Mumbai: India’s largest private-sector shipbuilder, ABG Shipyard Ltd, has agreed to buy Vipul Shipyard Ltd, its neighbour at the Magdalla Port in Gujarat. The objective is to add capacity to build more ships in a booming global shipbuilding market.
The Mumbai-based ABG has signed a memorandum of understanding with Vipul to buy the latter’s Surat facility that will raise its shipbuilding capacity to 40 vessels from the existing 32. ABG is likely to pay between Rs50 crore and Rs100 crore to acquire the yard. ABG declined to disclose details of the deal, saying it “is constrained by some conditions put by the seller”.
ABG stock lost marginally, dropping 0.10% to close at Rs412.35 on the Bombay Stock Exchange on Thursday.
“This strategic acquisition is a step to augment our resources for further consolidation of shipbuilding capacity in the growing segments of offshore, coastal shipping and other avenues of shipbuilding,” said Dhananjay Datar, chief financial officer, ABG.
Increasing global economic activity and India’s booming economy have boosted demand for ships to transport goods. The rising oil exploration and production activities, too, have triggered demand for offshore vessels that provide marine logistical support to drilling rigs.
Global shipowners are building more ships at Indian yards as builders in maritime nations such as South Korea, Japan and China decline to entertain orders for building relatively smaller ships.
As a result, Indian yards such as ABG, Bharati Shipyard Ltd, Cochin Shipyard Ltd and Tebma Shipyards 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.
Europe’s share of shipbuilding has slipped from 30% in 1995 to about 7% in 2006.
Local builders such as ABG and Bharati are building capacities by acquiring existing yards or building new ones. ABG, for instance, is also building a new yard at Dahej in Gujarat by investing Rs400 crore. Bharati is building a new yard in Mangalore that will add to its facilities located at Ratnagiri and Ghodbunder (Thane), both in Maharashtra. It also acquired Pinky Shipyard Ltd in Goa to boost capacity.
Tebma, which has a yard at Chengalpattu near Chennai, is building a new facility at Malpe, near Udupi in south Karnataka.
In a highly labour-intensive shipbuilding industry, India’s strengths lie in its low-wage structure and abundant supply of highly qualified personnel. India also has lower fabrication costs—a key element of costing in any shipbuilding activity, particularly for building larger ships. But the key factors affecting the Indian shipbuilding industry are design processes and productivity.
According to a study conducted by Mumbai-based maritime consultancy firm i-maritime, Indians take 300 hours to cut a tonne of steel.
In comparison, China takes anywhere between 45 hours and 100 hours while Japan takes only 15 hours to complete the task.