It gives me immense pleasure to welcome you all to the 45th Annual General Meeting ofCochin Shipyard Limited.
Since taking over as Chairman & Managing Director of CSL on 01 January 2016 thelast one and a half years have been extremely challenging but exciting. The Company'sambitions for expansion coupled with strategic projects on challenging timelines and theensuing IPO transaction kept us on our toes during the entire period.
It is encouraging that the Indian economy continues to do well. As per the OECD's IndiaEconomic forecast of June 2017 the economic growth of the country is projected to remainstrong and India will remain the fastest growing G 20 economy. The robust position of theIndian economy will help us in positioning ourselves in new sectors of operations such asthe Inland Waterways small/ medium LNG vessels/ repairs to rigs etc. The Government ofIndia's drive towards Make in India and the subsidy scheme introduced for the purpose isexpected to improve the competitive position of the Indian shipyards. However the globalshipping scenario continued to be grim and provided little reason to cheer. It is expectedthat the downturn in Oil and Gas sector will continue for sometime thus prolonging thetime for recovery of the shipping worldwide.
In view of the grim global scenario the Company would be concentrating on its Indiancommercial and defence business for a while though marketing efforts in the internationalscenario will continue.
Achievements during the year
The notable achievements since the last AGM in September 2016 has been the completionand delivery of twenty Fast Patrol Vessels for the Indian Coast Guard in December 2016.The contract was completed three months ahead of schedule despite the initial difficultiesfaced with respect to steel. CSL was awarded the work of constructing 20 Fast PatrolVessels for the Indian Coast Guard on 20th October 2010. CSL delivered the first vessel on25th September 2013 and subsequently delivered vessels in about two months interval. CSLstarted delivering vessels ahead of schedule from the 13th vessel onwards.
In the repair front the Shipyard could complete the first drydock repairs of INSVikramaditya the latest Aircraft Carrier for the Indian Navy within a record timeline of74 days as against the contractual delivery period of 112 days. CSL has also undertakenthe last drydocking of INS Viraat which was a decommissioning refit in September 2016.This Financial year the yard has achieved an all-time record turnover in Ship repair ofRs. 543 Crores. In addition to the four MOUs which are prevelant for repair of vesselsCSL has entered into MoU with Andaman & Nicobar Island Administration in December 17for repairs of 10 nos of large vessels owned by them.
The execution of current order book in Shipbuilding is proceeding as per schedule. Morethan 50% of the Phase II work of the Indigenous Aircraft Carriers has been completed.Commenced trials onboard the vessel including starting of Diesel Generators in December2016. Some of critical equipments relating to the Aviation Facilities Complex which werelong awaited have started arriving. However some more are awaited. Shri Pon RadhakrishnanMinister of State for Shipping Road Transport & Highways cut the first steel plate ofShip No. 23 and Shri N K Premachandran Honourable Member of Parliament cut the firststeel plate of Ship No. 24 the two 1200 Passenger cum 1000 Tonne Cargo Ships contractedto be built for the Andaman & Nicobar Administration. The block fabrication of othertwo vessels the 500 Pax being built for A&N Administration also commenced in March2017. On 15th July 2017 we have commenced the hull erection of Technology DemonstrationVessel being built for DRDO in the presence of Dr. Satish Reddy Scientific Advisor toRaksha Mantri.
On 15th & 16th May 2017 CSL organised a two-day National Level Vendor DevelopmentProgram cum Industrial Exhibition and B2B meeting with the active support of Department ofIndustry and Commerce Government of Kerala and MSME development Institute Thrissur. Itwas a great success with more than 80 firms in the MSME sector participating in the event.
The company delivered the two Ro-Ro vessels to the Kochi Municipal Corporation on 30thJune 2017.
Major Expansion Plans
The two major expansion plans of the company include the International ShiprepairFacility at the Cochin Port Trust premises and the new Drydock at the shipyard's existingpremises. These new facilities will expand our existing capabilities significantly andhelp us build and repair a broader variety of vessels including new generation aircraftcarriers and oil rigs. The new ISRF facility will allow us to undertake repair of abroader range of vessel. The progress on these expansion projects have been satisfactory.
International Ship Repair Facility (ISRF)
The construction of the International Ship Repair Facility (ISRF) with an investment of' 970 crores is progressing. The Environmental Clearance and Coastal Regulation Zoneclearance under Environment Impact Assessment (EIA) Notification 2006 and CRZNotification 2011 under the Environment Protection Act 1986 was received for the projectfrom the Ministry of Environment Forests and Climate Change Government of India on 22ndJune 2017. Approvals from the National Board for Wild Life is awaited for the projectwhich is at the final stages. The contract for the shiplift and transfer system wasawarded on 19th January 2017. The construction contract is also in the tendering stage.The contractors for construction have been shortlisted.
All statutory approvals in relation to the Drydock has been received. The procurementof the 600T crane is in progress. CSL has shortlisted construction contractors. Afterre-engineering the tender has been prepared and is being readied for final tendering forconstruction process. We expect to commence construction of the Drydock by end of thisyear. This dock is going to be one of the breakthrough intiative of the yard because wewould be capable of building larger Aircraft carrier LNG carriers and other such largerniche vessels on completion of this project. A re-entry into the offshore market by way ofDry dock repairs of Jack up rigs and Semi-submersibles are also in cards.
