How a cruise business landed Zee’s Subhash Chandra in uncharted waters

The Zee Group’s audacious diversification into cruise shipping in the form of Jalesh Cruises might have ended in misfortune, but a new cruise startup has taken birth in Mumbai, drawing “strength” from this recently shut company.

Interestingly, the new undisclosed deal between Zee Group’s Subhash Chandra and US-based billionaire hotelier Sant Singh Chatwal did not involve the company’s only visible asset: a 20-year-old cruise ship called Karnika.

The ship, named after a mythological apsara known for her beauty and allure, was caught in a whirlwind of arrests and controversies over nonpayment of crew salaries and dues to vendors and the port. As it began its final voyage to a scrapyard in Gujarat’s Alang in November 2020, the Zee Group sold the brand name under which the ship was operated – Jalesh Cruises – to Cordelia Cruises, the company newly set up by Chatwal.

Cordelia Cruises was launched by Waterways Leisure Tourism, a division of the Dream Hotel Group. This is Chatwal’s first foray into cruise shipping, according to company officials. Jalesh’s CEO Jurgen Bailom moved to the new company along with a few of his colleagues.

But if Karnika was not available for sale, then what did Chandra sell to Chatwal?

According to Bailom, the short-lived Jalesh brand will be “sunsetted”, and Waterways/Cordelia will continue “the legacy of Jalesh Cruises in upholding the spirit, culture, and value of 'Incredible India’”.

Waterways also said it bought out Jalesh Cruises’ remaining business operations (except the ship) and intellectual properties.

It should be pointed out that Chandra’s gamble in uncharted waters like cruise shipping was truly astounding, even for his supporters. It happened at a time when his group companies such as Essel Infraprojects were reporting mounting losses and tottering on the verge of collapse.

Yet, Chandra was unfazed. After a few months of preparation – probably one of the shortest in the history of the global cruise industry – he launched Jalesh Cruises in early 2019. Chandra was hoping to gain a first-mover advantage in a potentially sunrise industry in India which had, in the past, seen a couple of unsuccessful forays, including the Mumbai home-ported Star Cruises.

Simultaneously, in his own wisdom, Chandra helped set up an industry body in 2019 – the Indian Cruise Lines Association, or INCLA – and provided it office space at Marathon Futurex, the Zee Group’s corporate headquarters at Lower Parel, Mumbai. He installed Jalesh’s CEO Bailom as INCLA’s chairman. A true nationalist, Chandra didn’t want to “bow down” to the interests of the Washington DC-based Cruise Lines International Association, or CLIA, a powerful lobby for the global industry. Chandra opposed its Indian chapter.

The actual reason might have been more material: sources close to the now-defunct INCLA revealed that a top government functionary had advised Chandra to approach the shipping ministry for concessions through an association.

A questionnaire sent to the Zee Group has not elicited a response so far.

Concessions via INCLA

Chandra’s efforts to promote the INCLA were not without success. Soon after the nationwide lockdown to contain the Covid pandemic was lifted in June, the Centre permitted cruise ships to start sailing from October, even as the cruise industry across the world continued to remain on the brink. In August, the shipping ministry announced a barrage of discounts in port tariffs, ranging from 60 to 70 percent for cruise ships, with effect from August 14.

According to the ministry directive, the port charges for a cruise ship were reduced to $0.0085 per gross registered tonnage from the earlier rate of $0.35 for the first 12 hours of stay and a head tax of $5. The cruise ships were also excluded from all other charges like berth hire charges, port dues, pilotage and passenger fees. For stays exceeding 12 hours, the ministry said the fixed charges on cruise ships would be equal to their berth hire charges payable as per schedule of rates with a 40 percent discount.

The ministry also announced other rebates. Cruise ships making up to 50 calls a year would get a 10 percent discount. Those making 51-100 calls per year would get a 20 percent discount, and for above 100 calls a year would receive a 30 percent discount.

The ministry said its move was in line with the government’s policy to support the economy during the pandemic. The shipping minister, Mansukh Mandaviya, said the decision was the result of the ministry’s efforts to “convert the vision of Prime Minister Shri Narendra Modi into reality by putting India on the map of the global cruise market”.

