Bangalore: India’s biggest private sector shipbuilder by order book and capacity, ABG Shipyard Ltd (ABG), has deferred plans to raise $200 million (about Rs860 crore) through a stake sale because of a market downturn, a top official said.
The sale was planned to help fund the construction of a third shipbuilding facility and to expand an existing yard in Surat, both in Gujarat, to meet rising demand from global fleet owners. ABG had initiated talks with several banks, including ICICI Bank Ltd, to help sell the stock.
“The fund-raising plan has been deferred due to market conditions. We will revisit the proposal when the markets are positive and are ready to give (right) valuations,” Dhananjay Datar, chief financial officer of ABG, said in a telephone interview from Mumbai. “The plan to set up a third facility has been deferred till such time we are able to raise funds.”
Datar said the third yard would be located close to ABG’s existing facility in Surat and designed to build ships measuring 350m in length, compared with 250m at its Rs950 crore second facility being built at Dahej in Gujarat.
“None of the shipyards in India can currently build ships of 350m length,” he said.
ABG’s Surat facility can build 32 ships in a year. To augment capacity to build 40 ships a year, the company agreed in May 2007 to buy Vipul Shipyard Ltd, its neighbour at Magdalla port in Surat.
The Mumbai-based firm is building ships worth $1.7 billion, mainly dry bulk carriers and offshore vessels for global and local fleet owners.
ABG is the latest among a score of Indian companies to defer or withdraw fund-raising plans because of a market slump, triggered mainly by the mortgage crisis in the US and rising inflation.
Construction firm Emaar MGF Land Ltd and pharmaceutical company Wockhardt Ltd were forced to pull out their public offerings earlier this year. Wockhardt has since listed on the bourses and Emaar plans to tap the capital markets in the next 12-18 months.
Global shipowners are building more ships at Indian yards as a scarcity of shipbuilding slots in maritime strongholds such as South Korea, Japan and China has forced them to look at new destinations, including India.
Indian firms such as ABG, Bharati Shipyard Ltd and state-run Cochin Shipyard Ltd are looking to grab a higher share of the global shipbuilding market and capture the space vacated by the closure of yards in Europe and other developed countries. Indian yards are building 244 ships worth more than Rs20,000 crore.