The GOI has announced major initiatives in the IWT sector with new 101 Inlandwaterways being declared as National waterways. This coupled with major initiatives underthe Sagarmala project has the potential to shift a major part of transportation to thewaterways in the future. As part of the Jal Marg Vikas programme the IWAI is developing1398 km of the NW1 from Varanasi to Haldia (Kolkata) by creating multi-model terminals atVaranasi Gazipur Barh Shahibganj Haldia etc with rail/ road connectivity a criticallock at Farakka undertaking requisite dredging to provide least available depth (LAD) of2.5 M in the upstream segments (much more is available downstream) navigational aidsfuelling stations etc. Two Shiprepairing units one near Patna and the other one at Haldiais being proposed. The Jal Marg Vikas project is being funded by the World Bank at USD 800million Rs. 5369 crores and contracts for many of the terminals/ locks have already beenawarded. It is expected that the Inland water traffic will increase from 3.5 million MT to11.5 million MT in the first phase of development. At this phase it is estimated thatthere would be a requirement of 123 ships. In the subsequent phases another 200 ships areestimated to be required and traffic to go upto 22 million MT and later upto 45 millionMT.
The Company is of the view that the IWT sector holds enormous potential and CSL shouldbe at the forefront of growth and development as and when it emerges. The potential shouldbe tapped for creating another growth vertical for CSL leveraging its strengths as theleading shipbuilder and shiprepairer in India. However IWT is a very different spacecalling for different skillsets capabilities and commercial approach and this segment isbest addressed through entities which are solely dedicated to the IWT space.
In order to create space in the IWT sector CSL proposes to form a joint venture withHooghly Dock and Port Engineers to take over the facilities in Salkia and Nazirgunge whichwould operate in the IWAI space. We are at the final stages of formation of Joint VentureCompany at Hooghly to enter into this new segment of constructing smaller vessels forInland waterways and coastal shipping. An MoU that was signed between CSL and EngineersIndia Limited last year will enable CSL to enter into small LNG segments too.
The Company continued to comply with good corporate governance practices as stipulatedby various statutes and guidelines of the Department of Public Enterprises (DPE). Thetotal strength of the Board of Directors as on July 17 2017 is twelve out of which sixare Independent Directors. The Company has constituted an Audit Committee consisting oftwo Independent Directors and one Nominee Director. A remuneration Committee and CSRCommittee chaired by an Independent Director have been constituted.
Shri Barun Mitra IAS demitted office of director on relinquishing his charge as theJoint Secretary Shipping. Shri Pravir Krishna IAS the present Joint Secretary Shippingwas appointed on the board on 17th April 2017. Shri Jiji Thomson IAS (Retd.) former ChiefSecretary of Kerala Shri Nanda Kumaran Puthezhath former MD of SBT and Shri PradiptaBanerji former Director of IIT Roorke were inducted as Non Official Part Time(Independent Director) on 15 July 2017.
The Industrial relation scenario was by and large peaceful except for the one daystrike called by the trade unions of the permanent workmen against the IPO on 28th April2017 and the shade of protest still lingers around the Company.
Research and Development
The Company could develop weld procedures for the welding of the austenitic stainlesssteel plates of the cargo containment system of LNG carrier. This would help the Companyin its endeavour to enter the domestic LNG carrier segment.
CSL is a member of Strategic manufacturing sector skill council which has been set upto take forward the Skill India Mission. The council has developed the training curriculumfor the job role of pipe fitter shipbuilding. CSL has commenced this course on May 24. Thecouncil is developing courses for other job roles in the shipbuilding / shiprepair segmentas well.
Integrated Management System
The Shipyard continues to be compliant with the Integrated Management System (IMS)consisting of ISO 9001 Quality Management System. ISO 14001 Environment Standards andOHSAS 18001 Occupational Health and Safety Standards.
Corporate Social Responsibility
The Company continues to fulfil its obligation towards society through its CSRinitiatives. The Company has identified and implemented socially impactful projects in atime bound manner. The total amount spent on CSR projects during the year 2016-17 was Rs7.24 crores as against the mandated amount of Rs 7.22 crores as per the provisions of theAct.
Initial Public Offer
The Company is going ahead with the Initial Public Offer of 33984000 (3.3984 crs)equity shares of Rs 10 each amounting Rs 339840000 (33.984 crs) Equity Capitalconsisting of:
(a) Sale of shares by GOI - 11328000 (1.1328 crs) equity shares of Rs 10 eachamounting to Rs 113280000 (11.328 crs) Equity Capital
(b) Fresh Issue of Shares - 22656000 (2.2656 crs) Equity shares of Rs 10 eachamounting to Rs 226560000 (22.656 crs) Equity Capital
The Employee reservation in the above issue would be 824000 shares. The Company hascompleted appointment of all intermediaries. The Draft Red Herring Prospectus was filedwith SEBI on 24th March 2017. The Company is presently at the RHP filing stage.
The Company is all set to maintain its "Excellent" rating against the MOUtargets set by the Department of Public Enterprises Government of India for the year2016-17. However the final rating from the Department of Public Enterprises is awaited.Cochin Shipyard has received awards from Government of Kerala and National Safety councilfor outstanding safety performance. The Company has won the award for top 50 PSUorganisations with innovative HR practices presented by Times Ascent at Asia Pacific HRMCongress. The Company has also received the KMA excellence award for best CSR activitiesundertaken. The company was also the winner in category III corporate citizen award byNational institute of Personnel management. The WIPS CSL unit won the "Recognition ofWIPS activities award"in the National meet held at Nagpur.
CSL is presently at a very critical stage of growth. To sustain and develop from thispoint calls for immense investment of commitment and capability from each and every memberof the CSL family. Going forward our aim is to build up this Company as a robusttechnology oriented multi-segment operations company with focus on Human development.With the heavy investment in the tangibles and intangibles we are confident that CSL'sgrowth trajectory would be consistent in future.
Jai Hind Madhu S Nair
Chairman and Managing Director
DIN: 07376798 17th July 2017