Bangalore: Indian shipbuilders ended one of their worst years in recent memory as orders for new ships fell sharply in the wake of a global credit crunch and economic slowdown that has depressed demand. The downturn has also led to a steep drop in earnings from ships and their valuations.
In the year through March, ABG Shipyard Ltd, the country’s biggest private sector shipbuilder, received orders for seven ships valued at Rs3,290 crore. A bulk of this order by value came from Essar Oilfields Services Ltd, a unit of the diversified Essar Group, for constructing two offshore oil drilling jack-up rigs costing Rs2,400 crore.
In 2007-08, however, ABG Shipyard had signed orders for 33 ships worth Rs4,340 crore. During the year, ABG Shipyard’s closest rival, Bharati Shipyard Ltd won orders for 16 ships valued at Rs574.39 crore. This included a Rs281.23 crore order in March from India’s Coast Guard for building 15 interceptor boats.
“It’s been a difficult year for Indian shipbuilders from a business environment point of view,” said Dhananjay Datar, chief financial officer, ABG Shipyard, adding that the global outlook would be pessimistic for some time to come.
New entrants such as Larsen and Toubro Ltd and Pipavav Shipyard Ltd that entered the industry in 2007 failed to add any new orders to their books, which had been valued at Rs2,112 crore and Rs4,360 crore, respectively, at the end of fiscal 2008. State-run Cochin Shipyard Ltd, Hindustan Shipyard Ltd and privately owned Tebma Shipyards Ltd also drew a blank in terms of new orders.
Globally, fleet owners are cancelling orders, renegotiating prices or delaying construction schedules because of lack of funding, record low freight rates, falling ship prices, as well as to arrest excess capacity in the system.
Indian shipyards, however, have been largely unaffected by these happenings.
“Indian shipyards cater mostly to the offshore segment, which has not been affected as much as the bulk carrier segment,” said an executive at state-run Cochin Shipyard. He declined to be named because of company policy on speaking to the media.
There are a total of 23 yards in India that are building at least 250 ships at a collective value of around Rs25,000 crore, up from an order book of Rs816 crore in 2002. These order books are expected to see Indian yards through until at least 2012-13.
“That’s a matter to cheer about. At least, we have business to do unlike firms in many other business sectors,” said Datar of ABG Shipyard.