Pipavav eyes acquisitions, large defence deals

Pipavav eyes acquisitions, large defence deals

Mumbai: Pipavav Shipyard is scouting overseas for firms catering to the oil and gas and defence sectors, besides setting up a second dry dock facility to tap the lucrative Indian defence and offshore segments, a top official said.

“We are on the lookout for opportunities, our eyes and ears are open and we are very keen but we must have the right opportunity that will create both huge visibility and significant value proposition," chairman Nikhil Gandhi told Reuters on Friday.

The shipbuilder, India’s largest by market capitalization, is eyeing companies in Asia and Europe, especially Scandinavia, he added.

“Oil and gas asset building and operating companies and defence sector companies interest us. Eventually, we will have to do a backward and forward integration plan."

Last week, Pipavav Shipyard got the go-ahead from the Foreign Investment Promotion Board to build warships, thus making it eligible to bid for multi-billion dollar defence contracts along with foreign partners.

In February, rival ABG Shipyard also received government approval to foray into defence-related contracts.

Pipavav is also bidding for a multi-billion dollar helicopter carrier as well as a submarine programme “of substantial value", Gandhi said.

The Indian firm has already tied up with a host of foreign firms to build defence hardware.

Last December, it signed an agreement with SAAB Dynamics enabling the latter to enter India’s army and air force segments. In February this year, Pipavav tied up with Northop Grumman Overseas for defence production.

The firm’s order book now stands at around $1.5 billion and Gandhi expects this to “grow substantially" once new orders come in from defence and offshore.

“We think there would be substantial increase (in orders), The opportunity that exists in India’s oil and gas and defence sectors in next two years is worth over $50 billion."

The recent surge in crude prices has prompted oil companies to step up their thrust on exploration and production, which could result in increased offshore orders for firms like Pipavav.

The firm is expanding capacity by adding a dry dock adjacent to the existing facility on the south western coast of Gujarat, at a cost of around $230 million, Gandhi said.

“We are in the process of beginning the work on a second dry dock, which will start soon. We already have a wet dock which we will convert into a dry dock, he said, adding the whole process could take around 16 months.

“This additional facility will help us carry out some international work we might get and also we can work with far larger number of assets. With the second dry docking facility and associated infrastructure our ability to deliver the ships at one third or one fourth the time of anyone else," Gandhi added.

Pipavav’s current infrastructure alone has the potential to clock revenue of nearly Rs10,000 crore, he said.

At 12:25 pm Pipavav Shipyard shares were up 1.27% at Rs80 in a weak Mumbai market.