Shipping Corporation of India loses 15%
Of late, Shipping Corporation of India (SCI) has fallen out of favour with even those investors who held on to the stock in past years despite its listless performance on the stock exchanges , Economic Times reports.
A shipping ministry document warning that SCI's financial health could deteriorate like Air India's, which triggered a 15% correction in SCI shares this week, has prompted these loyalists to dump the stock as they are worried that this situation could lead to a drop in high-dividend payouts.
"SCI is known to have a high-dividend yield. So, long-term investors may be exiting the stock expecting low yields," said Dipen Shah, head of research, Kotak Securities. From January till last week, when the shipping ministry document was first reported in media, SCI shares had fallen over 36% against a 23% drop in the BSE 500 index, with the company reporting losses in the past two quarters.
Yet, some investors stuck on because of potential dividend yield of over 6.5%. Now, with the shipping ministry warning that SCI could lose Rs 940 crore on buying new vessels that could impact its cash reserves, investors are not sure if expectations of high dividends could be met.
SCI's finance director BK Mandal dismissed the stock decline in the past one week as 'sentimental'. "The stock has only fallen because of some reports stating that the ministry has raised concerns about our future.
The shipping industry has been facing a turbulent period for the past two years, but we have enough money and reserves to tide over the crisis," he said. The stock closed at Rs 70 on Wednesday.
SCI's annual report said it had cash balance of Rs 2,156 crore on March 31, 2011. It reported a profit after tax (PAT) of Rs 5,673 crore in the period. "Our balance and financials are very strong at the moment and there is no need for any concern," Mandal added.
Broking firm ICICIdirect, in a report last month, said SCI's earnings per share (EPS) in 2010-11 is Rs 4.2 compared with Rs 12.2 in 2009-10.
"We expect return ratios to be in the low-single digits over the next couple of years due to weakness in freight rates and continued underperformance of the liner division.
In such a scenario, a revival in performance is likely to take a significantly longer time," said ICICIdirect, in a report in August. The Baltic Dry Index, a benchmark for international freight rates, has fallen 29% since October 7, 2010.
"In the near term, dry bulk freight rates are expected to remain positive owing to the revival of Australian coal exports and higher imports of nickel and ferrous scrap by China," said ICICIdirect. "Over the longer term, excess supply of tonnage would keep tabs on the up move in freight rates," it said.
A shipping ministry document warning that SCI's financial health could deteriorate like Air India's, which triggered a 15% correction in SCI shares this week, has prompted these loyalists to dump the stock as they are worried that this situation could lead to a drop in high-dividend payouts.
"SCI is known to have a high-dividend yield. So, long-term investors may be exiting the stock expecting low yields," said Dipen Shah, head of research, Kotak Securities. From January till last week, when the shipping ministry document was first reported in media, SCI shares had fallen over 36% against a 23% drop in the BSE 500 index, with the company reporting losses in the past two quarters.
Yet, some investors stuck on because of potential dividend yield of over 6.5%. Now, with the shipping ministry warning that SCI could lose Rs 940 crore on buying new vessels that could impact its cash reserves, investors are not sure if expectations of high dividends could be met.
SCI's finance director BK Mandal dismissed the stock decline in the past one week as 'sentimental'. "The stock has only fallen because of some reports stating that the ministry has raised concerns about our future.
The shipping industry has been facing a turbulent period for the past two years, but we have enough money and reserves to tide over the crisis," he said. The stock closed at Rs 70 on Wednesday.
SCI's annual report said it had cash balance of Rs 2,156 crore on March 31, 2011. It reported a profit after tax (PAT) of Rs 5,673 crore in the period. "Our balance and financials are very strong at the moment and there is no need for any concern," Mandal added.
Broking firm ICICIdirect, in a report last month, said SCI's earnings per share (EPS) in 2010-11 is Rs 4.2 compared with Rs 12.2 in 2009-10.
"We expect return ratios to be in the low-single digits over the next couple of years due to weakness in freight rates and continued underperformance of the liner division.
In such a scenario, a revival in performance is likely to take a significantly longer time," said ICICIdirect, in a report in August. The Baltic Dry Index, a benchmark for international freight rates, has fallen 29% since October 7, 2010.
"In the near term, dry bulk freight rates are expected to remain positive owing to the revival of Australian coal exports and higher imports of nickel and ferrous scrap by China," said ICICIdirect. "Over the longer term, excess supply of tonnage would keep tabs on the up move in freight rates," it said.