Cochin Shipyard to tap market to fund expansion plans

Cochin Shipyard to tap market to fund expansion plans

Bangalore: State-run Cochin Shipyard Ltd plans to sell shares to the public to bankroll a 1,500 crore expansion in shipbuilding, repair and fabrication, a top executive said.

“The expansion plan to cater to our near- and medium-term growth will be funded through an initial public offering of shares," chairman and managing director K. Subramaniam said.

The firm, India’s biggest state-owned shipbuilder by capacity, will hire an investment banker in two weeks to advise it on the sale.

“Ship repair is an area where immense opportunities exist in the county," Subramaniam said.

The expansion involves building a new dock to allow the Kochi shipbuilder to repair oil drilling rigs.

Cochin Shipyard also intends to build a new shipyard in the Vizhinjam-Poovar area near Thiruvananthapuram in Kerala, where the natural depth makes the location attractive, Subramaniam said.

The only profit-making yard controlled by the shipping ministry, the firm is building India’s first aircraft carrier as well as 28 other ships.

It posted a net profit of 172 crore in the year ended March.

Subramaniam said the global shipping and shipbuilding sector has taken a hit due to the economic downturn since 2008, hurting Cochin Shipyard’s efforts to win new orders for commercial ships, forcing the yard to look at other related areas for growth.

Besides repairing offshore rigs, Cochin Shipyard will pursue growth in the offshore fabrication sector.

“We have recently been qualified by ONGC Ltd for fabrication of offshore structures and platforms. The fabrication strengths of the shipyard will help the company to establish itself in this segment. ONGC has planned huge investments in the offshore business over the next five years. If we are able to take even a minor chunk of this, it would be a major thrust for the yard," Subramaniam said.

“In this segment, the yard hopes to make a modest beginning at its existing location but hopes to set up a permanent greenfield facility at a suitable location, which is being identified," he said.

Cochin Shipyard is also keen to establish a ship-repair facility in the nearby Cochin port premises for small and medium vessels.

“This would ensure that larger ships can be taken for repairs in the existing bigger dock at the yard," Subramaniam said.

“There is a huge potential for offshore repairs and fabrication," said Samir Kanabar, partner, infrastructure practice at Ernst and Young Pvt. Ltd, a consultancy. “If Cochin Shipyard focuses on this segment, it can grow."

Over 80% of the rigs operating in India have to go to the Middle East or Singapore for repairs.

“With oil exploration off the Indian coast gaining momentum, the opportunities in rig repairs and maintenance is expected to go up substantially," Kanabar said.