Amid the not-so-good business climate for ship building, state-owned Cochin Shipyard has prepared a cautiously sizable growth plan.
Expansion of the repair business, foray into the volume-based business of fishing boats, and eyeing Indian Navy projects and the private tourism sector are some.
“We are looking to up our ship repair turnover and have moved into profit sharing agreements with both Mumbai and Kolkata port trusts. We see an additional revenue of Rs 70-80 crore from Mumbai alone in FY20 itself. In the next two years, our revenue from the Mumbai port alone should be above Rs 200 crore,” Madhu Nair, chairman and managing director, told.
Currently, about 70 per cent of the revenue comes from the ship building business and the rest from ship repair. “We are also investing Rs 80 crore at the Mumbai port for a floating dry dock and Rs 20 crore at the Kolkata port,” said Nair. An agreement is in place between each of the ports and Cochin Shipyard, creating an asset-light model for the latter.
Nair said India should do much more of ship repair, given the country’s location and good-quality manpower.
Cochin Shipyard was also in talks with the Mormugao Port Trust for their ship repair facility but could not take this ahead, due to vessel size limitations. “Between our own repair facility, along with the Mumbai and Kolkata ports, we can now handle large and mid-sized ship repairs. We were, therefore, on a lookout for a small-sized ship repair facility. Goa should have been small but it did not fit,” said Nair.
Though revenue consistently rose between 2014-15 and 2018-19, growth in the ship building business income was not as impressive as in the repair section.
According to the latest annual report, the yard built 20 defence vessels, 15 large vessels, 35 offshore support vessels and 52 small and medium vessels. These figures are unchanged from the preceding year.
The company has taken 42 acres on lease at the Cochin shipyard where it aims to shift the repair facility for smaller and mid-size vessels. The facility is expected to add revenue by 15-20 per cent in the next two years. The target is to handle 80 ships a year. It also is not affected from the current order flow vagary due to the new IMO 2020 sulphur cap regulations.
These affect merchant vessels, a space where Cochin Shipyard is not present. “We have a slightly different product mix — it is largely naval ships, which do not use heavy fuel oil,” says Nair. No Indian shipyard is in the affected segment — L&T’s in Gujarat, Hindustan Shipyard at Visakhapatnam and Reliance Naval and Engineering Company, for instance.
Apart from the repair business, the company is looking at the building of 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 or more vessels (yearly) in terms of order flow,” said Nair.
It is for the same reason that the company is eyeing insolvent Temba Shipyard, subsidiary of Bharti Shipyard, which has yards in Malpe, Karnataka, and in Tamil Nadu. “We see value in Temba as it is located in an area which is a fishing boat hub and can have about 4,000 boats,” said Nair. All projects put together, Cochin Shipyard has an investment plan of Rs 3,500 crore. The majority of this money is to come from internal accrual.
With an eye on growing the ship repair business segment at Port Blair, the company is to look at operations and management of the repair facility at Netaji Subhas Dock, Kolkata. It expects this to aid its working with the navy in the Andaman region and with private tourism.