Hyderabad: Hyderabad-based infrastructure major, IVRCL Infrastructures & Projects Ltd, plans to enter the port development business by setting up a Rs2,500 crore facility in Andhra Pradesh to target both the global and domestic markets for shipbuilding and offshore oil rig fabrication.
As part of this strategy, it is also in the race—having set aside a $150 million (Rs600 crore) corpus—to acquire a US onshore oil rig company with rigs in Brazil.
IVRCL, buoyed by the spurt in hydrocarbon exploration in the country, is in talks with three overseas firms for the port development project and plans to develop it as part of a consortium. It’s banking on overbooking in the shipbuilding space till 2010 and a demand for fabrication of offshore oil rigs.
“The talks are in very initial stages. We’re looking at sea-port development in a consortium. There is a great demand for a port facility for shipbuilding and onshore fabrication facility. We are more comfortable in setting up this project in Andhra Pradesh. We’re looking for suitable partners with expertise so that we can stake a claim for building such a facility on the eastern coast of India,” said IVRCL deputy director of development and corporate strategy S. Ramachandran.
IVRCL’s?turnover for 2006-07 was Rs2,518 crore and it made a net profit of Rs168.9 crore.
Commenting on IVRCL’s plans, Arvind Mahajan, executive director at accounting firm KPMG, said, “Shipbuilding and fabrication are a growing market and a lot of companies are planning to enter it. There is a market demand for such facilities and given the global situation, it is an opportunity for the Indian companies to tap the global demand. However, the global shipyards get some sort of support from their governments, and, in my view, IVRCL would be looking at some kind of government support to compete globally.”
To establish its presence in the hydrocarbon exploration and production (E&P) space in the country, IVRCL is in the race with other Indian and overseas firms for the American firm. The acquisition plans come in the backdrop of a shortage of rigs in the E&P sector. IVRCL is also scouting for partners to participate in the next new exploration licensing policy (Nelp) round and is also looking for a joint venture partner for its oil and gas pipeline construction business.
“We need technical know-how support for Nelp as getting a block on our own is not possible,” Ramachandran said.
The company is looking to set up a fabrication yard with a large facility for offshore rigs and ship building. The proposed facility will have a fabrication yard with a barge facility for the fabrication of offshore oil rig components. “It can also be utilized for the fabrication ships and in the ship building work,” Ramachandran said.
“While it’s an excellent opportunity for IVRCL, it does not mean much for the Indian hydrocarbon exploration space until and unless they plan to bring the rigs to India,” said Deepak Mahurkar, associated director, oil and gas industry practice at accounting firm PricewaterhouseCoopers.
While the total project cost is expected to be around Rs2,500 crore, the equity portion will be around Rs750 crore to be shared between the consortium partners.
“This equity will be utilized to raise debt from the institutions. With two to three partners in the consortium, IVRCL equity share may work out to be Rs250 crore,” Ramachandran added.
The IVRCL scrip suffered a marginal drop of 1.51% on Tuesday to close at Rs359.55 on the Bombay Stock Exchange. The scrip recorded a year’s high price of Rs460 and low of Rs164.