The government of Gujarat has invited bids to sell its 100% stake in ship-building firm Alcock Ashdown (Gujarat) Ltd, which has two shipyards, one each in Bhavnagar and Chanch. The ship-builder ended 2005-06 with a revenue of Rs111.77 crore and a profit of Rs3.54 crore. The decision to sell the company is based on the government’s desire to exit the ship-building business, said an executive at Alcock Ashdown, who did not wish to be identified. It also comes at a time when there is a boom in the global ship-building industry, and fleet-owners are looking to source smaller ships from Indian companies because ship-builders in Korea and China, flush with orders, are entertaining only enquiries related to bigger ships. These factors could ensure a high valuation for Alcock Ashdown, which designs and builds seagoing grade steel vessels for various purposes as well as inland and coastal ships and boats in steel- or fibre-reinforced plastics (FRP).
The amount the government hopes to generate through this sale isn’t known. Last year, it called off a competitive bidding process to re-evaluate the company’s value in a changed global scenario, said the executive at the company. The process had attracted bids from domestic ship-builders such as ABG Shipyard Ltd and Tebma Shipyards Ltd.
This time around, the state government expects foreign firms to bid; the Central government has permitted 100% foreign direct investment (FDI) in domestic shipyards. In 2006, Alcock Ashdown secured a Rs850 crore order from Sea Tanker Management Company Ltd based in Norway and Cyprus to build eight tankers, each with a capacity of 12,800 tonnes. “The yard is sitting on a good order book position. We are selling the yard for facilitating further development and growth. Shipbuilding is not an area where the government should invest,” said the Alcock executive. Experts who spoke on the condition of anonymity said the yard, which caters to the lower- and middle-segment needs of fleet owners, has potential for growth if adequate investments are made to expand its capacity.
“Chanch yard has the largest dry dock on the Northwestern coast of India with direct access to the sea. Proximity to Mumbai High and the international Gulf-bound shipping route makes it ideal for offshore support, fabrication, ship repair or new construction,” the executive said. The outfit jetty has a depth of 4.5 metres and can build multipurpose cargo and passenger ships of up to 20,000 tonnes capacity.
Orders for ships of such capacity (which would make them small- and mid-sized ships) have been flowing into Indian yards such as ABG, Bharati Shipyard Ltd, and Larsen & Toubro Ltd’s ship-building division. Indian shipyards receive a 30% subsidy from the government on the order value of ships built for exports as well as for ocean-going vessels built for local owners. This allows them to be as competitive as their international rivals on the cost front.
Domestic ship-builders are also raising capacity to meet growing demand for building new ships to carry cargo and to replace those that are scrapped globally as per the rules framed by the global shipping regulator, the International Maritime Organization (IMO).
Alcock Ashdown was originally owned by a British company. When the firm ran into financial trouble, it was taken over by the Indian government in 1975.
The yard was subsequently acquired by the Gujarat government in 1994.