Cochin Shipyard Ltd (CSL), the country’s largest largest public sector shipyard, is inching closer towards an initial public offering (IPO), with the company closer to filing Red Herring Prospectus. The IPO might follow in a month’s time. On completion of a successful IPO, CSL will become the first of five state-owned shipbuilding companies to be publicly listed. The PSU shipyard, which is now building the country’s first indigenous aircraft carrier INS Vikrant, is also placing its bets on the emerging contracts from the Defence sector. On the quality front, CSL is better than many global companies in ship building, its Chairman and Managing Director Madhu S Nair told BusinessLine. Excerpts:
We believe your IPO is around the corner?
We intend to go to the market with the March 31 results, and we’ll probably do it in a month’s time. Essentially, the proceeds are for two main objects, one is for a new large dry dock, and the second one is to set up a brand new International Ship Repair Facility (ISRF). We have earmarked ₹1,799 crore for the dry dock and ₹970 crore for ISRF. The major part of these requirements will be met by the IPO. We intend to start construction of both these projects this year.
The IPO comes at a time when the shipping industry is in doldrums….
By nature, ship building and ship repair are cyclical and we have been through these ups and downs. CSL is not just a ship building player but an integrated ship building and ship repair company, with presence across different segments such as Defence and commercial. Globally, I do agree it’s a bad time for the shipping industry, but for us things are steadily moving upwards. I think this is the best time for the IPO.
The trade unions are opposing the IPO, and they have also held a token strike in April?
CSL is one company that has not faced a single strike in the past 32 years. The worker-management relations have been the best, and their views are taken on a positive note. They think, this IPO is the first step towards privatisation, while the management and the government have explained that is not the case. We are unlocking value from an excellent company and the money would be ploughed back into the company. The unions understand this. There are two parts to the IPO, a 10 per cent disinvestment by the government and a 20 per cent fresh issue of shares. Post IPO, 75 per cent will be held by the government and 25 per cent by public. We have requested the unions not to do anything that will hurt activities at the yard. We don’t expect any issues to come up.
Indian shipyards have less than 1 per cent share in the global shipbuilding and repair market, which is dominated by Singapore. Where does India stand, and how is CSL faring?
Ship repair is an ideal industry for India. With our trade picking up, we believe that India is growing 6-7 per cent annually. There is substantial investment being done in the ports, both public and private, and with this volume going up there will be more ships in our waters. CSL has been in ship repair for almost 40 years now, ship repair is all about building an ecosystem. There is a sub-contract ecosystem that needs to built, and policies and customs should be in place for this. The government is putting in efforts on this.
CSL has posted quantum jumps in ship repair turnovers, and today we repair 80-100 ships per year. Ship repairs move in clusters and Kochi is already a cluster. Indian Navy in Kochi has also got sanctions to build a new facility, so Kochi can actually come up as a good ship repair cluster. So there is a market available. This is on the commercial part, while on the Defence side also there is a lot of potential.
Chinese and South Korean companies top the list of ship building?
On the quality front, CSL is better than many of the companies out there. Indian shipbuilding is different from Chinese and Korean on levels of scale and size. I don’t think there can be a comparison. We will never be able to do bigger ships than Korean or Chinese yards. But there is a segment of niche vessels that are one notch below the most sophisticated ones, that is one area which we have done extremely well.
Ship building market orders are also on the wane. Isn’t it a concern?
We were doing exceedingly well in the international oil and gas market, which is down now. We are looking inward now as ‘Make in India’ and Defence are throwing up a lot of opportunities. Our current order book and what were are envisaging for next 3-5 years, is largely dependent what we have in hand and it’s healthy. We have an aircraft carrier order and we are building five ships now.
What’s the update on the aircraft carrier INS Vikrant?
From the technical standpoint, from the enormity of the project, it’s going to be the pride of India. It’s coming up well. Certain systems have already got energised and charged and we are moving into phases where the flying equipment and stuff are being integrated into the system. I don’t want to talk on the date, but we are well on target and things are going extremely well.
How do you see the opening up of Defence sector and Navy estimated spend of $3 billion opening up doors for ship repair and ship building sectors?
Defence is going to be important for us both in ship repair and ship building, and we are strongly positioned on both these fronts. At present, about 75 per cent of our ship building revenues are from Defence and on the ship repair front close to those levels are from Defence.
We are strongly positioned on both sides, ship building and ship repair. On the ship building front, we have proven our capabilities with the delivered 20 fast patrol vessels to the Coast Guard, construction of the aircraft carrier and working with the Navy. We have bid for three major tenders of the Navy. We are confident that Defence will get us volumes and turnovers through the bidding route.
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