Mumbai: The Union government-owned Cochin Shipyard Ltd plans an initial public offering (IPO) to fund an expansion plan even as the country scales up its shipbuilding capabilities to tap into a global boom in the business.
The plan involves building a new dry dock, which typically costs Rs800-1,000 crore.
A dry dock is a narrow basin that can be flooded to allow a ship to be floated in, then drained to allow that ship to come to rest on a dry platform. Dry docks are used for the construction, maintenance and repair of ships.
“We have submitted a proposal to the shipping ministry for constructing a new dry dock at the yard which could be funded through a sale of new shares to the public,” said a company executive, who did not want to be named because he is not authorized to speak to the media.
If and when the ministry clears the proposal, Cochin Shipyard will become the first state-owned shipbuilding yard to be listed on the bourses. The finer details of the share sale will be worked out after receiving government nod, the executive added.
The Centre also owns Hindustan Shipyard Ltd, Mazagon Dock Ltd, Goa Shipyard Ltd, Garden Reach Shipbuilders and Engineers Ltd, Hooghly Dock and Port Engineers Ltd and Central Inland Water Transport Corp. Ltd. Another shipyard, Alcock Ashdown (Gujarat) Ltd, is fully owned by the Gujarat government.
India has 23 shipyards, but only four of them are listed: ABG Shipyard Ltd, Bharati Shipyard Ltd, Western India Shipyard Ltd and India’s biggest engineering and construction firm Larsen and Toubro Ltd, which also builds ships.
India’s newest private sector shipbuilder, Pipavav Shipyard Ltd, promoted by SKIL Infrastructure Ltd, has filed a draft prospectus with the Securities and Exchange Board of India, seeking clearance for an IPO to raise around Rs800 crore.
The country’s shipyards can currently build ships with a combined cargo carrying capacity of ?2.8?million?tonnes (mt). They are currently building about 245 ships worth more than Rs20,000 crore, accounting for just 0.4% of the global market share.
In comparison, China has 326 yards with a capacity to build ships with a cargo carrying capacity of 12.2mt and South Korea has the capacity to build ships with 11.5mt capacity.
India’s shipbuilding capacity is projected to reach 19mt by 2017. “To achieve this, Indian private firms have plans to invest over Rs18,500 crore to build new facilities or expand existing yards,” said a report prepared by audit and consulting firm KPMG India Pvt. Ltd.
Cochin Shipyard started building ships in 1978. It has two dry docks at present, one capable of building ships with capacities of up to 110,000 tonnes while the second can repair ships of 125,000 tonnes.
The yard is executing orders for 21 ships valued at more than Rs2,000 crore from clients in Europe and the US.
It is also building India’s first indigenous aircraft carrier for the navy.
“With enquiries coming in for more orders, we want to build a new dry dock for constructing larger ships which can carry 200,000-250,000 tonnes of cargo,” said the Cochin Shipyard executive.
The firm’s shipbuilding dry dock will be occupied for the next two years for constructing the aircraft carrier.
Cochin Shipyard earned a profit after tax of Rs58.11 crore on revenue of Rs845 crore in the 12 months to March 2007.