It gives me immense pleasure to welcome you all on behalf of the Board of Directors tothe 47th Annual General Meeting of your Company Cochin Shipyard Limited (CSL). I wouldlike to take you through the highlights of performance and achievements of the Company inthe year 2018-19 and the initiatives for the future.
The operating scenario remained unchanged during the
year. The GOI thrust on the coastal shipping and inland water transport sector remainsfirm. The development of NW 1 looked up with the inauguration of multi-modal terminal atVaranasi in November 2018 by the Honble Prime Minister. In February 2019 in a bigstep to promote the Make in India initiative and incentivize ship building activity in thecountry the Ministry of Shipping has revised its guidelines for chartering of ships byproviding Right of First Refusal (RoFR) to ships built in India. As per the newguidelines whenever a tendering process is undertaken to charter a vessel a bidderoffering a ship built in India will be given the first priority to match the L1 quote. Itis expected that this priority given to ships built in India will raise the demand forsuch vessels and will be a major incentive for the shipbuilding industry.
We feel that our continued focus on the current main business segments viz. defenceand domestic orders in Shipbuilding and Ship Repair has helped us to achieve another yearof impressive results. The Company posted an all time high turnover of ' 2962.16 croresand PAT of ' 481.18 crores. The ship repair income was at an all time high of ' 831.97crores.
The Indigenous Aircraft Carrier (IAC) project has progressed well. We are currently ata very critical phase of the project with equipment being energised and commissioned andthe setting to work (STW) of various systems underway. During the latter part of this yearand early next year we are targeting to achieve significant milestones on the project.Major efforts have been put in and I am happy to report that discussions are at advancedstages to conclude the contract for the final phase of the IAC project. The TDV for theDRDO is also progressing towards a potential delivery later this year. The first twopassenger vessels for A&N Administration which has a capacity to carry 500 Pax and 150MT cargo was launched on October 30 2018 and will reach the delivery stage later thisyear. The two 1200 Pax passenger vessels for A&N Administration are at theassembly/erection stage.
We have also been focussing on smaller vessels which we believe has the potential toprovide CSL with growth avenues in the future. In the small fishing boats sector thefirst batch of 3 nos. Tuna Long Liner Cum Gillnetter Fishing Vessels for fishermenbeneficiaries of Tamilnadu was flagged off in February 2019. This project where we haveteamed up with CIFT IIT Kharaghpur and IRS has been very well received by the industryand we will try to build up further projects in this space.
Also in line with our initiatives in the fishing vessel sector the Steel -cutting ceremony of 3 nos. Marine Ambulance Boats for the Department of FisheriesGovt. of Kerala was carried out in February 2019.
Our thrust on the inland water transport sector has led us to contracts with the InlandWaterways Authority of India (IWAI) in July 2018 for design and construction of 10 nos.Ro-Pax/Ro-Ro vessels. Most of these vessels will be delivered within 2019 and arepresently in various stages of construction. They are for deployment in NW 1 (Ganga) NW 2(Brahmaputra) and NW 3 (Kerala).
CSL signed contracts for building 4 nos. 8000 T Mini Bulk Carriers with UtkarshAdvisory Services Private Limited (part of the JSW Group). The order for 4 ships wasbagged by CSL against stiff international competition both with respect to time as wellas cost. This project is significant since it has the potential to bring in more ordersfrom the Indian Coastal Shipping sector as also from international coastal shippingcompanies.
CSL also secured a contract from the Ministry of Home Affairs to build 9 nos. FloatingBorder Outposts (FBOP) for the Border Security Force. These FBOPs are for deployment inthe Sunderbans area of West Bengal and the Rann of Kutch area of Gujarat.
The Company also signed the landmark contract for 8 nos. ASW Corvettes worth about '6000 crores for the Indian Navy for which CSL had emerged L1 last year. These advancedvessels will help CSL to position as one of the foremost solution providers for suchvessels.
On the ship repair front we handled 79 projects. During the year Indias flagshipAircraft carrier INS Vikramaditya docked at CSL and has completed a technologicallydemanding refit in a very challenging timeframe. Other major vessels repaired/majorprojects handled were INS Shardul ICGS Samar INS Sagardhwani RV Sindhu Sadhana INSJamuna etc. MODU Sagar Bhushan owned by ONGC which suffered damages in the fire accidentat CSL during February 2018 sailed off from the yard in December 2018 after all damageswere restored and the ship was fully fit for service. I am happy to report that ONGCreposed faith in CSL and awarded the contract for their MODU Sagar Vijay also to CSLwhich ship has also completed a successful refit at CSL.
