The state-owned shipping major, with 63.75% government ownership, faced headwinds from declining freight rates and operational challenges during the September quarter. Whilst net sales edged up marginally by 1.73% quarter-on-quarter to ₹1,338.87 crores, they remained 7.71% below the year-ago period's ₹1,450.76 crores. The company's operating profit margin excluding other income contracted sharply to 30.36% from 37.16% in the previous quarter, signalling pressure on core shipping operations. For the first half of FY26 (H1 FY26), the company posted consolidated net profit of ₹543.33 crores on revenues of ₹2,654.91 crores.
The stock's post-result performance has been notably positive, with shares climbing 2.66% over the past week and an impressive 19.96% over the past month. Trading above all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—SCI's technical positioning remains constructive despite the fundamental challenges. The company's current price of ₹266.50 sits just 4.82% below its 52-week high of ₹280.00, reflecting sustained investor confidence in the long-term shipping sector prospects.
| Quarter | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 | Jun'24 | Mar'24 |
|---|---|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 1,338.87 | 1,316.04 | 1,325.19 | 1,315.60 | 1,450.76 | 1,514.27 | 1,412.54 |
| QoQ Growth | +1.73% | -0.69% | +0.73% | -9.32% | -4.19% | +7.20% | — |
| Cons. Net Profit (₹ Cr) | 189.16 | 354.17 | 185.14 | 75.52 | 291.44 | 291.48 | 307.28 |
| QoQ Growth | -46.59% | +91.30% | +145.15% | -74.09% | -0.01% | -5.14% | — |
| Operating Margin (Excl OI) | 30.36% | 37.16% | 27.52% | 27.16% | 36.71% | 33.66% | 28.82% |
| PAT Margin | 14.13% | 26.91% | 13.97% | 5.74% | 20.09% | 19.25% | 21.75% |
Financial Performance: Margin Compression Weighs Heavy
The September quarter revealed significant pressure on Shipping Corporation's profitability metrics, with the company struggling to maintain its margin profile amidst volatile freight conditions. Net sales in Q2 FY26 rose a modest 1.73% quarter-on-quarter to ₹1,338.87 crores from ₹1,316.04 crores in Q1 FY26, but remained 7.71% below the year-ago quarter's ₹1,450.76 crores. The year-on-year revenue decline reflects the normalisation of freight rates from the elevated levels witnessed during the pandemic and subsequent supply chain disruptions.
Operating profit excluding other income stood at ₹406.47 crores in Q2 FY26, representing a sharp 16.88% quarter-on-quarter decline from ₹488.99 crores in the previous quarter. The operating margin (excluding other income) compressed by 682 basis points sequentially to 30.36% from 37.16%, indicating deteriorating pricing power and potentially higher operating costs. On a year-on-year basis, the operating margin contracted by 635 basis points from 36.71% in Q2 FY25.
The profit after tax margin witnessed a dramatic contraction to 14.13% in Q2 FY26 from 26.91% in Q1 FY26, a decline of 1,278 basis points. Employee costs rose 4.04% quarter-on-quarter to ₹132.22 crores from ₹127.08 crores, whilst interest expenses surged 55.24% to ₹47.38 crores from ₹30.52 crores, adding to the margin pressure. Depreciation charges increased marginally to ₹255.73 crores from ₹249.65 crores in the previous quarter.
A concerning aspect of the quarterly performance was the elevated contribution of other income to profitability. Other income stood at ₹97.27 crores in Q2 FY26, representing 45.45% of profit before tax (PBT) of ₹214.01 crores. This high dependence on non-operating income raises questions about the sustainability of earnings quality, as core shipping operations generated profit before tax (excluding other income) of just ₹116.74 crores, down 25.10% from the previous four-quarter average.
Quality of Earnings Concern
Other income constituted 45.45% of profit before tax in Q2 FY26, indicating significant reliance on non-operating sources for profitability. Core operating profit before tax (excluding other income) fell to ₹116.74 crores, down 25.10% from the previous four-quarter average, suggesting pressure on fundamental shipping operations.
Operational Challenges: Freight Rate Normalisation Bites
The global shipping industry has witnessed a significant normalisation of freight rates from the extraordinary highs of 2021-2022, when pandemic-induced supply chain disruptions and port congestion created unprecedented pricing power for vessel operators. Shipping Corporation of India's operational performance in Q2 FY26 reflects this challenging environment, with the company struggling to maintain the robust margins achieved in previous periods.
