," said Varun Shipping.
In March 2014, India's maritime regulator reportedly annulled Varun Shipping's licence for skipping mandatory safety checks and failure to pay wage arrears.
The regulator has also said that statutory surveys and certifications on six of Varun's eight Indian ships were also overdue for several months, rendering them unsafe and unseaworthy.
Commenting on Varun Shipping's demerger announcement, a senior research analyst with an Indian brokerage said, "this largely looks like a measure forced by lenders to create an asset-light company and an asset-heavy company."
"The company will be further marginalized by splitting into two. It is not sure how the company will come out of the debt troubles with the current market conditions."
Verun Shipping says the promoter group has already complied with all requirements of bringing in equity and the master restructuring agreement is signed by all banks in March 2015.
The company also added that it has already availed of part disbursement out of the JLF package for the operationalization of its LPG fleet, and that the LPG market continues to remain strong at this time.
In March, it was reported by local media that Indian bulk shippers are living "hand to mouth" despite almost full utilisation and low bunker prices.