BUYBACK OF SHARES
Based on the Capital Restructuring guidelines by DPE the Company bought back 4395610(Forty Three Lakh Ninety Five Thousand Six Hundred and Ten only) fully paid-up equityshares of ' 10/- (Rupees Ten only) each from the Shareholders / beneficial owners ofequity shares of the Company as on the record date i.e. October 31 2018 on aproportionate basis. Priced at ' 455/- (Rupees Four Hundred and Fifty Five only) thebuyback was through the tender offer route to enable the GOI to offer shares aspromoters. The aggregate amount spent for the
buyback was ' 2000002550/- (Rupees Two Hundred Crore Two Thousand Five Hundred andFifty only) excluding any expenses in connection with the transaction. This buyback wasapproximately 3.23% of the total number of equity shares in the issued subscribed andpaid-up equity share capital of the Company as at March 31 2018. The buyback size was6.41% of the aggregate of the fully paid- up equity share capital and free reserves as perthe audited standalone financial statements of the Company for the financial year endedMarch 31 2018.
International Ship Repair Facility (ISRF) at Kochi
The construction work for the facility is progressing in full swing. About 85% of theMarine side piling and about 60% of the land side piling is completed and allied works arein various stages of progress. The dock gate of the existing small dock has beensuccessfully replaced. CSLs Maritime Park being setup adjacent to the ISRF is alsoat an advanced stage of completion. With the commissioning of the ISRF and the Maritimepark being populated with service providers we are well on course to develop Kochi as theshiprepair hub of the nation. The completion date has been revised to mid 2020.
New 310M Dry-dock project at Kochi
The construction activities for the new dry-dock commenced in 2018 and is currentlyprogressing well.
Shri Pinarayi Vijayan the Honble Chief Minister of Kerala and Shri NitinGadkari Honble Union Minister for Shipping Road Transport Highways WaterResources River Development and Ganga Rejuvenation did the honours of ground breakingceremony of the dry-dock project. Ground improvement works are at advanced stages ofcompletion and RCC piling in progress with more than 600 pile already completed. TheCompany has contracted for the supply & commissioning of 600 T gantry crane with aleading international supplier. The facility is targeted to be commissioned in June 2021.
Hooghly cochin Shipyard Limited at Kolkata
The construction contract was awarded in Jan 2019 and the civil works are underprogress. As per the revised DPR prepared by the consultant KITCO Ltd. the project isdivided into two phases. In the first phase i.e. operational phase the existing slipwayswill be completely revamped and development of related shops and allied facilities will becarried out. In the expansion phase side launching facilities and associated outfitberthing facilities will be commissioned.
Ship Repair at Mumbai Port
Based on an agreement signed in October 2018 CSL took over the operations andmanagement of ship repair facility at Hughes dry-dock and berth nos. 5 6 7 and 8 ofIndira Dock of Mumbai Port Trust and commenced ship repair operations from January 2019.The Company has already commenced ship repair operations in the Indira Dock facility andthree ships were repaired during the year.
Ship Repair at Kolkata Port
An agreement has been signed with Kolkata Port Trust on March 28 2019 for operationsand management of ship repair facility at Netaji Subhas Dock. This facility will help theCompany to tap the repair market in the eastern part of the country as also cater tovessel repairs in the inland waterways segment.
CSL has also signed a MoU with Andaman & Nicobar (A&N) Administration forsetting up its unit at Port Blair in September 2018. As per the MOU CSL would take up themodernization of facilities maintenance of vessels and skill development for theislanders.
The Company continued to comply with good corporate governance practices. A majorstride taken by the Company during the year is to put in place a digitised system formonitoring legal compliance. The new digital legal compliance system was commissioned inJanuary 2019. Legatrix is a one stop solution for effectively managing theorganisations legal & regulatory compliances through monitoring control atdifferent levels. This online solution will support risk tracking & compliance on realtime basis along with creation of a centralised repository compliance calendarauto-generated reports and certificates and immediate updates for legal and regulatoryamendments.
