Category: Articles

It only took me four years to realize that I should tap into readers to add new features to the site. For some reason in the past I’ve just made changes on my own and not really cared about communicating them to readers, but that’s going to change now.

This change came about because of three things that happened in quick succession. First, Shiv asked me to setup something that allows you to send emails to multiple people from the post itself, and that feature was implemented today.

At the bottom of the post, you can now see an option to share the post through Facebook, Twitter, Email, StumbleUpon etc.

Second thing that happened was someone used Pinterest to pin a OneMint post. I had thought about adding a Pinterest option but then dismissed it because I thought who would want to use Pinterest for something like OneMint? How wrong I was.

That option has also been added.

Thirdly, Anil Kuppa suggested that Disqus be used to manage comments and I’ve toyed with the idea a few times but never implemented it because using Disqus will give the control of the comments to Disqus and I didn’t want that. However, this has certain benefits like being able to see all the comments you ever made, and I think I can assign a few comment moderators apart from myself which will be good. Disqus hasn’t been implemented yet, but it will be very soon.

These three things that happened in quick succession made me realize how big an opportunity I’m missing when I don’t seek feedback for features. So, if you have any suggestion for features, please leave a comment on this or any other post and I’ll respond to you.

Finally, I’m going to talk about new features in a post from now on so that people understand the rationale behind why I made a certain change and then either use the new feature to their benefit, ignore it if it doesn’t appeal to them or give me feedback for improvements.

Most of the content here is driven by reader’s comments and interaction, so I can’t understand why it took me so long to use reader feedback for features, but I guess it’s better later than never.

Finally, I want to thank Kim who does all the WordPress work behind the scenes on OneMint, and she probably doesn’t realize how big a contribution she makes to OneMint, and without her I’m pretty sure OneMint would’ve never reached the scale it has. Thanks a lot Kim, and if you ever have any WordPress related work that you needed to get done, I highly recommend contacting her.

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

India is the second fastest growing economy in the world and despite continued global economic slowdown, India has remained one of the most attractive destinations for the foreign investors and thus has been able to generate enough employment opportunities for our predominantly young working population.

People change jobs, move to newer places and with many other new things, get new EPF accounts also. They either get the previous balances transferred into the new accounts or withdraw the balances completely. Not many people know that withdrawing EPF balance is illegal. But that is not the central point of this post.

Starting July 25th this year, Employees’ Provident Fund Organisation (EPFO) has started providing online information of EPF balances to its active subscribers by issuing them “e-Passbook”. Here is the EPFO Circular (Sample e-Passbook attached) dated July 20th, 2012 carrying announcing the same.

e-Passbook is an online version of an employee’s provident fund records, in which all the transactions are recorded month-wise and date-wise. With the help of this passbook, you can now check your EPF balance online as and when you want to.

Here is what to do to access your EPF e-Passbook:

Step # 1 – Visit the EPFO members’ portal – http://members.epfoservices.in/

Step # 2 – Click on the Register >> button at the bottom of the page or Click here to Register button under the LOGIN box to reach the Registration page.

Step # 3 – On the Registration page, you are required to enter your Mobile number, Date of Birth, Email id, a six-alphabet unique text character and one of the below mentioned eight documents with its unique number and your name as on the document.

1.  PAN Number
2. AADHAR (UID)
3. NPR (National Population Register)
4. Bank Account Number
5. Voter ID Card
6. Driving License
7. Passport Number
8. Ration Card Number

Once all fields are filled up, click on “GET PIN” button and you will get a four-digit Authorization PIN on your mobile instantly. The message would read like this “To complete your registration on member portal enter PIN: XXXX”

Enter the PIN in the box provided at the bottom of the page besides “Enter Authorization PIN”, tick the “I Agree” box and click on the “Submit” button to complete the registration. On successful registration, you will get a confirmation message on your mobile “Your Registration on Member Portal is successful. Your PAN Number is XXXXXXXXXX and date of birth is XX-XX-XXXX. (date of birth is not required).”

Step # 4 – Once registration is complete, you can enter the members area by selecting your document, entering the document number and your mobile number that you entered on the Registration page and clicking on the “Sign In” button.

Please note that there is no need to create and remember any user id and password. You just have to use your mobile number and the identification proof number to login into the system. Once login is successful, you will see your name on the right hand side of the page.

