Dredging Corporation bets big on new fleet

Buys two dredgers; issues tax-free bonds to raise Rs 500 cr for third one

The Dredging Corporation of India (DCI), a miniratna company and the only public sector dredging player in the country, is hoping to turn more profitable by adding new dredgers to its fleet after a gap of 10 years.

After taking the external commercial borrowings  route to fund two of the three new dredgers, the corporation has chosen to issue tax-free bonds to raise Rs 500 crore for buying the third one. The cost of each dredger is around Rs 550 crore.

“Given our net worth of close to Rs 1,400 crore, we are capable of generating another Rs 2,000 crore loans. We also have plans to acquire 9,000 cubic metre capacity dredgers in future,” DK Mohanty, chairman and managing director of DCI, said here today. Many cash rich ports are also willing to extend loans to the corporation against the dredging work to be done at these ports, he said.

The issue of Rs 500 crore tax-free bonds was opened Thursday. These 10-year bonds carry a coupon rate of 6.97 per cent for qualified institutional investors, domestic corporate houses and high net worth individuals while 7.47 per cent for original allottees under the retail individual investor category.

Listed on both the stock exchanges, the Visakhapatnam-headquartered corporation earned a net profit of Rs 13 crore last year and expects the same this year.  “Much of our income is going for repairs and maintenance of the existing fleet of 15 dredgers, 60 per cent of which are more than 20-year-old,” PV Ramana Murthy, director (finance), said while giving reasons for low profitability.

Not adding new dredgers in the past 10 years on account of procedural delays in procuring them even after initiating the process some 5-8 years ago had impacted the financial performance of the company.

The corporation expects to increase the dredging capacity to 80 million tonne from the present 60 million tonne annually once the three dredgers are added. One dredger has already arrived and the second is expected in June. The third is scheduled to come in January, 2014.

Mohanty said the two newly-proposed major ports and the 12th Plan target of 500 million maintenance dredging and 600 million tonne capital dredging provide ample opportunity for the corporation to scale up its operations.

Around 55 per cent of its income from operations came from maintenance contract with Kolkata port (Haldia) in 2011-12. DCI recently got a Rs 240-crore dredging contract from Kandla port.