Despite the margin pressure, the company's ability to service debt remains adequate, with an EBIT to interest coverage ratio of 16.02 times in Q2 FY26, the highest in recent quarters. This strong coverage provides a cushion against the current operational headwinds. The company's debt-to-EBITDA ratio stands at a manageable 1.35 times, indicating low leverage relative to earnings generation capacity.
From a capital efficiency perspective, Shipping Corporation's return on equity (ROE) of 10.15% for the latest period remains modest, placing it below industry leaders but within acceptable ranges for the capital-intensive shipping sector. The company's return on capital employed (ROCE) of 8.31% similarly reflects the challenges of generating superior returns in a cyclical, asset-heavy business. These profitability metrics, whilst not exceptional, remain positive and indicate the company's ability to generate returns above its cost of capital.
The balance sheet as of March 2025 showed shareholder funds of ₹8,311.75 crores against long-term debt of ₹1,509.03 crores, resulting in a net debt-to-equity ratio of just 0.18 times. This conservative capital structure provides financial flexibility to navigate the current downcycle and invest in fleet modernisation when opportunities arise. Fixed assets stood at ₹6,433.89 crores, representing the company's substantial fleet of vessels across crude oil tankers, product tankers, bulk carriers, and offshore supply vessels.
Capital Allocation Discipline
Shipping Corporation maintains a prudent capital structure with net debt-to-equity of 0.18 times and a dividend payout ratio of 36.38%. The company paid a dividend of ₹6.50 per share with an ex-dividend date of September 4, 2025, offering investors a dividend yield of 2.44% at current prices. This balance between returning cash to shareholders and retaining capital for fleet investment demonstrates financial discipline.
Industry Context: Navigating Cyclical Headwinds
The global shipping industry operates in a highly cyclical manner, with freight rates driven by the delicate balance between vessel supply and cargo demand. Following the extraordinary boom period of 2020-2022, the sector has entered a normalisation phase characterised by moderating rates, increased vessel deliveries, and slower global trade growth. Container shipping, dry bulk, and tanker segments have all witnessed varying degrees of rate pressure, impacting profitability across the industry.
For Shipping Corporation of India, the company's diversified fleet across multiple segments provides some insulation from sector-specific downturns, but also limits upside participation when individual segments experience strong rallies. The company operates in crude oil transportation, product tankers, dry bulk cargo, liner services, and offshore support vessels, each with distinct demand-supply dynamics and rate structures.
India's growing energy import requirements and expanding trade volumes provide a structural tailwind for domestic shipping companies over the medium to long term. The government's focus on developing coastal shipping infrastructure and promoting Indian-flagged vessels under the Sagarmala programme could benefit established players like SCI. However, near-term challenges from global freight rate weakness and rising operational costs continue to weigh on performance.
The company's position as India's second-largest transport services company by market capitalisation (₹12,407 crores) reflects its established market presence and strategic importance as a government-owned entity. With 63.75% promoter holding by the President of India, the company benefits from implicit sovereign support whilst also facing constraints typical of public sector undertakings in terms of operational flexibility and capital allocation decisions.
Peer Comparison: Valuation Discount Reflects Challenges
Within the transport services peer group, Shipping Corporation of India trades at a price-to-earnings ratio of 13.70 times trailing twelve-month earnings, representing a significant discount to the sector average but a premium to select peers. The company's valuation multiple sits below Container Corporation of India (30.06x), Blue Dart Express (55.23x), and Blackbuck (32.21x), but above Great Eastern Shipping Company (7.60x), which offers the most attractive valuation in the peer set.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| S C I | 13.70 | 1.49 | 9.96% | 0.18 | 2.44% |
| Container Corporation | 30.06 | 3.21 | 9.38% | -0.24 | 1.76% |
| GE Shipping Company | 7.60 | 1.09 | 16.47% | -0.41 | 2.07% |
| Blue Dart Express | 55.23 | 9.44 | 27.38% | 0.29 | 0.40% |
| Delhivery | 232.73 | 0.34 | 0.12% | -0.15 | — |
| Blackbuck | 32.21 | 0.93 | 2.89% | -0.56 | — |
Shipping Corporation's return on equity of 9.96% places it in the middle of the peer group, ahead of Container Corporation (9.38%), Delhivery (0.12%), and Blackbuck (2.89%), but significantly behind Great Eastern Shipping (16.47%) and Blue Dart Express (27.38%). The lower ROE reflects the capital-intensive nature of the shipping business and the current margin pressure from freight rate normalisation.
The company's price-to-book ratio of 1.49 times represents a substantial discount to Container Corporation (3.21x) and Blue Dart Express (9.44x), but a premium to Great Eastern Shipping (1.09x), Delhivery (0.34x), and Blackbuck (0.93x). This valuation positioning suggests that whilst the market recognises SCI's established franchise and government backing, it also factors in the operational challenges and modest return profile.
