Mazagon Dock Shipbuilders puts Rs 2K-crore greenfield capex on hold

With economic disruption continuing due to the Covid-19 pandemic, Mumbai-based Mazagon Dock Shipbuilders Ltd has placed its Rs 2,000-crore greenfield capital expenditure (capex) plan on hold.

“There is no clear visibility in terms of orders and unless we have that we would not like to commit any expenditure at this juncture. So, capex at Nhava Sheva can be considered on hold,” Sanjeev Singhal, director (finance) at Mazagon Dock Shipbuilders, told Business Standard.

However, the company plans to continue with its annual maintenance capex of Rs 100 crore for FY22.

The company was planning to develop a dockyard for merchant ships on a 37-acre land it owns adjacent to Nhava Sheva port in a bid to diversify its order books, which currently are dependent only on the Indian Navy.

“We have the land as well as the resources in terms of funds to put up the dockyard but it being a very capital-intensive business with a long gestation period, once work starts, it cannot be halted and so unless we have a clear visibility of orders building up, it does not make sense to have the capex,” Singhal added. 

Like other companies, Mazagon Dock Shipbuilders, too, was not spared by the pandemic, and it saw a 17 per cent drop in revenue for FY21 to Rs 4,049 crore from Rs 4,917 crore in FY20.

“For FY22, our revenue should be close to Rs 4,500 crore, which is lower than our initial projection of Rs 5,000 crore as the second wave brought glitches in industrial oxygen supplies (which was not there in the first wave). There was also a workforce contraction due to lockdown and constraints in global supply (chain),” said Singhal. 

The company has a sizable contracted labour workforce, which it depends on to carry out its operations and saw its workforce attendance in full strength only in the last one week.

 The industrial oxygen requirement for the company, though not large, needs to be consistent and has now resumed. 

“The number of Covid-19 cases was also significant at the dockyard earlier and we also lost a couple of people,” he said, adding that the number of infections among its staff was nil now.

Alongside, the company has revisited its contracts for supply tie-ups of equipment or other accessories and has placed orders with alternative sources. The company, however, remains comfortable in terms of the size of its current order books, despite the overall challenging economic scenario.