On Episode 853 of The Core Report, financial journalist Govindraj Ethiraj talks to Captain Shiv Samrat Kapur, Managing Director at Sentosa Ship Brokers.

SHOW NOTES

(00:00) The Take

(05:38) India stocks gain as timeline fatigue continues

(09:05) Russian oil dominates India’s energy stack again

(10:59) What the latest flow of Indian tankers through the Gulf is telling us.

(23:53) Feedback

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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

Good morning, it's Wednesday, the 22nd of April, and this is Govindraj Ethiraj, broadcasting and streaming weekdays from Mumbai, usually, but now in transit.

The Take

When Apple announced John Ternus as the successor to Tim Cook earlier this week, the tech world erupted into a highly predictable debate. Is a hardware guy the right person to lead the world's third most valuable company into the age of artificial intelligence? Mr. Ternus, 51, has spent about 25 years at Apple, nearly half his life.

He rose through the ranks to become vice president of hardware engineering and then senior VP in 2021. When he officially takes the helm on September 1st, with Mr. Cook transitioning to executive chairman, he will inherit an empire generating over $400 billion in annual revenue. But Mr. Ternus is definitely not an AI visionary or a software savant.

And that is exactly what makes Apple's choice so revealing, not just for Silicon Valley, but for corporate boards worldwide. Tim Cook's 15-year tenure will be remembered for its supply chain mastery, lifting Apple's market capitalisation by a staggering $3.6 trillion. He oversaw the launch of the Apple Watch and AirPods amongst others, massive successes that were largely the conceptual handiwork of teams nurtured by the late Steve Jobs and founder of Apple.

But Mr. Cook also presided over the Vision Pro headset, a multi-billion dollar flop and a scrapped $10 billion autonomous car project. In both these failures, Mr. Ternus was reportedly the internal sceptic. His instincts lean towards caution and rigorous execution, according to that Bloomberg report.

He has excelled at ensuring the relentless high-quality annual iterations of the iPhone, iPad, and Mac. His most surprising and successful strategic departure was championing the $599 MacBook Neo, a budget laptop aimed at younger users that bucked Apple's premium-only positioning. And yet, as a Forrester research analyst told Bloomberg, Mr. Ternus must resist the temptation of incrementalism that has plagued Apple of late.

As Ternus assumes the helm, he must define Apple's future as ferociously as he defends its past. And that brings us to a fundamental corporate question. What factors should dictate the choice of a CEO in these times? Apple has made its calculation clear.

It believes its core competence and the source of its consumer worship remains hardware perfection. The integration of AI is viewed as a feature to be blended into that hardware rather than a reason to abandon the company's manufacturing DNA. Now, this tension between defending the core and chasing the frontier is playing out globally, including in India in other industries.

For family-owned conglomerates like Reliance Industries, succession is currently a complex transition of power to the next generation, where it remains to be seen if the third generation inheritors possess the first and second generation's aggressive chops. But even professionalised non-family businesses are facing profound succession dilemmas. Consider India's private banking sector.

A report in the Mint newspaper points out that major institutions like ICICI Bank, Axis Bank, Kotak Bank, and HDFC Bank are all navigating or preparing for leadership changes. The founders and early leaders of some of these banks, figures like Aditya Puri and K.V. Kamath, were essentially entrepreneurs operating within a corporate structure. They injected fierce aggression and a win-at-all-costs mentality to capture and build market share.

Today, as the Mint report says, there is a growing tendency to look at and elevate chief financial officers or CFOs to the top job. HDFC Bank's current CEO was its CFO earlier. Now, while that may not be the only reason, the rationale is still sound.

Regulatory environments are tighter and there is a heightened premium on governance and reputational stability. Elevating a CEO also signals an organisation is entering a more defensive, mature phase of its lifecycle. ICICI Bank is a prime example.

Its current CEO, who was not a CFO earlier, successfully stabilised an institution previously rocked by scandal. But defensive leadership has limits. A growth market, whether in banking, computing devices or consumer goods, eventually demands aggressive, front-facing leadership.

Defensive leaders must either transition back to a growth mindset or step aside when the stabilisation job is done. Top-performing companies in India are currently logging double-digit growth, but not always by expanding the market. Overall private consumption has slowed, hurting fast-moving consumer goods and retail industries.