Step # 5 – You can now download your EPF e-Passbook by clicking on the “DOWNLOAD E PASSBOOK” link on the top of the page. You can edit your mobile number and other details also on this page.

You need to select the state where your establishment/company is covered and then the EPFO office name which is applicable to you. There are a total of 120 state offices of EPFO in 35 states and union territories of India.

In case you do not know the EPFO office under which your company is complying or which is applicable to your account, then you can use either of these establishment search facilities to get the details of the office and also the code number of the company – Search Establishment Code – 1 or Search Establishment Code – 2

Establishments under old Office Code – It is EPFO office code and works state-wise
Establishments under Office – It is EPFO office code and works EPFO office-wise
Show all estt. under this PIN Code – It will show all the companies under the entered Pin Code
Old Office Code – It is EPFO office code and works state-wise
Establishment Code – It is your company’s code

Step # 6 – Once the state EPFO office is selected, you need to enter your EPF Account Number which would look something like this one – GN/GGN/28544/999 or GN/GGN/0028544/000/0000999.

Understand your EPF Account Number

GN is the Region Code.
GGN is the Office Code.
0028544 is the Establishment/Company Code and cannot be greater than 7 digits.
000 is the Extension Code and in most cases it is 000.
0000999 is the Account Number.

Now enter your name exactly as per EPF records, a six-alphabet unique text character and click on the “Get PIN” button to again get the four-digit Authorization PIN on your mobile. You would again receive a PIN on your mobile. The message would read like this “To download Member Passbook from Member Portal please enter PIN XXXX”

Again, enter the PIN in the box provided besides “Enter Authorization PIN”, tick the “I Agree” box and click on the “Get Detail” button to get your required e-Passbook. You will get a link for the passbook to open or save for your reference. You will see month-wise transactions made in your EPF account from the year for which the annual accounts of your company were updated since computerisation of the concerned field office.

But, if you had left the company prior to March 2012, then the information will not show up immediately. In that case, a message will be displayed “Your e-Passbook not available”. You would be required to click on the link “Send request to get your e-Passbook” and then “OK”.

You will get this message “Your e-Passbook request has been accepted. You shall be intimated on SMS when the same is available. You can check back after 3 days.”

If your account is inoperative due to non-receipt of any contribution for more than 36 months or if it is settled or has a negative balance, then the passbook will not be made available online. Whenever you have an active account, you should apply in Form 13 to get the earlier account(s) transferred to the active account.

Some other important points to remember:

This facility at present is available only for the employees for whom the employer has uploaded the Electronic Challan Cum Return for the wage month of May 2012 onwards.

If your organisation is not covered under the EPF Scheme 1952, you will not be able to access this facility.

One mobile number can be used for one registration only. But, you can edit your details subsequently.

A registered member can view only one account details under one establishment. In case you are having more than one account under one establishment, you need to apply for transfer of your old account balance into the new account through Form 13.

One member can view up to a maximum of 10 accounts under different establishments. All of the accounts can be viewed any number of times. You can get your old accounts transferred to the current one by using Form 13.

e-Passbook facility is a welcome move by the EPFO and will facilitate the employees in managing their EPF accounts in a better manner. EPFO should take more such steps to introduce other online services so that people can easily track and consolidate their accounts working anywhere in India.

I was amazed to read that Mr. Manohar Parrikar has promised to reduce the price of petrol in Goa by Rs. 11 and I was really curious to see how he managed this, and how big a hole this will put in the State’s finances.

The way he has managed this Rs. 11 reduction is by abolishing (almost) the VAT on petrol which used to be 20%. This is now only 0.1% and it has not been brought down to zero so as to maintain sales records.

The thing that amazed me most was that this step will not lead to a revenue loss but the Goa government is actually projecting an increased realization of Rs. 470 crores from VAT, Entertainment Tax, Luxury Tax, and Entry Tax!

The source of this information is the budget speech document (pdf) and I don’t know how far these projections have been accurate in the past but they have raised the rates on a whole host of other things in order to plug the loss from the reduction in VAT.

From the budget document, here are the things on which taxes have been increased.

Value Added Taxes

195 VAT on IMFL (Indian Made Foreign Liquor) and Beer to be increased from 20% to 22%.

196 VAT on Carbonated beverages (Coke, Pepsi etc.) increased from 12.5% to 20%.

197 VAT on junk food and fast food increased to 20%. (Not mentioned how much it was earlier)

198 Levy a tax rate of 15% on cars and SUVs sold at more than Rs. 15.00 lakhs. Same thing is applicable on bikes that cost more than Rs. 2 lakhs.