From a dividend perspective, Shipping Corporation's yield of 2.44% stands as the highest in the peer group, ahead of Great Eastern Shipping (2.07%), Container Corporation (1.76%), and Blue Dart Express (0.40%). This attractive yield, supported by a dividend payout ratio of 36.38%, provides income-oriented investors with a compelling reason to consider the stock despite the near-term earnings volatility.
Valuation Analysis: Attractive Entry Point Amidst Uncertainty
At the current market price of ₹266.50, Shipping Corporation of India trades at a price-to-earnings ratio of 13.70 times, below the transport services industry average P/E of 10 times but representing reasonable value given the company's established market position and diversified operations. The stock's valuation grade has been classified as "Very Attractive" since October 29, 2025, having oscillated between "Fair," "Attractive," and "Very Attractive" over the past year as freight rate dynamics and earnings visibility have shifted.
The company's enterprise value-to-EBITDA multiple of 7.96 times appears reasonable for a cyclical shipping company, particularly when considering the current trough in freight rates may represent a favourable entry point for patient, long-term investors. The EV-to-capital employed ratio of 1.42 times suggests the market is valuing the company's asset base at a modest premium to book value, reflecting expectations of continued positive returns on invested capital.
The stock's price-to-book ratio of 1.49 times compares favourably to the shareholder funds of ₹8,311.75 crores (book value per share of ₹178.44), implying the market is willing to pay a 49% premium to the company's net asset value. This premium, whilst modest, recognises the going-concern value of the operating fleet and the company's ability to generate positive returns, albeit at levels below historical peaks.
Based on the company's five-year average earnings and normalised freight rate assumptions, a fair value estimate for Shipping Corporation of India would be in the range of ₹280-300 per share, representing potential upside of 5-13% from current levels. This estimate assumes a gradual recovery in freight rates over the next 12-18 months and maintenance of the current fleet utilisation levels. However, investors should recognise that shipping is inherently cyclical, and valuation multiples can compress significantly during prolonged downturns.
Shareholding Pattern: Government Anchor, FII Interest Rising
The shareholding structure of Shipping Corporation of India has remained remarkably stable over recent quarters, with the President of India maintaining a constant 63.75% promoter stake. This substantial government ownership provides implicit support and strategic importance but also limits free float and potentially constrains operational flexibility typical of private sector peers.
| Category | Sep'25 | Jun'25 | Mar'25 | Dec'24 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 63.75% | 63.75% | 63.75% | 63.75% | 0.00% |
| FII | 6.49% | 6.13% | 4.68% | 4.78% | +0.36% |
| Mutual Funds | 0.17% | 0.16% | 0.57% | 0.13% | +0.01% |
| Insurance | 2.41% | 2.41% | 2.59% | 3.50% | 0.00% |
| Non-Institutional | 27.18% | 27.54% | 28.41% | 27.83% | -0.36% |
Foreign institutional investor (FII) holding has shown a positive trend, rising from 4.68% in March 2025 to 6.49% in September 2025, with 107 FII accounts holding positions in the company. The sequential increase of 36 basis points in Q2 FY26 suggests growing international investor interest, potentially driven by attractive valuations and expectations of a cyclical recovery in freight rates. This rising FII participation is a constructive signal, as foreign investors typically conduct rigorous due diligence and bring longer investment horizons.
Mutual fund holding remains minimal at 0.17%, with just 16 mutual fund schemes holding positions. This low institutional ownership from domestic mutual funds represents both a concern—limited validation from professional domestic investors—and an opportunity, as any meaningful increase in mutual fund interest could provide upward price momentum. Insurance company holdings have declined from 3.50% in December 2024 to 2.41% in September 2025, indicating some institutional selling pressure.
The non-institutional holding category, comprising retail investors and non-institutional entities, accounts for 27.18% of the equity, down marginally from 27.54% in the previous quarter. This substantial retail participation reflects the stock's popularity among individual investors attracted by the government ownership, dividend yield, and India's shipping sector exposure. The absence of any promoter pledging provides additional comfort regarding financial stability.