Reigniting consumption on the supply side requires radical innovation, not just careful management. Look no further than the pharmaceutical industry where weight-loss drugs have suddenly surged to become the highest-selling category by value, a disruptive prospect unimaginable just six months ago. And I'm talking about India.

Apple's elevation of John Ternus is a powerful reminder to shareholders and boards everywhere. A company's choice of CEO is a declaration of its strategic priorities. Apple has decided it wants a master executor of hardware to navigate the AI revolution.

Boards must ask themselves, in the race for market leadership, are we hiring an entrepreneur to build the future or an operator to manage the present? For better or worse, Apple has placed its bet. Is your organisation doing the same?

And that brings us to the top stories and themes…

Indian stocks gain as timeline fatigue continues.

Russian oil dominates India's energy stack again.

Moody's ratings reduces India's growth projections.

And what the latest flow of Indian tankers through the Gulf is telling us.

Markets, Oil, The Rupee and Shipping

Indian markets continue to experience timeline fatigue. Credit for this term goes to Professor Scott Galloway as they ignored the now on and now off peace talks between Iran and the United States in Pakistan. So as we speak, the talks are on and both sides are turning up for them going by the latest reports.

Now, talks do not mean that there will be the desired peace outcome because it is also evident that the positions taken by the two countries are quite far apart. Now, the markets, of course, believe that the end is near and all problems are over. The major indices are now trading at or above pre-war levels as investors rapidly unwind geopolitical risk hedges and refocus on the artificial intelligence boom according to CNBC.

The MSCI World Index, which measures the performance of over 1,000 large and mid-cap equities from developed markets has hit a fresh record high and is now almost 2% above its March 2nd level, the first trading day after the war started. The sharp rebound has surprised some market watchers because the conflict remains unresolved and a fragile ceasefire faces looming deadlines. The rebound has been driven by a rapid unwind of the war risk premium that was sitting across equities, oil, and the dollar at the peak of the conflict rather than a fundamental reset according to an investment strategist at Global X ETFs who spoke to CNBC.

Back home, the Nifty 50 and the Sensex extended their gaining streak to the third session as investors and traders bet that the US and Iran talks would lead to something constructive. The Nifty 50 was up 211 points at 24,576 and the Sensex was up 753 points to 79,273. In the broader markets, the Nifty mid-cap and Nifty small-cap indexes were up 0.49 and 0.8% each.

Nestle India amongst corporate results posted a 26% increase in quarterly profit thanks to a strong demand for packaged foods including KitKat chocolates and Maggi instant noodles according to Reuters, which added that after a prolonged slowdown in consumption, demand for consumer packaged goods in India has begun picking up about four quarters ago thanks to easing inflation and of course tax cuts. That's the goods and services tax cuts. Elsewhere, gold prices fell on Tuesday thanks to among other things, a stronger dollar.

Spot gold was down slightly to about $4,785 per ounce on Tuesday morning. And some macro outlook rating agency Moody's has trimmed its growth forecast for India's real GDP to 6% for fiscal 2027 from 6.8% earlier, factoring in the impact of the Iran war. Moody's said that a prolonged disruption would pose more material challenges, potentially entrenching inflation, straining fiscal and monetary policy flexibility and testing external investor confidence.

Moody has a BAA3 rating on India with a stable outlook. The rupee was lower on Tuesday after the reserve bank rolled back some restrictions it had imposed on currency market transactions, including allowing banks to offer offshore derivatives linked to the rupee. Bloomberg reported that it was down to 93 rupees, 49 paise per dollar, and that's the biggest drop in a week.

Bloomberg also said that the gap between three-month forward points in the offshore and the local market has shrunk to 16 points from about 30 points prior to the Reserve Bank of India's statement. Meanwhile, oil prices also fell on Tuesday, reversing gains on Monday on expectations from the pea stocks Brent crude futures were at about $94.79 on Tuesday morning. Meanwhile, India's crude oil imports have fallen 13% in March from pre-war levels in February, and half of that is coming from Russia.

