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PMO to decide if India should invest in large-size LNG vessels: Cochin Shipyard CMD

Cochin Shipyard is gearing up to grow its ship repair business to insulate itself from external shocks, says Madhu Nair

Aditi Divekar  |  Mumbai 

We will gun for ship repair, says Cochin Shipyard CMD

With industry across the globe still not out of the gloomy business environment, state-owned is gearing up to grow its ship repair business to insulate itself from external shocks. In an interview with Aditi Divekar, chairman and managing director Madhu S Nair talks about his organic and inorganic expansion plans for the shipyard. Edited excerpts. 

How do you see your in a scenario when the shipbuilding market is not doing well for a long time? 
 
Currently, we have an of Rs 3,000 crore of which the aircraft carrier INSVikrant alone is of Rs 1,600 crore (phase-I,II). This is not a good order book. Being a heavy engineering company we need to have an at least four-to-four-and-half times turnover. The market is not good but ship repair business is not impacted. There is demand for ship repair from the navy and coast guards and we will fulfill that requirement. We aspire to take the existing share of ship repair business much higher from current 20-22% of total topline. I am going all out to get what I can in this segment. We will gun for ship repair. Alongside, we are banking on LNG vessels and on navy for more orders in future. 

GAIL is said to have cancelled the $7-billion 'Make In India' LNG carrier tender. With this, the potential growth of your has also taken a hit. How are you looking at this?
 
GAIL has not cancelled the tender. Since the bids went unanswered even after extension, the tender has lapsed. Now, whether GAIL will make these vessels in India or get them made from outside is being decided by a committee at PMO (Prime Minister Office) level and a final decision is expected by end of December. We strongly feel there are positives in this project but government is in the best position to decide whether such a move is good for India.  

Price differential between vessels made in India and abroad is seen as the main hurdle for dull response to LNG carrier tender. How is the PMO tackling this issue?
 
The hard cost of the ship is about 55-60% higher in India than when made abroad, while project cost is about 80-90% higher since the ecosystem outside is different from that in the domestic market. Due to this, there is a fair bit of investment that needs to be made by the government as stakeholders are not in a position to fund it entirely. Whether India should make investment of this size in LNG at present and, if yes, how should they go about it, is what is getting discussed at PMO level. With complete set of information available to the government at this juncture there is more clarity on the subject this time than two years ago when this project was initiated.

has a healthy balance sheet but is amid a bad downcycle which has lasted for a longer-than-stipulated period. What is the growth strategy the company has planned for itself?
 
Ship repair is a segment that is not impacted by cycles and so there is ample scope for growth there. We are also open for acquisitions in this segment, as we understand this business very well. Apart from ship repair, any interesting offer towards coastal and inland waterways is also something will look for to grow inorganically. We already have a Rs 3,000-crore expansion plan in place over the next two to three years which includes a third dry dock and a ship repair facility. 

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PMO to decide if India should invest in large-size LNG vessels: Cochin Shipyard CMD

Cochin Shipyard is gearing up to grow its ship repair business to insulate itself from external shocks, says Madhu Nair

Cochin Shipyard is gearing up to grow its ship repair business to insulate itself from external shocks, says Madhu S Nair
With industry across the globe still not out of the gloomy business environment, state-owned is gearing up to grow its ship repair business to insulate itself from external shocks. In an interview with Aditi Divekar, chairman and managing director Madhu S Nair talks about his organic and inorganic expansion plans for the shipyard. Edited excerpts. 

How do you see your in a scenario when the shipbuilding market is not doing well for a long time? 
 
Currently, we have an of Rs 3,000 crore of which the aircraft carrier INSVikrant alone is of Rs 1,600 crore (phase-I,II). This is not a good order book. Being a heavy engineering company we need to have an at least four-to-four-and-half times turnover. The market is not good but ship repair business is not impacted. There is demand for ship repair from the navy and coast guards and we will fulfill that requirement. We aspire to take the existing share of ship repair business much higher from current 20-22% of total topline. I am going all out to get what I can in this segment. We will gun for ship repair. Alongside, we are banking on LNG vessels and on navy for more orders in future. 

GAIL is said to have cancelled the $7-billion 'Make In India' LNG carrier tender. With this, the potential growth of your has also taken a hit. How are you looking at this?
 