Stock Performance: Strong Momentum Despite Earnings Miss
Shipping Corporation of India's stock price performance has diverged notably from the underlying quarterly earnings trajectory, with shares delivering robust returns across multiple timeframes despite the 46.59% profit decline in Q2 FY26. The stock has generated a remarkable 20.45% return over the past year, significantly outperforming the Sensex return of 4.62% by an alpha of 15.83 percentage points. This outperformance suggests investors are looking beyond near-term earnings volatility and focusing on longer-term cyclical recovery prospects.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +2.66% | -0.86% | +3.52% |
| 1 Month | +19.96% | +1.57% | +18.39% |
| 3 Months | +28.53% | +3.22% | +25.31% |
| 6 Months | +56.76% | +3.06% | +53.70% |
| YTD | +27.51% | +6.50% | +21.01% |
| 1 Year | +20.45% | +4.62% | +15.83% |
| 2 Years | +99.85% | +28.14% | +71.71% |
| 3 Years | +169.34% | +36.01% | +133.33% |
The stock's recent momentum has been particularly impressive, with a 19.96% gain over the past month and a 28.53% surge over the past three months. This strong performance has pushed the stock above all key moving averages, with the current price of ₹266.50 trading above the 5-day MA (₹258.77), 20-day MA (₹246.62), 50-day MA (₹229.77), 100-day MA (₹223.81), and 200-day MA (₹201.06). Such broad-based technical strength indicates sustained buying interest across different investor cohorts.
On a longer-term basis, Shipping Corporation has delivered exceptional returns, with the stock up 99.85% over two years, 169.34% over three years, and a staggering 560.48% over five years. These multi-year returns dramatically outpace the Sensex, generating alpha of 71.71%, 133.33%, and 461.84% respectively over these periods. The stellar five-year performance reflects the extraordinary freight rate boom during the pandemic period and subsequent supply chain disruptions, when shipping companies generated windfall profits.
The stock's beta of 1.35 indicates higher volatility than the broader market, with a one-year volatility of 46.36% compared to the Sensex volatility of 12.35%. This elevated volatility is characteristic of cyclical shipping stocks, which experience amplified swings during industry up and down cycles. Risk-adjusted returns of 0.44 for SCI compare favourably to the Sensex's 0.37, suggesting the stock has delivered superior returns relative to its risk profile over the past year.
"Whilst quarterly earnings have disappointed, the stock's strong technical positioning and attractive valuation suggest investors are positioning for a cyclical recovery in freight rates over the coming quarters."
Investment Thesis: Cyclical Value Play with Government Backing
Shipping Corporation of India presents a complex investment proposition that balances attractive valuation metrics, government ownership stability, and dividend yield against near-term earnings pressure, modest return ratios, and inherent shipping industry cyclicality. The company's Mojo Score of 60/100 and "HOLD" rating reflect this mixed outlook, with the recommendation suggesting existing holders maintain positions whilst fresh investors wait for clearer signs of operational improvement.
The investment case rests on four key pillars: valuation attractiveness at current levels, quality assessment of the business franchise, near-term financial trends, and technical momentum. The company's "Very Attractive" valuation grade indicates the stock trades at compelling multiples relative to its asset base and earnings potential, with a P/E of 13.70x and P/BV of 1.49x offering reasonable entry points for patient capital. The enterprise value-to-capital employed ratio of 1.42x suggests the market is pricing in modest expectations for returns on invested capital.
From a quality perspective, Shipping Corporation receives an "Average" grade, reflecting its established market position and adequate financial metrics but also acknowledging the modest ROE of 9.96% and ROCE of 8.31%. The company benefits from zero promoter pledging, consistent dividend payments (2.44% yield), and low leverage (debt-to-equity of 0.18), but faces constraints typical of public sector undertakings in terms of operational agility and capital allocation efficiency.
The near-term financial trend classification of "Negative" represents the most significant concern, with operating cash flow at its lowest level (₹849.51 crores annually), profit before tax (excluding other income) declining 25.10% versus the previous four-quarter average, and interest costs surging 55.24% quarter-on-quarter. The elevated contribution of other income (45.45% of PBT) raises questions about earnings quality and sustainability of profitability if freight rates remain depressed.
Technical indicators provide a more constructive picture, with the stock in a "Bullish" trend since October 23, 2025, trading above all key moving averages, and demonstrating strong momentum with delivery volumes up 105.72% over the trailing month. The MACD, Bollinger Bands, and KST indicators all signal bullish conditions on weekly timeframes, suggesting near-term price momentum remains favourable despite the fundamental earnings challenges.