199 Levy 5% VAT on textile fabrics.

200 Entry tax on Naptha increased from 12.5% to 15%.

202 Tax on cigarettes increased to 22%.

Entertainment Tax

211 Entry fee on casinos reduced from Rs. 2,000 to Rs. 500 but the license fee increased to Rs. 6.5 crores – these two measures are expected to net themselves out.

213 Entertainment tax on casino games to be increased from 10% to 15%

Luxury Tax

214 Space being rented out for use of commercial activities to be brought under the ambit of luxury tax at the rate of 5%.

215 Services provided in a beauty parlor or spa to be covered under luxury tax of 10%.

Entry Tax

218 Raise the rate of entry tax on coal and coke to 2%.

219 Increase the rate of entry tax on SUVs and bikes which exceed Rs. 15 lakhs and Rs. 2 lakhs to 15%. I’m not quite sure whether this is in addition to the 15% VAT.

Conclusion

220 The effect of all this is that they expect to raise additional revenue by Rs. 470 crores.

Please note that this is not a complete list of all the items and I’ve excluded some other items like Gensets – the rates on which have also gone down. I’ve done that because I was primarily interested in seeing what rates they have increased to manage this extra Rs. 470 crores.

I must emphasize again that these are the only numbers I’ve seen, and this is the first time I’ve seen such a thing so it is possible that I may have missed an increase mentioned in the document which turns out to be quite important. Also, I’ve not seen the absolute numbers for any of these items as it was last year so it is hard for me to say how realistic this additional realization really is.

If you have any knowledge on that – fire away!

One of the more interesting things I learned while writing about India’s major trade partners was that Switzerland (not China) was the country that India ran it’s largest trade deficit with.

While you’d expect India to import a lot more than it exports to oil producing countries – I was a bit surprised to see that even Switzerland fell into that category.

I looked up further data on what India specifically imported from Switzerland and here are the numbers. The headings of the commodity name are rather long and I’ve retained the same thing that I found on official Department of Commerce website.

Commodity	In Millions USD
NATURAL OR CULTURED PEARLS,PRECIOUS OR SEMIPRECIOUS STONES,PRE.METALS,CLAD WITH PRE.METAL AND ARTCLS THEREOF;IMIT.JEWLRY;COIN.	$22,815.23
NUCLEAR REACTORS, BOILERS, MACHINERY AND MECHANICAL APPLIANCES; PARTS THEREOF.	$565.12
PHARMACEUTICAL PRODUCTS	$410.48
ELECTRICAL MACHINERY AND EQUIPMENT AND PARTS THEREOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS,AND PARTS.	$172.46
OPTICAL, PHOTOGRAPHIC CINEMATOGRAPHIC MEASURING, CHECKING PRECISION, MEDICAL OR SURGICAL INST. AND APPARATUS PARTS AND ACCESSORIES THEREOF;	$170.91
Others	$667.64
Total	$24,802.00

 

I think the first category consists mainly of gold and here’s a pie chart that I think really drives home the point.

 

As  you can see the bulk of the imports are gold and pearls and I think gold must be the primary constituent in this category. Further, I think that the gold people buy for investment like gold ETFs and gold bars and coins sold by banks constitute a large part of these imports.

I say that because this category grew by 75% the last year and people suddenly didn’t start buying that much extra jewelery. This category also happens to be the main reason for growth in imports from Switzerland which grew by 68% overall in the last year. This will probably not grow as much this year so the deficit situation may change, but it’s really amazing how one commodity can drive so much growth in just one year.

It will be interesting to see where else does India import its gold from but that needs to be the topic of another post.

Perpetual bonds are bonds that don’t have a maturity date, and to compensate for the fact that investors can never redeem them – they pay a higher rate than other bonds with a similar credit profile.

They are not all that popular and I could not find references of many perpetual bond issues, and there seem to be more dollar denominated perpetual bond issues than rupee denominated ones.

The company that issues the perpetual bonds normally has an option to call them which means that they can decide to redeem the bonds at the end of certain time periods say 5 or 10 years, and the Tata Steel perpetual bond issue had a step up option also which means that if the bond is not called within a certain time frame then the company will have to pay a higher rate of interest on them. They issued the bonds at 11.8%, and if the company didn’t call the bonds within 10 years then the coupon rate would increase by 300 basis points.

