In this series, Sramana Mitra shares chapters from her book Vision India 2020, that outlines 45 interesting ideas for start-up companies with the potential to become billion-dollar enterprises. These articles are written as business fiction, as if we’re in 2020, reflecting back on building these businesses over the previous decade. We hope to spark ideas for building successful start-ups of your own.
In the 1970s, my father launched his original liner shipping venture, Himalaya Shipping. His overactive entrepreneurial instinct had propelled him to leave the Birla family empire quite early in his career and set off on his own, albeit for turbulent waters. Through the seventies, Himalaya Shipping, started with a mere Rs. 10 lakhs ($20,000) in equity, enjoyed steady growth up to Rs. 13-14 crores ($3.5 million) in profitable revenue, until shareholder disputes tore the company apart in 1980, wiping out his decade-long effort.
By 2008, many aspects of the shipping world had changed, but in India logistics and transportation remained a clear bottleneck. But a bottleneck that I believed could be relieved with a second iteration of Himalaya Shipping. The naming of this company was purely nostalgic; the idea of ships by the names of Nanda Devi, Kedarnath, Gauri Shankar, and Sri Kailash had captured my imagination since I was a little girl. Always fascinated by faraway places, exotic destinations like Bander-Abbas, Basra, Baghdad, and Athens, which came into focus through my father’s postcards, I could see these ships sailing in and out of ports in Europe and Asia, as austere and regal as the peaks they were named after. The time had come for Himalaya Shipping to reincarnate.
With the domestic market booming and the international market clamoring for certain Indian products like iron ore, India’s exports and imports were up across the board. In both raw materials and finished goods, the volume of cargo had surged throughout the 2000 decade. India’s thermal coal imports alone were to rise to nearly 53 million tons by 2012 – up from 40 million tons in 2009. Of this, about 34 million tons were forecasted to be consumed by the power sector, 7 million by cement, and 12 million by miscellaneous industrial buyers. The cement sector in India had been expanding rapidly due to India’s construction boom. Cement production was forecasted to rise to 251 million tons by 2012, and the coal required in this production process, to a large extent, had to be imported. Furthermore, coking coal imports by steel plants was to rise to 20 million tons by 2014, up from 14 million tons in 2009.
Coal – both thermal and coking – was a clear opportunity for a major shipping venture.
Other exciting opportunities included bulk iron ore and tea exports, jute, food products, and other commodity shipments, as well as electronics and engineering goods and machinery. This was no small-scale opportunity before us.
In international shipping, there was another vulnerability that drew our attention. Danish shipping conglomerate Maersk had acquired an enormous amount of market power in the global container shipping sector by acquiring several major shipping companies, including Sea-Land in 1999 and the P&O Nedlloyd Container Line in 2005. The latter merger established Maersk as the undeniable world leader in container shipping, although it was unable to hold its 18% market share post-merger due to integration problems mainly because of internal management deadlocks across the various acquired divisions. By 2007, Maersk’s market share of international shipping had dropped to about 14%. So, while the company still retained maximum market clout, its vulnerability was undeniable.
In 2010, we decided to take on Maersk with a three-pronged strategy spanning a container division, a bulk shipping division, and a barge division. And so, some 40 years after my father’s maiden voyage, with his help, I launched Himalaya Shipping anew. Our first step: we searched among my father’s protégés, now spread throughout the Indian shipping industry, and found Sabyasachi Hazra, then chairman of the Shipping Corporation of India, and lured him to become our CEO.
It turned out that financing for a team with such depth of experience was relatively easy. For the container division, we built a fleet of six 6000 TEU post-Panamax vessels over a six-year period. These vessels – a combination of chartered vessels and our own ships – were initiated into a global, round-the-world container service consortium featuring COSCO Shipping from China, Mitsui OSK and NYK Line from Japan, Evergreen Shipping from Taiwan, Hyundai from Korea, APL from the US, and our very own Himalaya Shipping.
The 25 consortium ships were deployed for round-the-world operations starting from New York and ending in New York, covering three clockwise and three counterclockwise routes. These routes covered Felixstowe, Rotterdam, Marseille, Port Said, Jedda in the Red Sea, Jebel Ali, Navseva, Singapore, Hong Kong, Shanghai, Tokyo, Osaka, Seattle, Los Angeles, Houston, and New Orleans before returning to New York.