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Government Ownership: 63.75% promoter holding by President of India provides implicit sovereign support and strategic importance in India's maritime sector
- Attractive Valuation: Trading at P/E of 13.70x and P/BV of 1.49x with "Very Attractive" valuation grade, offering reasonable entry point at current freight rate trough
- Strong Debt Metrics: Low debt-to-EBITDA of 1.35x and net debt-to-equity of 0.18x provide financial flexibility; EBIT-to-interest coverage of 16.02x indicates robust debt servicing ability
- Dividend Appeal: Highest dividend yield in peer group at 2.44% with payout ratio of 36.38%; latest dividend of ₹6.50 per share provides income cushion
- Diversified Fleet: Operations across crude tankers, product tankers, bulk carriers, and offshore vessels provide exposure to multiple shipping segments
- Technical Momentum: Bullish trend with stock trading above all moving averages; strong returns of 20.45% over past year and 28.53% over three months
- Zero Pledging: No promoter share pledging provides comfort on financial stability and governance
KEY CONCERNS ⚠
- Profit Collapse: Consolidated net profit plunged 46.59% QoQ and 35.09% YoY in Q2 FY26 to ₹189.16 crores, reflecting severe freight rate pressure
- Margin Compression: Operating margin (excl OI) contracted 682 bps QoQ to 30.36%; PAT margin fell 1,278 bps to 14.13%, indicating deteriorating pricing power
- Earnings Quality: Other income constituted 45.45% of PBT in Q2 FY26; core operating profit (excl OI) down 25.10% vs four-quarter average
- Negative Financial Trend: Operating cash flow at lowest level of ₹849.51 crores annually; multiple negative trend indicators flagged
- Modest Returns: ROE of 9.96% and ROCE of 8.31% lag industry leaders; below-average capital efficiency in asset-heavy business
- Low Institutional Holding: Minimal mutual fund ownership (0.17%) and declining insurance holdings (2.41%) suggest limited domestic institutional validation
- Cyclical Volatility: High beta of 1.35 and volatility of 46.36% expose investors to amplified downside during shipping downturns
Outlook: What to Watch in Coming Quarters
The trajectory for Shipping Corporation of India over the next 12-18 months will be determined primarily by the evolution of global freight rates across its operating segments and the company's ability to control costs whilst maintaining fleet utilisation. Investors should monitor several key indicators to assess whether the current earnings trough represents a cyclical buying opportunity or signals more structural challenges.
POSITIVE CATALYSTS
- Freight Rate Recovery: Any stabilisation or uptick in global tanker and bulk carrier rates would immediately improve margins and profitability
- Government Policy Support: Sagarmala programme initiatives and coastal shipping development could provide volume growth opportunities
- FII Interest: Rising foreign institutional holding (6.49% and growing) suggests international investors see value at current levels
- Dividend Sustainability: Continued dividend payments despite earnings volatility would support income investor interest
- Fleet Modernisation: Strategic vessel additions or replacements could improve operational efficiency and cost structure
RED FLAGS TO MONITOR
- Further Margin Erosion: If operating margins fall below 25%, it would signal severe pricing pressure and potential for losses
- Rising Interest Burden: The 55.24% QoQ surge in interest costs needs monitoring; further increases would pressure profitability
- Cash Flow Deterioration: Operating cash flow already at ₹849.51 crores (lowest level); any further decline would raise capital allocation concerns
- Institutional Exodus: If insurance and mutual fund holdings continue declining, it would indicate professional investors losing confidence
- Elevated Other Income: Continued reliance on non-operating income above 40% of PBT would raise earnings quality concerns
The global shipping industry's supply-demand dynamics will be critical, with new vessel deliveries potentially adding capacity pressure whilst scrapping of older vessels and global trade growth provide offsetting support. India-specific factors, including crude oil import volumes, coal imports, and coastal cargo development, will influence SCI's utilisation rates and pricing power. Investors should also monitor the company's capital allocation decisions, particularly regarding fleet expansion, dividend sustainability, and potential debt reduction.
The Verdict: Hold for Income, Wait for Fresh Entry
Score: 60/100
For Fresh Investors: Wait for clearer signs of freight rate stabilisation and margin improvement before initiating positions. The current earnings trajectory and negative financial trend suggest caution despite attractive valuation multiples. Consider establishing positions only if the stock corrects to ₹240-250 levels or Q3 FY26 results show sequential margin improvement.
For Existing Holders: Maintain positions given the attractive dividend yield (2.44%), government backing, and potential for cyclical recovery in freight rates. The stock's strong technical momentum and "Very Attractive" valuation provide cushion. However, set a stop-loss at ₹240 (10% below current levels) to protect against further earnings deterioration.
Fair Value Estimate: ₹280-300 (5-13% upside potential), assuming gradual freight rate recovery and normalisation of operating margins to 32-34% levels over the next 12-18 months.
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results, and shipping stocks are subject to significant cyclical volatility driven by global freight rate dynamics beyond company control.
