Delay in projects due to COVID-19 to impact profitability in FY21: Cochin Shipyard

Cochin Shipyard on Monday said projects delay on account of COVID-19 will have an adverse impact on financial performance and profitability of the company during FY21 but the assessment of the blow will be possible only after stabilisation of operations in the yard.

However, there will not be any additional impact due to liquidated damages for delay in running projects as the company has already invoked force majeure clause available in all the contracts, by which the contractual delivery dates will get automatically extended to compensate the lockdown period, it said in a filing to the BSE.

"As the operations were stopped w.e.f. from 23rd March 2020, only six days production was lost in FY20, hence the impact on the financials of FY20 will be minimal. Delay in running projects will have an adverse impact on financial performance and profitability of the company during FY21," it said.

It said there are delays in capex projects in Kochi, Mumbai, Kolkata, Port Blair as well as subsidiaries of company viz. Hooghly Cochin Shipyard Limited and Tebma Shipyard Limited which was acquired by bidding at NCLT in March 2020 and will result in consequent loss of production.

Withholding of future projects/cancellation of few running enquiries and potential projects have to be put on hold citing liquidity issues, it said.

With effect from May 6, 2020, the company started its operations at the main unit at Kochi with entire permanent workforce.

The Kochi unit alone contributes more than 90 per cent of the turnover of the company in a year.

The units in Mumbai and Kolkata are still closed due to the lockdown and will be opened only after the restrictions are over, the company said.

It said all permanent employees of the company are reporting to work from May 6, 2020 onwards in two shifts, the company said adding, each each shift contains not more than 50 per cent of the total strength.

To catch up with the lost production days, the second and fourth Saturdays which were closed holidays have now been declared as normal working days until further notice, it said and added, henceforth there would be six working days in a week, the company said.

"As the company is practically zero debt company except for the tax free bonds of Rs 123 crore, debt servicing does not pose any serious impact," the statement said.

While there is a delay in collection of receivables from the customers especially from the government, the company does not foresee any credit risks, it said and added that the company does not foresee any liquidity challenges to meet its supplier obligations.

"Ongoing capex will not be impacted on account of liquidity," it said and added that the company has set up a crisis war room which proposes a zero based budgeting and other austerity measures.