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| 'We have offers to buy our Great Offshore stake but we have said no' |
| Abhineet Kumar & Sidhartha / Mumbai May 09, 2009, 00:28 IST |
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 It has been a hectic week for Bharati Shipyard Managing Director P C Kapoor. He returned to Mumbai this morning after taking delivery of a floating dock at the Dabhol Shipyard. While he was away, the company announced the acquisition of a 14.89 per cent in Great Offshore, which accounts for nearly a quarter of Bharati Shipyard’s Rs 5,093-crore order book. Kapoor spoke to Abhineet Kumar and Sidhartha about the Rs 174-crore stake acquisition and what it means for Bharati Shipyard. Excerpts:
How is the Great Offshore transaction a strategic investment?
We have been associated with Great Offshore for the last 15 years. A lot of the fleet is constructed by us and even currently we have orders worth around Rs 1,200 crore from them. So, we have a strategic interest in Great Offshore.
Is there a time frame for which you want to stay invested in the company?
We have no time frame in mind. We are in the business of making offshore vessels. They run an offshore business. So there is a lot of common ground between the two companies. The very fact that we have been doing business for the past 15 years points to that. We want to be involved in every sphere of offshore activity but at the moment, I cannot pinpoint the other segments we are looking at.
Does 14.9 per cent give you control? You have the option to make an open offer. Will you do that?
At the moment, there are no plans for an open offer. Reports of an open offer are speculation.
The public has a large portion of the shares and Bharat Sheth, promoter of Great Eastern Shipping, holds about 5 per cent in Great Offshore. Does that make you susceptible?
We have cordial relations with everybody and we do not see any threat. There is no hostile situation anywhere. It has been done in cooperation with the entire family, with everybody.
Does the family settlement and the demerger restrict his ability to make an open offer?
No, this is not part of the demerger plan. There is no change in that. We have cordial relations with everyone.
Are you not making an open offer because of your own cash and debt position?
That situation does not arise because we are not planning an open offer. Had we acquired more than 14.9 per cent, it would have triggered an open offer. The shares pledged with us were for 14.9 per cent stake.
Is there an additional amount that Vijay Sheth owes you? Can you tell us when the deal was done and what the terms were?
The entire deal has been done in consultation and in cooperation with everyone. The money was lent in November. Around Rs 75 crore was returned and I will not say he (Vijay Sheth) could not return the balance. Some of the money has been returned and the balance, which is Rs 174 crore, was used to buy the shares. A very insignificant amount is left, maybe Rs 1 crore is the balance. There were no terms or triggers. It was always on the table that if he repays the money, the shares will be released. In consultation with Vijay Sheth, we decided to acquire the shares.
Does Vijay Sheth have the option to buy back the shares later if he wants to?
I do not think that situation will arise. If that were the case, we would not have acquired the shares.
There are a lot of people interested in buying the shares that you just acquired. Will you sell them?
There have been some offers but we have said no. Some people have approached us but I have not met them.
What will the new management and the board look like?
The present management is a very capable management and it is doing a good job. So we do not foresee any change. The issue of board representation does not arise at the moment, but it may come up later. The appointment of new directors is not a priority at the moment.
But two directors have resigned from the board after the announcement on sale of shares...
They wanted to because they were part of the old system. Some other independent directors will come (in their place). It was part of the plan.
So are you saying that Vijay Sheth will run the show?
Yes. Not only him but the entire team will be there. We have interacted with them at every level for 15 years and we have no problems.
Are orders from Great Offshore a huge attraction?
Oh, yes. Great Offshore is placing orders abroad as well but we can offer them much better prices. Whatever orders are placed, are placed. But in future, they have to do a lot of fleet expansion. A substantial number of vessels need to be replaced. That will be to our advantage. Two, with the floating dock (in the Dabhol shipyard) we now have a repair capability. Right now vessels have to go to Dubai, Singapore and Bahrain since we do not have the facility here. The synergy will help both companies. Our capacity will be able to take care of the orders that will come from them.
Punj Lloyd and ABG Shipyard had some stake in Great Offshore and if they had increased their shareholding, a large part of the order would have come under threat. Is that correct?
We have been dealing with Great Offshore for 15 years. You can say that maybe this fits in but that is not the reason. We do have common interests and that is why we bought the shares.
With 75 per cent of your business dependent on offshore business are you facing pressures, due to a fall in crude oil prices?
The price of oil is going to bounce back, it is already above $50 a barrel. Once it is at $60-$70 a barrel, there will be demand for rigs again.
You have seen an increase of Rs 600 crore in your order book during the last quarter. Where did it come from?
We received orders for Rs 290 crore from the Indian Navy. Their shipyards make larger vessels like aircraft carriers and submarines. A lot of business may come from the Navy.
When do you expect to complete work on the first rig that you are building for Great Offshore at Dabhol?
Nearly 75 per cent of the work, which is slightly delayed, is over. It will be ready by November.
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