They are supposed to be listed on the stock exchange also, but from what I can see there isn’t any trading in them at all. If you know of a perpetual bond that is listed on an exchange then please leave a comment here.

While this may be of interest to pension funds and institutional investors, I don’t see any value in this for retail investors.

I can’t think of a single situation where someone will be better off with one or two extra percentage points in interest income every year with the trade off that they may never see their capital back. That doesn’t appeal to me at all.

These bonds are good for banks and other companies to raise money and shore up their capital and also good for pension funds who would like to lock on to the high interest rates, and if they got the principal redeemed then they anyway need to re-invest it in another instrument, but as far as retail investors are concerned – I don’t see any utility in them.

This post was from the Suggest a Topic page.

Here are the puzzles from OneMint’s Facebook page this week. I couldn’t post last week because I was away Saturday, and didn’t get an opportunity on Sunday.

—

1. Simplicity can make your message powerful by carrying it far and clear. But, that was not one of the virtues of my beloved uncle. He told me the following one day:

Winged creatures with a shared identity tend to gravitate to those that have similar leanings.

I was baffled, but it’s apparently a very well known saying. What is the saying?

2. My friend asked, “Should I start my business in summer or autumn?”

“In school I asked you to join the boxing team, but not the wrestling team. Later, I suggested you learn the salsa, but not the ballet, and then I advised to you to become a surgeon but not a psychologist. Doesn’t that tell you what my advice now will be?”, I said.

In which season will he start his business?

3. “A rabbit petting zoo was a great idea!”, my friend said, “little school kids can take care of them, so overheads are really low.”

That was right, I looked at the area and saw only uniformed kids, and cute little rabbits.

“Look at all those ears”, I said – “I can count 120 of them.” “In that case, there must be a 100 more legs there.” said my friend.

How many rabbits, and kids were present there?

4. “Congratulations!”, said my father in law, “Your wife’s mother in law’s only son’s sister in law is going to go to the same college as you!”

Who was he talking about?

5. Can you guess the missing number? It is not part of a sequence, you have to visualize the answer a bit, and do one addition and a multiplication.

6. TIC TIC TIC is a sweet sound, but a pleasant sound is not what I heard when my friend stormed into the room with a newspaper in hand declaring this.

I’m going to send all these _ _ _ _TIC_ _ _ _ to the _ _ _ _ _ _TIC.

Can you fill in the blanks to tell me what he was saying?

About these

If you missed my earlier post about them, and are wondering what these are then I started writing some puzzles a couple of weeks ago, and since they are not big enough for a full post I publish one every day on OneMint’s Facebook page, and then try to publish a week’s worth on Sunday here. There are no prizes for correct guesses, just the pleasure of getting them right.

Piyush Modi had a very interesting comment on yesterday’s post, and this is relevant for people with home loans from ICICI Bank. It seems that he called them up to get something done, and they offered him a lower rate on an existing home loan, and saved him a lot of money!

I’ve been thinking about it, and can’t understand why they did that, and I certainly don’t know of any other such cases.

I thought I’d publish his comment here to see if anyone else has a similar experience, and to let others know about this as well. It will only cost you a phone call, so there is no harm in trying your luck.

Here is his comment verbatim:

Though this comment is not particularly relevant to this post, but I wanted to leave it and want you to write about it cause I am sure it will help many many of your readers.

My dad has a home loan with ICICI Bank which was once taken at a floating rate of 7.5%, and which now stands at 14.5% rate. I recently called up ICICI Phone banking to ask the procedures for a balance transfer to a different bank & I was told that they are running a scheme where existing customers could move to a lower rate of interest. I was skeptical at first, but then went through with the documentation required and apparently its an amazing scheme. Obviously ICICI wont advertise it or inform you, but it is available.

My dad’s rate has been reset from 14.5 to 10.5% a huge 4% difference. His tenure, which was originally 180 months, and had now gone up to 315 months despite making the EMI repayments for the last 4-5 years (60 months approx) stood slashed at one go to 160 something. Alternatively, one can choose to reduce one’s EMI instead of choosing to reduce the tenure.