India is the world's third-largest oil importer and consumer. Now, imports from Russia have nearly doubled from February to about 2.25 million barrels per day in March, while shipments from the Middle East have fallen 60% to 1.18 million barrels per day, according to data quoted by Reuters. The share of Middle Eastern oil in India's crude imports has declined to the lowest level at 26% in March, according to the Reuters data, with shipments from Iraq and the United Arab Emirates falling to multi-year lows.

Only a handful of oil tankers have sailed to India in the past two months, while two Indian flagships were attacked while trying to cross the strait on Saturday. To replace Middle Eastern oil, Indian refiners have been buying Russian oil floating at sea after India was the first to get a waiver from the United States to buy the sanctions apply, according to Reuters. And that waiver, of course, was renewed on Friday last week, which allowed countries to buy sanctioned Russian oil at sea for about a month.

Now, there has been some flip-flop there, too, because just two days before that renewal, the U.S. Treasury Secretary had said that there would not be a renewal. So, Russia is the top supplier to India in March, and Saudi Arabia has replaced Iraq to become the second-biggest supplier. Angola was at number three, as Indian refiners lifted more crude from Africa to replace that Middle East supply, according to Reuters data.

So, if you were to look at the share of OPEC, that's the Organisation of Petroleum Exporting Countries in India, it's come down to its lowest-ever share of 29%. So, how is traffic looking right now in terms of oil, and particularly gas flows, where we are still facing shortages? I reached out to Captain Shiv Samrat Kapur, Managing Director of Sentosa Ship Brokers India, and I began by asking him how things were looking like right now.

INTERVIEW TRANSCRIPT

Capt. Shiv Samrat Kapur: So, at the moment as it looks that most of the, you know, conventional fleet is stalled again. Like, you know, as you know, these two ships had to turn back. I think they were the Jag Arnav and the Sanmar Herald.

So, there was some confusion. I think they had some sort of permission from the Iranian guards and then there was some confusion because of the naval blockade put in by the US. Then, you know, the Iranians wanted to prove a point and asked them to turn back again after firing at them.

So, there was some leaked distress signal also of the master, you know, sort of trying to plead that they were granted transit but then it turned around. As far as, like, you know, the transits are concerned, at the moment everything is shut. I mean, you know, I don't think the conventional fleet is transiting.

Although a few ships, you know, which belong to Iran now, they are finding it tough to transit as well because US is stopping them which was not the case earlier. Now, the US blockade, they are sort of intercepted or, you know, sort of captured which is being called as a maritime robbery by Iran and a violation of instructions by US. It's, I think, one of the container ships that Iran had.

At the moment, it looks like everything is sort of gone, you know, it's like stalemate but we saw, like, you know, the past two weeks when the ceasefire started and, you know, things started moving a bit. I think there was a total of about 137 transits out of which, I think, there were 81 ships which came out in 138. 81 ships, I think, which came out in 57 went in out of which, I think, 30 were LPG carriers and I would say probably 15 in and 15 out.

Interestingly, IOC was able to convince one of their time charter ships to go in which was the NV Sunshine. So, she has gone in and loaded. So, at the moment, as we speak, just to, I mean, when we say Indian ships, both these ships are not Indian flagships but they are within the control of Indian Oil Corporation.

That is a Sar Shakti. It's an Indian name but the ship is not an Indian flagship. It belongs to owners of Indian origin but they are not flagging their ships into India and the other one is the NV Sunshine as I mentioned.

Another ship which was able to come out was a MGC called the Jagvikram which I like, you know, which is the smallest. So, this is, you know, what we've seen with respect to the Indian perspective. You know, that is what is happening at the moment.

Govindraj Ethiraj: Right. And in terms of our total need for LPG and what we are reporting, both LPG and LNG, where do we stand right now and vis-a-vis, let's say, where we were before the war?

Capt. Shiv Samrat Kapur: So, you know, I'm more focused on LPG, LNG. I'm not following that, you know, closely but as far as LPG is concerned, as you know, like we're tracking all ships and all movements. In fact, we're in close discussions with most of the PSUs and, you know, like what they are doing and what is happening.

So, just to give you a brief, what they have managed to do is, like initially, you know, after we spoke last, you know, they had the time charter ships which have come out, which have discharged into India and are idling, you know. So, IOC was the first one to come out into the market and say, look, we have these ships idling and we'll welcome people to use these ships as in charter them in on a spot basis. But they had the condition of discharging cargo back into India.

