Bangalore: The country’s biggest shipbuilder under state control, Cochin Shipyard Ltd, is talking to potential partners in the defence sector to jointly build a new dry dock at the yard to boost capacity, the Kerala-based firm’s top executive has said.
A dry dock is a narrow basin that can be flooded to allow a ship to be floated in, then drained to allow that ship to come to rest on a dry platform. Dry docks are used for construction, maintenance and repair of ships, and typically cost as much as Rs1,000 crore to build from scratch.
“We are talking to potential partners in the defence sector to jointly build the new dry dock,” M. Jitendran, chairman and managing director of Cochin Shipyard, said on the sidelines of the India Shipping Summit held in Mumbai last week. “We will use the dry dock for six months of the year and the partner will use it for the remaining six months. That’s the idea,” he said, without giving details.
Cochin and the potential partner will share the cost of building the new dry dock in equal proportion. The shipyard will fund its share from a planned initial public offering (IPO) of shares, which is awaiting Union government clearance.
Jitendran said that the government is looking at selling around 15% of the firm’s shares in the IPO. This includes a fresh issue of some 240 million shares having a face value of Rs10 apiece.
The Union government, which currently owns 100% of Cochin Shipyard, will piggyback on the IPO to sell its shares in the market, a shipping ministry official said.
Money raised through an IPO will go to the firm and that from a secondary share sale to the Union government.
An IPO would make Cochin Shipyard the first state-owned shipbuilder to be listed on the bourses.
“There are lot of synergies when you have a business partner,” explained V. Kala, company secretary and public information officer at Cochin Shipyard.
“The partnership will give us assured flow of business,” she said over the phone from Kochi on Saturday. “It will also help us raise funds for the new dry dock so much more easily.”
Cochin Shipyard has an order book for constructing 20 ships estimated to cost Rs5,000 crore. More than half the value is made up by the Indian Navy’s order for an air defence ship, India’s first indigenous aircraft carrier.
The order book also includes two anchor-handling, towing and supply vessels (AHTSVs) and two platform supply vessels (PSVs) ordered by state-run Shipping Corp. of India Ltd, or SCI, India’s biggest ocean carrier, between June and July this year, worth at least Rs600 crore. AHTSVs and PSVs are ships used for supporting offshore oil exploration activities. The SCI contract has an option for building two more AHTSVs.
These orders came after a long dry spell of new orders for the yard and were helped greatly by the intervention of the Union shipping ministry that administers both Cochin Shipyard and SCI.
In the year ended March, Cochin Shipyard did not win a single new shipbuilding order as the global financial turmoil, economic recession and the consequent slower global trade cut demand for ships.
On 22 October, Cochin Shipyard signed a memorandum of understanding (MoU) with SCI for strengthening cooperation between the two state-owned firms for building more vessels used for supporting offshore oil exploration activities.
The yard earned a net profit of Rs160 crore on revenues of Rs1,383 crore in the fiscal ended March.