For those wondering how such a drastic reduction in tenure is possible, it can happen. In this case, the total EMI was approximately equal to the interest charged in a year and only a very small amount (4-5%) of the EMI was being used to repay capital. With the fall in the rate charged by 4%, this shifted up considerably to 25-27% of the EMI, and this means that a lot more of the EMi is being used to repay capital instead of just service debt and this leads to drastic reduction in tenure.

What were the documentation/formalities required –

1. Cheque for a charge of 0.5% of balance outstanding on the loan+service tax on the same.
This is extremely cheap as I will recoup this charge within 2 months
2. Non-judicial stamp paper of Rs 30 signed by borrower & co borrowers
3. Some sort of an agreement which you will get from the bank itself and has to be signed by borrower & co borrowers
4. All outstanding EMI payments have to be cleared (obviously)

Now I am not sure whether the scheme is available for all home loan borrowers or a particular category, as also the amount of reduction in rates will be the same for all borrowers or not. But give a call to ICICI bank and just ask. It will save you a tonne of money.

 

I have often felt the need to calculate numbers from Crores to Millions because I feel its easier to make sense of larger numbers in millions and billions. Isn’t Rs. 1 trillion much better than 1 lakh crore?

If you think in terms of Millions of Dollars then it also simplifies comparison across geographies. With that in mind I made this simple calculator that will take your input in Rs. Crores and then convert the number into millions and billions of INR and USD.

I’ve started with an exchange rate of 1 USD to 54 Rupees but you have the ability to change that.

Enter Crores
Exchange Rate

In Millions of INR
In Billions of INR
In Millions of USD
In Billions of USD

There was a very well researched comment on the forum the other day where reader SM Gupta had researched term insurance quotes from various insurers, and presented his findings.

You can see the comparison below.

Sample Quotes:

• Age – 31 Years
• Policy Term – 25 Years
• Sum Assured: Rs. 50, 00, 000

Company Name	Plan	Annual Premium
Met Life India Insurance	Met Protect	Rs. 5,800
Aegon Religare Life Insurance	iTerm Plan	Rs. 5,900
ICICI Prudential Life Insurance	iProtect	Rs. 5,900
Kotak Mahindra Old Mutual Life Insurance	E-Term / E – Preferred Term	Rs. 6,370
Kotak Mahindra Old Mutual Life Insurance	Preferred Term Plan	Rs. 7,638
Bharti AXA Life Insurance	Elite Secure	Rs. 9,850
Future Generali Life Insurance	Smart Life	Rs. 10,050
HDFC Standard Life Insurance	Term Assurance Plan	Rs. 11,871
Aviva Life Insurance	Life Shield Plus	Rs. 12,243
Bajaj Allianz Life Insurance	New Risk Care	Rs. 13,540
Tata – AIG Life Insurance	Life Raksha	Rs. 13,900
Birla Sunlife Insurance	Term Plan	Rs. 15,332
LIC of India	Amulya Jeevan	Rs. 15,450

You can see that there is a wide range in these quotes, and the natural question is which one to of these policies should you choose. I haven’t double checked these quotes, but the ball – park seems right to me.

Unfortunately, I can’t answer that question since I’m not well versed with insurance, but I thought I’d post this here with my own thoughts, and also share what I have done myself as far as term insurance is concerned, and then leave it open for discussion.

When I searched for term insurance I found out about this wide range, and ultimately decided to go for a LIC policy even thought it cost more.

One of the primary reasons for opting for LIC was that we have known a particular LIC agent for a very long time, and he has provided my family excellent service in the past for car and other insurance needs.

We have had our share of Mediclaims and car insurance claims that have been processed without hassle, so that added to my confidence in going with him.

No one contemplates mortality, but if something were to happen, then I feel comfort in the thought that this gentleman is more likely to assist my family than a stranger.

The second reason is that LIC has a fairly high claim settlement ratio, and while I’m not intimately familiar with how these numbers are calculated  – it does inspire confidence that they payout on a large number of claims.

The third reason is that I plan to split the total insurance into two policies – one LIC and one other insurer, as that makes it easier to manage the insurance if in the future I decide that I don’t need so much cover, or if one insurer declines to pay, then at least there is the other one.  So far, I haven’t been able to get to the second insurance cover, but that was the initial plan.

The last reason was that while in percentage terms the numbers might vary a lot – in absolute terms it is not very significant, and I’m not too concerned with paying the extra money.

So those are some of my thoughts – please add to the discussion, as I’m sure a lot of you have dealt with the insurance question, and chosen one over the other. You can leave a comment here, or at the forum post.