So, it's a way of, you know, providing the tonnage but trying to, you know, get product back into India. That never flew because, you know, it sort of restricts the capacity for traders to trade that cargo, you know. Normally, ships which are like, you know, loaded by non-Indian traders out of the US, WAF, you know, the conventional loading areas, Australia, I mean, AG and Yanbu as well, they have various options, you know, for India, including Far East, which is the Singapore-Japan range.

So, that didn't fly. But what we are seeing is that a lot of ships are coming from Yanbu. So, that is Saudi Aramco, probably Aramco trading company.

When I say a lot, it's like they're doing five to six fixtures out of which I think two to three are coming into India. I'm not exactly familiar of the exact number, keeps changing, you know. So, they're coming and discharging into India, like there's a ship from which is discharging into Mangalore might go to East Coast India.

So, this was on the shipping side, you know, like what I was mentioning earlier, IOC coming out to get the ships on spot. On the product side, what has happened, like I have been fortunately been able to speak to a couple of traders also who are in Indian PSUs. What they've managed to do is one of the time charter ships of IOC that went to Australia, she loaded out of Darwin and she is coming back to now discharge into India.

I think she reaches Vizag by the end of the month or something. So, that was reported as a relayed out, but I think it was a product deal and the freight was just calculated basis, you know, how they price the product and the freight on top of it. We're not sure if there's a freight exchange, but the chartering channels are not aware of it.

So, I know it's not a shipping deal, it's a product deal for sure. Bharat Petroleum, BPCI, they have managed to secure a May end stem out of US Gulf. I think it's around 25, 27 May.

And as we speak, I think the BW Chinook is in route to pick up that cargo. And they were also in the market looking around for a first week June FOB stem, June 4. The benefit that they have is that they have their own DC ships.

If you look at the US market, otherwise, it's quite tight. The freight rates have gone crazy. Like, you know, there are $250 limit.

They've broken like, you know, mostly all time highs or they're close to all time highs right now because of the Panama disruptions as well. So, India is trying to procure cargo from, you know, as many places and they're being innovative about things. In fact, when I was talking to them, I was asking, you know, if they are going to start looking at, you know, more FOBs out of US and then spot chartering.

Right now, the FOB that they are procuring, they are using their own DC planners. That also, they are taking baby steps like not just sending all their ships because a typical US Gulf India round voyage, if you look at it, the ship going from India, loading there, coming back and then discharging into India takes about 85-90 days. Opposed to what an AG India voyage would be, which would be around 30 days.

So, you know, that ship is practically gone for three months and suddenly the AG opens up, although I personally feel that the volumes will just not go back up the way they were the pre-war era after the damages that have happened. But, you know, they want to be in a position where they can sort of use that opportunity to send ships back into the AG.

Govindraj Ethiraj: Right. So, if I were to ask you for a number or a percentage, so let's say if we were getting 10 ships carrying LPG into India before March, what would that number be today? Anywhere in the world?

So, let's say we were sourcing 10 or whatever the number is, if you have the exact numbers.

Capt. Shiv Samrat Kapur: I would have to look them up honestly, like, you know, because this is something where you have to work it backwards, like what is the total import per month? What is their TC tonnage? What is their spot?

But one thing which can be said with certainty is because they have these TC ships idling, okay, Darwin, Australia is a small haul, it's a short haul, it's not a long haul. But something into the US, it reduces, you know, it becomes three times the voyage man.

Govindraj Ethiraj: Let me ask the question a little differently, Captain. So, suppose we imported roughly 60 to anywhere between 60 and 80% of our LPG requirement before the war, how much of that 60 to 80% do you think we might be managing to import today with all of this?

Capt. Shiv Samrat Kapur: You know, it's like all those numbers are still very sketchy, because it's still really new, right? Because it is not like a fixed structure which is there, they are trying to, you know, procure FOPs, they have more, they're looking for CFRs, there are more traders, who are sort of like, I am in discussion with at least two traders who are not per se in India, who are trying to, you know, so it's very hard to put a number to it right now, it's still too early. But of course, and the other thing is the data with all the ships which come in and how much they discharge, it comes available a month after they have discharged.

So, you know, it's not like something which is very light, we can track the ships as much as we want. But then we don't know if the ship is going to discharge one port in India and then go off to the Far East, you know, that happens too.

