Amid the not-so-good business climate for shipbuilding, the Cochin State Shipyard has prepared a fairly cautious growth plan.
The expansion of the repair business, the foray into the volume of fishing boats and the projects of the Indian Navy and the private tourism sector are some of them.
"We are looking to increase our ship repair business and have profit sharing agreements with the Mumbai and Kolkata port trusts. We see an additional income of Rs 70-80 crore from Mumbai alone in FY20 itself. Over the next two years, our revenues from the port of Mumbai alone should exceed Rs 200 crore, "said Madhu Nair, president and chief executive officer. Commercial standard.
Currently, around 70% of revenues come from shipbuilding and the rest from ship repair. "We are also investing Rs 80 crore in the port of Mumbai for a floating dry dock and Rs 20 crore in the port of Kolkata," said Nair. An agreement is in place between each of the ports and the Cochin shipyard, creating a model of light assets for the latter.
Mr Nair said India should do a lot more naval repairs, given the country's location and good quality manpower.
The Cochin shipyard was also in talks with the Mormugao Port Trust for its ship repair facility, but was unable to go ahead due to the size limitations of the ships. “Between our own repair facilities, as well as the ports of Mumbai and Kolkata, we can now manage repairs to large and medium-sized vessels. So we were looking for a small ship repair facility. Goa should have been small but it was not suitable, "said Nair.
Although revenues increased steadily between 2014-2015 and 2018-2019, the growth in revenues of shipbuilding companies was not as impressive as in the repairs section.
According to the latest annual report, the shipyard has built 20 defense vessels, 15 large vessels, 35 offshore support vessels and 52 small and medium vessels. These figures are unchanged from the previous year.
The company has taken 42 acres for lease from the Cochin Shipyard where it aims to relocate the repair facility for smaller and medium-sized vessels. The facility is expected to increase revenues by 15-20% over the next two years. The goal is to manage 80 ships per year. It is also not affected by the current order flow due to the new IMO 2020 regulation on the sulfur ceiling.
These affect merchant ships, an area where the Cochin shipyard is not present. "Our product line is slightly different – these are mainly warships that don't use heavy fuel oil," says Nair. There are no Indian shipyards in the affected segment – L&T in Tamil Nadu, the Hindustan shipyard in Visakhapatnam and Reliance Naval and Engineering Company, for example.
Besides the repair activity, the company plans to build fishing boats. “In this business, we will play on the volume game. One of these ships costs (only) Rs 1-1.5 crore but the volume is over 100 ships or more (per year) in terms of order flow, "said Nair.
It is for the same reason that the company is eyeing the insolvent Temba Shipyard, a subsidiary of Bharti Shipyard, which has yards in Malpe, Karnataka and Tamil Nadu. "We see value in Temba because it is located in an area that is a hub for fishing boats and can have around 4,000 boats," said Nair. All projects combined, Cochin Shipyard has an investment plan of Rs 3,500 crore. The majority of this money must come from internal accrual accounting.
In order to develop the ship repair business at Port Blair, the company must review the operations and management of the repair facility at Netaji Subhas Dock, Kolkata. He hopes this will help him work with the navy in the Andaman region and with private tourism.