Reliance Industries Establishes First Ship Leasing Firm at IFSC Gift City

Reliance Industries Limited (RIL) is poised to establish a ship leasing entity at the International Financial Services Centre (IFSC) - Gujarat International Finance Tec-City (GIFT City) in Gujarat. The total investment and expenses for this venture are estimated to be around ₹22,033 crore. Reliance International Leasing IFSC has put forth plans to establish the leasing entity within GIFT IFSC.

However, the establishment of this entity is subject to approval from the Special Economic Zone (SEZ) committee. Sources familiar with the matter revealed that the proposal presented to the GIFT SEZ Authority pertains to seeking approvals for setting up a ship leasing firm aimed at conducting the business of Operating Lease of ships, vessels, and voyage charters.

The company has appointed three directors for this venture, including Hitesh Kumar Sethia, President and CEO of Jio Financial Services Ltd; Amit Mehta, a veteran with 20 years of experience at RIL serving as the Senior Vice President and Head of Gases; and Jayesh Biharilal Dholakia, an Assistant General Manager at RIL.

Regarding the financing aspect, Reliance intends to utilize capital from financial liabilities and internal accruals. As per available information, the promoter and investors will invest ₹5 crore capital from financial liabilities, ₹11,607 crore from financial liabilities, and the remaining ₹13.26 crore from internal accruals.

Reliance has sought approvals from the International Financial Services Centres Authority (IFSCA) for setting up the ship leasing firm. Financial projections indicate that the Free on Board (FOB) value for the export of services over a five-year period is estimated at ₹10,780.41 crore, with a projected foreign exchange outgo of ₹10,397 crore, resulting in a Net Foreign Exchange (NFE) of ₹383 crore.

Dipesh Shah, Executive Director (Development) at IFSCA, confirmed the receipt of an application from Reliance International Leasing IFSC Ltd. He expressed optimism about the growing interest from institutions to establish ship leasing businesses at GIFT IFSC, noting that three ships have already been leased into India from IFSC.

Ship leasing marks a recent addition to the spectrum of activities permitted by the regulatory authority IFSC at GIFT City. Ripley Shipping India IFSC Private Ltd was the first company to lease a vessel from GIFT City, receiving a certificate of registration from IFSCA in March 2023 to operate in GIFT City. The move to establish a ship leasing entity at GIFT City allows Indian entities to conduct transactions in foreign currency, facilitating the return of Indian firms that had shifted overseas due to regulatory and tax concerns.

Presently, only Indian flag ships are permitted in IFSC-GIFT City, akin to the Domestic Tariff Area, as regulated under the Merchant Shipping Act, 1958. Despite India's favorable maritime landscape, Indian companies often engage with foreign entities for freight agreements to ship their cargo.

Globally, ship leasing serves as a prevalent trading tool across various segments of the shipping industry, including containers, dry bulk, and tankers. As of April 2023, the global charter hire market was estimated at $100 billion.

HBL