“It will be a big support for the cruise tourism in India, which has suffered tremendously due to the adverse economic impacts of Covid-19 pandemic,” Mandaviya said in the directive issued by the shipping ministry. “It will provide the opportunity to earn a huge amount of foreign exchange and generate sizeable direct and indirect onshore employment in cruise tourism sector of India.”

Soon, INCLA was a house divided.

“It looks like INCLA was acting on behalf of the Zee Group and it left other members in the association annoyed,” said an industry official and former member of INCLA. “Though under one umbrella, the member companies were serving three different verticals: inbound (cruise lines bringing foreign tourists into India); outbound (taking Indians abroad for cruising); and domestic (operating cruise ships with home ports in India). The concessions from the ministry came only to the third vertical, where Zee was operating its company.”

INCLA folded up on December 31 soon after the sale of Jalesh Cruises.

Mounting misfortunes

Interestingly, Jalesh Cruises’ parent company, Zen Cruises, was registered in Mauritius while its sole cruise ship, Karnika, flew a Bahamas flag.

The Bahamas is one of the few flags of convenience, or FOC, countries that allow owners to register ships and operate them internationally under a lax regime. Though India offers a shipping registry, most shipowners go to FOC countries to register their ships with the sole aim of escaping India’s strict rules on safety, environment and crew. A former official claimed that Chandra was forced to flag his ship outside India after a local seamen’s association insisted on an all-Indian crew onboard Karnika as a precondition for allowing the Indian flag.

The Zee Group had taken delivery of the 14-deck passenger cruise ship in Singapore in March 2019. Just before the sale, it was called the Pacific Jewel and was owned by P&O Australia. Originally launched as the Crown Princess, it had served a few other owners before heading to P&O Australia.

Home-ported in Mumbai, Karnika’s maiden voyage on April 17, 2019, brought several celebrities on board for a big bang launch. A month later, voyages were stopped when the monsoons arrived. The ship was then moved to Dubai and did shorter trips to Muscat and back. After the close of the monsoons, it returned to Mumbai in October 2019.

Zee had worked out an innovative partnership-based model to make it less capital-intensive for the group and to raise working capital for its operations. The company fostered partnerships with at least seven or eight companies for onboard catering, spa services, medical assistance, music and entertainment, and port management. These partnerships were reportedly forged for money.

“This was a precarious arrangement,” said a former employee. “Day-to-day operations were essential to keep the partners happy. Even a day’s stoppage incurred huge losses.”

Sources said the ship did exceedingly well until March 2020 when the pandemic hit India, bringing cruise operations to an abrupt halt. Soon after, the company ran up a huge debt and delayed crew salaries indefinitely. Karnika was kept under arrest due to disputes between the owner, the oil company that supplied bunker oil, and the crew management company. Anchored at Mumbai port, it struggled to keep itself afloat and appeals for help from its 60-odd crew members fell on deaf ears.

In June, the Bombay High Court allowed Karnika to temporarily move to safe waters due to the then approaching Cyclone Nisarga. It had been stranded at the Y1/Y/2 Anchorage at the Mumbai port since March.

Karnika had turned into an unseaworthy junk bucket after just a few months of layup. In October, the Zee Group announced it would discontinue Jalesh Cruises’ operations. The ship remained in Mumbai until it underwent a judicial sale in November. The Bombay High Court sold it at an auction for $11.65 million to the UK-based cash buyer NKD Maritime, which was in turn sold to the Alang-based Shree Ram Group.

“We bought the vessel for $12.65 million from NKD Maritime,” said Mukesh Patel, the chairman of the Shree Ram Group. “It is in my yard now. The demolition will take up to one year.”

Now, the newly floated Waterways Leisure Tourism will operate two cruise ships, keeping Mumbai as their home port. The company has joined hands with investors from the Middle East, who jointly bought two cruise vessels – the Empress of the Seas and the Majesty of the Seas – from Royal Caribbean International. The company is likely to start promotional activities from February 1 and hopes to start operations by June, according to a company official.

Hopefully, Chatwal’s new company will have learned its lessons from Chandra.