GAIL has not cancelled the tender. Since the bids went unanswered even after extension, the tender has lapsed. Now, whether GAIL will make these vessels in India or get them made from outside is being decided by a committee at PMO (Prime Minister Office) level and a final decision is expected by end of December. We strongly feel there are positives in this project but government is in the best position to decide whether such a move is good for India.  

Price differential between vessels made in India and abroad is seen as the main hurdle for dull response to LNG carrier tender. How is the PMO tackling this issue?
 
The hard cost of the ship is about 55-60% higher in India than when made abroad, while project cost is about 80-90% higher since the ecosystem outside is different from that in the domestic market. Due to this, there is a fair bit of investment that needs to be made by the government as stakeholders are not in a position to fund it entirely. Whether India should make investment of this size in LNG at present and, if yes, how should they go about it, is what is getting discussed at PMO level. With complete set of information available to the government at this juncture there is more clarity on the subject this time than two years ago when this project was initiated.

has a healthy balance sheet but is amid a bad downcycle which has lasted for a longer-than-stipulated period. What is the growth strategy the company has planned for itself?
 
Ship repair is a segment that is not impacted by cycles and so there is ample scope for growth there. We are also open for acquisitions in this segment, as we understand this business very well. Apart from ship repair, any interesting offer towards coastal and inland waterways is also something will look for to grow inorganically. We already have a Rs 3,000-crore expansion plan in place over the next two to three years which includes a third dry dock and a ship repair facility. 
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Business Standard
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PMO to decide if India should invest in large-size LNG vessels: Cochin Shipyard CMD

Cochin Shipyard is gearing up to grow its ship repair business to insulate itself from external shocks, says Madhu Nair

With industry across the globe still not out of the gloomy business environment, state-owned is gearing up to grow its ship repair business to insulate itself from external shocks. In an interview with Aditi Divekar, chairman and managing director Madhu S Nair talks about his organic and inorganic expansion plans for the shipyard. Edited excerpts. 

How do you see your in a scenario when the shipbuilding market is not doing well for a long time? 
 
Currently, we have an of Rs 3,000 crore of which the aircraft carrier INSVikrant alone is of Rs 1,600 crore (phase-I,II). This is not a good order book. Being a heavy engineering company we need to have an at least four-to-four-and-half times turnover. The market is not good but ship repair business is not impacted. There is demand for ship repair from the navy and coast guards and we will fulfill that requirement. We aspire to take the existing share of ship repair business much higher from current 20-22% of total topline. I am going all out to get what I can in this segment. We will gun for ship repair. Alongside, we are banking on LNG vessels and on navy for more orders in future. 

GAIL is said to have cancelled the $7-billion 'Make In India' LNG carrier tender. With this, the potential growth of your has also taken a hit. How are you looking at this?
 
GAIL has not cancelled the tender. Since the bids went unanswered even after extension, the tender has lapsed. Now, whether GAIL will make these vessels in India or get them made from outside is being decided by a committee at PMO (Prime Minister Office) level and a final decision is expected by end of December. We strongly feel there are positives in this project but government is in the best position to decide whether such a move is good for India.  

Price differential between vessels made in India and abroad is seen as the main hurdle for dull response to LNG carrier tender. How is the PMO tackling this issue?
 
The hard cost of the ship is about 55-60% higher in India than when made abroad, while project cost is about 80-90% higher since the ecosystem outside is different from that in the domestic market. Due to this, there is a fair bit of investment that needs to be made by the government as stakeholders are not in a position to fund it entirely. Whether India should make investment of this size in LNG at present and, if yes, how should they go about it, is what is getting discussed at PMO level. With complete set of information available to the government at this juncture there is more clarity on the subject this time than two years ago when this project was initiated.

has a healthy balance sheet but is amid a bad downcycle which has lasted for a longer-than-stipulated period. What is the growth strategy the company has planned for itself?
 
Ship repair is a segment that is not impacted by cycles and so there is ample scope for growth there. We are also open for acquisitions in this segment, as we understand this business very well. Apart from ship repair, any interesting offer towards coastal and inland waterways is also something will look for to grow inorganically. We already have a Rs 3,000-crore expansion plan in place over the next two to three years which includes a third dry dock and a ship repair facility. 

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Business Standard
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