The total strength of the Board of Directors as on July 08 2019 is 9 out of which 3are Independent directors.
HUMAN RESOURCE DEVELOPMENT
The various programmes for development and motivation of the employees were continuedduring the year. The Company continued to nominate executives at all levels to attendspecific management development programmes at IIMA IIMK IIMC ASCI ISB etc. Custom madeprogrammes were conducted at IIMK Kochi campus covering 75 executives on communicationeffectiveness contract management and finance for non finance managers. The "YoungOfficers Competency Development Programme" covering young managers upto thelevel of Deputy Managers was conducted. A second batch comprising of
25 executives have completed 46 sessions. Third batch was also commenced and completed6 sessions for a total of 32 executive trainees. As part of facilitating knowledgetransfer a structured training programme for workmen in the trades of welder pipefitterstructural & engineering fitters and electrical covering 174 workmen was held duringthe year.
A major breakthrough in the Industrial Relations front was the conclusion of Long TermSettlement (LTS) with the workmen on June 18 2019 after multiple rounds of negotiationsspanning more than a year which will now be the basis for all wage related matters tillthe year 2027. There has been cordial industrial relations climate during the year.
RESEARCH AND DEVELOPMENT (R&D)
R&D activities have been undertaken during the year mainly in the areas of weldingprocedure development. Weld procedure development was undertaken in-house for welding oflower thickness grade A plate using SAW process with ceramic backing and a Weld ProcedureSpecification (WPS) has been prepared. This new process saves considerable amount of manhour and effort since turning of large welded plates is avoided and helps in completingthe weld pass in single side. The procedure has been validated by ABS ClassificationSociety.
A Memorandum of Understanding has been made in the period with Welding ResearchInstitute (WRI) Tiruchirappalli a research institute under Bharat Heavy Electricals Ltd.(BHEL). The objective of the MoU is to carry out R&D activities capacity developmentand training in welding and allied fields.
INTEGRATED MANAGEMENT SYSTEM
Cochin Shipyard upgraded its Integrated Management System (IMS) by getting certifiedunder the ISO 9001:2015 Quality Management System and ISO 14001:2015 EnvironmentalManagement System standards in September 2018. CSL will be upgrading its Health and SafetyManagement System to the latest ISO 45001:2018 by September 2019.
CORPORATE SOCIAL RESPONSIBILITY
During the year the Company is required to spent ' 10.15 crores in socially impactfulCSR projects. The actual spent was ' 10.41 crores.
The Company continued to post exemplary performance with reference to the MOUparameters set by GOI for the year 2018-19. However the final rating under the MOU is yetto be received. Cochin Shipyard also received a plethora of awards in different fieldsnotable among them being the KMA CSR award 2018 in the category of education health andhygiene FACT MKK Nair Memorial award for the second best productivity performance inState level from Kerala State Productivity Council in the category of Large IndustriesRajbhasha Kirti Puraskar from the Honble Vice President of India in recognition ofthe achievements of the PSUs and Government departments in implementation of the OfficialLanguage and various other awards for best implementation of the official language. TheCompany also received Kerala State Akshaya Urja award from Agency for Non-ConventionalEnergy and Rural Technology (ANERT) for popularising renewable energy options and energyconservation.
Cochin Shipyard is today at a very crucial juncture of growth and development. Whilestrengthening its core competencies in shipbuilding and ship repair the Company islooking at new avenues facilities and business opportunities. While focusing on thedefence and large shipbuilding orders CSL is also setting its sights on coastal shippingdeep sea fishing and the inland waterways
segment which could hold significant potential in future. The Company will continue tobe extremely focussed on ship repair. With a multi-locational operation and strategicdepth the Company is expecting significant growth in the coming years. To develop awell-crafted comprehensive long term strategy for CSL we are now engaged with M/s. BostonConsulting Group (BCG) in an enterprise wide exercise named CRUISE 2030.
I convey my thanks to all the Board Members for their valuable contribution inpropelling this great organization.
I thank the Ministry of Shipping other offices of Government of India the Governmentsof Kerala Maharashtra and West Bengal for their support. Finally I would like to takethis opportunity to thank all the shareholders for the trust and support and solicitcontinued support to fulfil your expectations.
Madhu S Nair
Chairman and Managing Director