Of the 10 companies in the ‘shipping’ industry as per the BSE, 8 have seen their share prices jump today.
For a single day, the 19.67% that shares of Varun Shipping saw, are quite extra-ordinary. This performance comes on the back of rumours that the current government was deliberating a financial assistance scheme for the industry. These rumours seemed to have been enough to provide a much-needed fillip to these companies.
The Economic Times reported, quoting officials from the government and industry, that the government could look at assistance to the sector through options like interest subventions, giving infrastructure status and ensuring defence or public sector orders to Indian shipyards. The government may also incentivize building ships from locally sourced raw material. A fund that could cater to long-term fund requirements of Indian shipyards may also be in the works, the report added.
Interest rate subventions and infra status will reduce the debt servicing costs of these companies, and will help them compete with foreign shipping companies which get beneficial interest rates. In fact, the government has told the public sector Shipping Corporation of India to reduce losses by 10% or it will lose that Navratna status. This might need some help like interest rate reduction through measures that are rumoured.
Disclosure: Interested in Shipping stocks, please assume we have a position on them.