Govindraj Ethiraj: Right. So if let's say total demand is 33 million tonnes, 20 million tonnes imported, that's for the full year, of course, divided by 12 would be per month. So you're saying that we will know roughly maybe in a few weeks time, how much we've actually managed?

Capt. Shiv Samrat Kapur: Yeah, how much we've managed to and they've sort of even freed up that other thing. And the other thing is, now what we've heard is they are sort of trying to reduce the dependence on LPG by promoting PNG, right, all over like, you know, wherever it is possible. So but then that's a double-edged sword as well, because India was majorly dependent on Qatar, right, for the requirement which has taken a hit, and it takes three to five years.

So it's all very nascent right now to sort of put numbers and it's really evolving right now. What we can say with certainty is that we have the TC ships which are idling, you know, their time charter ships apart from the few handful of ships that I've mentioned, you know, the Hisui which has gone there, they had a spot activity of, as I told you last time, about five to six ships, you know. So we haven't seen that activity happening, you know, the five to six ships which they, which are in spot from the AG.

And plus, you know, like their 20-odd ships, like around 22-23 ships which they have on time charter, they are not operating at the same, you know, efficiency or frequency, because either they are stuck inside or they have finished discharge and are waiting outside the Strait of Hormuz.

Govindraj Ethiraj: Right. Captain, last question. So we saw what happened with those two ships, the Indian ships over the weekend and they were fired upon.

In situations like this, do captains go back if they get the conviction that things are safer or do they tend to avoid for a period of time? What usually happens?

Capt. Shiv Samrat Kapur: So whenever we do commercial terms, there's always, like, you know, for stuff like this, it's the master's discretion. So the master's discretion should override everything. And the master should decide as per the safety of life on board, the safety of the cargo and the safety of the vessel, because he is the man in charge over there.

Right. So whatever commercial pressure or operational pressure is there on the master, finally, it is master's discretion that prevails. And it's again, a very, very personal matter, you know, like it's every person will react differently in the same situation, you know, to go to people can have the same reaction.

But generally, a master after something like this having happened, they would want some sort of surety, you know, from their owners, their underwriters, speaking of underwriters, the AWRP premium has just gone crazy in the AG. It's gone up from three to $5 billion. Like I believe some of the Indian ships which came out on the VLCs, as I can say, in terms of Indian rupees, I think they paid almost 25 to 30 CR as AWRP to just get escorted out.

And sure, that must be happening on these ships as well. And what happened, AWRP is yet to be seen. But, you know, it's a very personal thing on how a master reacts on a given situation.

But of course, everyone would like to sort of wait and see how it goes. Right.

Govindraj Ethiraj: Captain, thank you so much for joining me today.

Capt. Shiv Samrat Kapur: Thanks a lot. And thank you for having me again.

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DHL Group's CEO has warned that the global economy risks hitting a tipping point if the shortfall in oil supplies isn't resolved as the conflict in the Middle East squeezes transport routes and pushing up freight costs.

DHL's CEO Tobias Mayer said in a report on Bloomberg that consumers often fail to fully recognise the impact of crises until a single event, such as a major plant closure in a Western country, triggers a broader uproar. This hasn't happened yet, he said in a television interview, but if the underlying economic issue, which is the lack of supply of energy, the 10 to 12 million barrels of crude oil per day is not resolved, it will come to that tipping point. He also said that DHL has seen a tremendous impact due to the war in Iran and the closure of the state of Hormuz, which is impacting the movement of containerised goods.

On fuel supplies, he said there is not much we can do and added that DHL is talking to its suppliers and that the willingness to pay is important. He added that global trade routes between Asia and Europe are becoming quite limited, especially as Western airlines avoid Russian airspace and Gulf carriers operate below pre-war capacity. DHL's Mayor said that you see tight markets out of India, Southeast Asia, especially to Europe, and we'll continue to see elevated freight trades until the situation is further eased and resolved itself in the Middle East.

In the long term, however, he does not believe that conflict will structurally change trade. He said that think about pharmaceuticals, medical devices, those will not be produced in every country. They will be quite the opposite.

Those goods get more complicated, more concentrated, and these are goods that need to be traded, he said in that Bloomberg report.