The Shipping Corporation of India (SCI) has filed its draft red herring prospectus with SEBI, and this Navratna will probably come out with an FPO this November.

The company will come out with an issue of 84,690,730 equity shares – half of which are existing government shares, and half of which are fresh issue. Since this IPO contains a component of a fresh issue of shares – SCI will receive money from this issue even though this is disinvestment, and some of these funds are going to be utilized for its fleet expansion plan.

SCI is one of India’s largest shipping companies with approximately 35% of Indian flagged tonnage as on June 30th 2010. The company owned a fleet of 74 vessels of 5.11 million dead weight tonnage (DWT), and had ordered the construction of an additional 29 vessels to be delivered between 2011 and 2013.

Here is a breakup of the 74 vessels.

The bulk carrier, and tanker division generates the majority of the revenue with 68.5% percent of total income coming from this segment in 2009.

SCI Financials

The fortunes of the shipping sector are closely tied with the global economic conditions, and this is clearly illustrated with the revenue movement of SCI over the years.

The company generated revenues of Rs. 39.06 billion for the year ended March 2010, which was lower than the revenues generated in 2009 of Rs. 45.57 billion. The profit after taxes also follow a similar trend, and the chart below shows how the numbers moved from 2007 – 2010 (in Rs. million).

SCI had Rs. 22.11 billion in cash and equivalents on June 30, 2010, and had a debt – equity ratio of 0.45. The EPS for 2010 is Rs. 9.29 which is down from Rs. 22.66 EPS in 2009, and Rs. 17.82 EPS in 2008.

The company derives the majority of its revenues from the bulk carrier and tanker division, which in turn is dependent in movement of energy related products like crude oil, gas and coal, and this segment is the cause of the drop in revenues and profit from 2009 to 2010.

These three passages from the Management Discussion are quite useful to understand how the revenues and profit of SCI are impacted by external conditions and its own cost structure.

Demand for energy products
Our bulk carrier and tanker division is the primary revenue source of our Company, accounting for 70.5%, 71.7%, 68.5% and 63% of our total income for Fiscal Years 2008, 2009 2010 and the three-month period ending June 30, 2010, respectively. The demand for our bulk carriers and tankers, to a large extent, depends on the demand for energy related products, including crude oil, gas and coal. Due to imbalance in supply and demand of tonnage and its consequential effect on the freight market, our total income and adjusted profits for Fiscal Year 2010 dropped by 14.3% and 59%, respectively, compared to Fiscal Year 2009. We expect that our results of operations will continue to be dependent upon demand for shipping of energy related products in the future.

Fluctuations in charter rates

Our total income and operating margins are affected by the charter rates that we charge for our shipping services, which are largely dependent on supply and demand. Charter rates have declined during the global economic slowdown in Fiscal Years 2009 and 2010 due to the reduced demand for shipping services. During that same period, our total income and profits for Fiscal Year 2010 dropped by 14.3% and 59%, respectively.

Our operational and fixed expenses
Our profitability is significantly impacted by our operational expenses. For Fiscal Years 2008, 2009, 2010 and the three-month period ended June 30, 2010, our operational expenses were Rs. 25,939 million, Rs. 28,103 million, Rs. 27,646 million and Rs. 6,275 million, respectively, or 64.3%, 61.7%, 70.8%, and 63.1%, respectively, of our total income. Some of our expenses, such as those for rent on our properties and interest on our indebtedness, are fixed or subject to limited adjustment by us, and will not fluctuate in proportion to changes in operating revenues. The fixed expenses allow us to control our expenditure. However, if our income from operations decreases due to our inability to employ our vessels at profitable rates or low productivity, we are still required to pay such fixed expenses which will reduce our profitability and operating margin. In addition, any increase in expenses related to bunker (of fuel), maintenance, repairs, spare parts, salaries, consumables and compliance with new rules and regulations will also have a material adverse impact on the results of our operations, if we cannot pass such increased costs to our customers.

To summarize – recessionary conditions lower the demand for oil and fuel products, which drives the majority of the revenues of SCI, and charter rates for the ships are lowered due to the decreased demand. Combine this with a high fixed and operating cost, and the company really feels the squeeze of the slower economic condition, and has its fortune tied to the economy quite closely.

The pricing, or exact dates for the SCI FPO have not been declared yet, and I’ll update this post when the dates and pricing are available.