Six ships named Everest, Kanchenjunga, Annapurna, Nanda Devi, Trishul, and Makalu traversed the seas under the blue and yellow Himalaya Shipping flag. Joint consortium marketing through a global network of agents enabled us to establish stable freight rates and consistent service logistics, which allowed us to effectively compete with Maersk, which was still floundering under operational challenges. From Shanghai to Marseille, the consortium agents capitalized on the confusion facing Maersk customers.
By 2012, our container business shipped its way to $36 million in annual revenue. By 2013, $72 million. And 2020, $216 million.
Not only did my father have tremendous contacts and experience, our CEO Sabyasachi Hazra brought in several key executives, each with their own specific expertise. One of them, a Maharashtrian who came to us from Essar Shipping, was keen on starting a feeder service. In 2013, we bought a fleet of six 1200 TEU and two 500 TEU feeder vessels and chartered six more 1200 TEU vessels. Five of these were deployed in the Singapore-Diamond Harbour (India)-Singapore sector, another five in the Colombo (Sri Lanka)- Diamond Harbour-Chennai (India)-Colombo sector, and four in the Jebel Ali (UAE)-Kandla (India)-Colombo sector. My father’s extensive experience in running feeder services in the Middle East, Colombo, and Singapore routes, and his friend, veteran shipping man Peter Blumbach’s help from Singapore ramped the business in Southeast Asia. Soon the feeder service leapt up to $257 million in revenue.
In January 2015, Himalaya Shipping also invested $12 million in ten 2,000- deadweight-ton small barges to participate in a National Thermal Power Corporation (NTPC) contract carrying thermal coal from Sagar Island at the mouth of the Bay of Bengal to Farakka jetty adjacent to the NTPC power plant site. This was an opportunistic deal since the West Bengal government literally offered up $12 million on a platter to buy the ships, as well as the NTPC contract, in order to inaugurate Eastgate’s newly dredged waterways.
Each barge generated $1 million per year in revenue and cost $0.7 million to operate. Over time, our barge division grew from $10 million a year to $50 million a year as we captured market share and came to dominate the National Waterways No-1 and No-2 routes.
Besides the container and barge businesses, Himalaya Shipping also invested in four Capesize vessels of 175,000-deadweight-ton capacity, one each in 2011, 2014, 2017, and 2020, to handle bulk cargo. We joined a consortium led by Belgian shipping company Bocimar to service their 10-year contract of afreightment (COA), importing coking coal on behalf of Steel Authority of India Limited (SAIL) from Australian ports up to Haldia. Bocimar, my father, and Sabyasachi Hazra had long-standing business ties, so the partnership was a natural. Once the cargo arrived in Haldia, it then needed to be transloaded, with the entire 175,000 metric tons of coal split into 15,000-deadweight-ton barges to go into the riverways. The Capesize vessels, Chomolhari, Lhotse, Manaslu, and Kailash, generated a revenue stream of $180 million per year from annual traffic of six million tons by 2019.
We also invested in eight Panamax vessels of 75,000 deadweight tons for carrying thermal coal for power plants like NTPC, CESC, Kolaghat, Bandel, and Sagardihi. Each ship carried about one million tons of cargo per year and generated about $30 million with $21 million in finance and operating cost. The Panamax traffic grew from four million tons in 2015 with four ships (Dhaulagiri, Kedarnath, Sumeru, and Bhagirathi) and revenue of $120 million, to eight million tons in 2020 with eight ships and revenue of $240 million.
On January 3, 2019, my father’s eightieth birthday, Himalaya Shipping threw a party at the Kolkata port to celebrate what was quickly becoming one of the most impressive success stories in international shipping. Surrounded by ships, cranes, and containers, the team paid tribute to the very sources of their achievements. The entire port and all the ships were lit with candles and lanterns.
At the party, we received news that the Lhotse was shipwrecked off the Sydney harbor. It reminded me of 1980, when as a 10-year-old I watched my father cope with the news of the shipwreck of the Kedarnath. We were vacationing in Darjeeling, and immediately rushed back to Kolkata, our private life second in line to my father’s business life. But on this occasion, Sabyasachi Hazra was in charge. Besides, I had also developed enough business knowledge to know that the Lhotse was adequately insured to protect against precisely this sort of calamity. The party proceeded uninterrupted as the operations team promptly arranged for a smooth transfer of cargo, and our legal department took care of the insurance filings.
By 2020, we added a much-needed velocity to the Indian supply chain, previously choking at every point from soil to sea. Our container division brings in $216 million in annual revenue, the feeder service $257 million, barges $50 million, and bulk $420 million. Numbers that announce a rising star in international shipping and a threat for Maersk in many markets.
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(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory)