Even as the shipbuilding industry reels under a slowdown, state-owned Cochin Shipyard has chalked up huge expansion plans and is pushing ahead with an initial public offering, which will see the government sell 10 per cent stake in the country's largest public sector shipyard, while there will be a 20 per cent fresh issue of shares.
Cochin Shipyard | PTI
The company, which is building the Indian Navy's first indigenous aircraft carrier, will hit the capital markets with its IPO to raise around Rs 1,470 crore on August 1. The government's stake in the company will reduce to 75 per cent post the IPO, which closes on August 3.
The IPO is in the price band of Rs 424-432.
The shipbuilder, which is currently executing orders for the Indian Navy as well as other government departments, has two docks – one for ship repair, which can accommodate vessels with a maximum capacity of 125,000 DWT and another ship building dock, which can accommodate vessels with a maximum capacity of 110,000 DWT.
It has built vessels including bulk carriers, tankers, platform supply vessels, barges, fast patrol vessels and passenger vessels for government as well as private companies in India and abroad.
With capacity, particularly in ship repairing almost fully utilised, Cochin Shipyard has drawn up capital expenditure plan of Rs 2,800 crore.
“We are proceeding with substantial expansion projects, which is coming in two large capex investments. We have two dry docks today, a 255 meter long dock and 270 meter long dock; we are going to build a 310 meter long dry dock, which will help us handle ships with much larger capacities,” said Madhu Nair, chairman and managing director of Cochin Shipyard.
The next major expansion project is an international ship repair facility that will come up on land leased from Cochin Port Trust, Nair added.
The company will invest close to Rs 1,800 crore in the new dry dock, while another Rs 980 crore will be needed for the new ship repair facility.
The capex will be funded partly through the funds raised from the IPO, while the rest will be via the company's free cash flow and internal accruals among other means.
Cochin Shipyard will begin work on the dry dock in January 2018 and hopes to complete it in about 30 months, while work on the ship repair facility is expected to begin in November this year and will also take another 30-32 months for completion.
As of March 2017, Cochin Shipyard had Rs 3,000 crore worth orders in hand. For year-ended March 2016, Cochin Shipyard reported a net profit of Rs 286 crore on revenue of Rs 2,099 crore.
Shipbuilding industry in India as well as overseas, particularly the private sector, was hit by a slowdown in demand as long-term finance dried up. While a strong order book from the Indian government has helped Cochin Shipyard, its chairman sees green shoots visible in a few other areas too, although recovery across the board still remains to be seen.
“This game is all about long-term finance from an international order point of view. The large European banks that typically used to do long-term finance are all shying away, it is more hard to come by today. There are glimpses of upturn in certain specific areas, but it will take some more time before we see a real positive turnaround,” said Nair.
Meanwhile, Cochin Shipyard also sees huge growth opportunities in India's inland water transport segment.
The company is forming a joint venture with another state-owned firm Hooghly Dock and Ports Engineers in Kolkata. The JV company will lease land in Kolkata where a shipyard will be developed exclusively to build all types of small vessels to cater to the inland shipping market.