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Cochin Shipyard Ltd.

BSE: 540678 Sector: Others
NSE: COCHINSHIP ISIN Code: INE704P01017
BSE 00:00 | 30 Jul 376.45 0.75
(0.20%)
OPEN

377.85

HIGH

381.95

LOW

375.80

NSE 00:00 | 30 Jul 376.70 0.85
(0.23%)
OPEN

379.00

HIGH

382.70

LOW

376.00

OPEN 377.85
PREVIOUS CLOSE 375.70
VOLUME 17059
52-Week high 433.75
52-Week low 304.95
P/E 8.12
Mkt Cap.(Rs cr) 4,952
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 377.85
CLOSE 375.70
VOLUME 17059
52-Week high 433.75
52-Week low 304.95
P/E 8.12
Mkt Cap.(Rs cr) 4,952
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Cochin Shipyard Ltd. (COCHINSHIP) - Chairman Speech

Company chairman speech

Dear Shareholders

It gives me immense pleasure to welcome you all on behalf of the Board of Directors tothe 48th 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 2019-20 impact of COVID-19 and the initiatives for the future.

Operating Scenario

The operating scenario this year saw significant changes with CSL Mumbai Ship RepairUnit (CMSRU) at Mumbai ramping up operations and increasing momentum. CSL Kolkata ShipRepar Unit (CKSRU) at Kolkata became operational and has since completed three projects.The year also saw CSL moving into Andaman & Nicobar with the inauguration of the CSLAndaman & Nicobar Ship Repair Unit (CANSRU) at Port Blair. The long term businessstrategy road map worked out firmly points out the necessity of pro-active marketingefforts on both commercial and defence sectors. The main focus segments on the commercialfront would include coastal inland fishing specialised vessels etc. The eight Ro-Paxvessels contracted for Inland Waterways Authority of India (IWAI) for operations in NW1& NW2 was delivered amidst the COVID-19 lockdown and sailed off to Kolkata. The yardconstruction at Hooghly Cochin Shipyard Limited (HCSL) the 100% subsidiary of CSL atKolkata is making good progress except the delay that would accrue on account of theCOVID-19 lockdown period. This is being set up as a dedicated facility for construction ofinland water vessels. With further development of the inland waterways and coastalsegment the Company sees more opportunities here. CSL has also delivered 11 out of the 16Fishing Vessels contracted for the Tamil Nadu beneficiaries. The balance 5 vessels areready for delivery. Sensing the high potential in this arena for good quality safe andtechnologically advanced vessels CSL aspires to spin off a dedicated vertical which willenable production of these vessels to cater to the high demand volume envisaged. Towardsthis CSL submitted a Resolution Plan for TEBMA Shipyard Limited which was listed underthe National Company Law Tribunal (NCLT) and succeeded in obtaining favourable orders fortaking over the facility. Physical activities towards this will commence once lockdownrestriction are eased up.

Achievements

We feel that our diversified focus & many-front approach while at the same timeretaining sights on the main business segments viz. defence & commercial shipbuilding has helped us to achieve another year of impressive results. The Company postedan all time high turnover of Rs.3422.49 crores and PAT of Rs.637.69 crores. Theshipbuilding income was at an all time high of Rs.2852.27 crores. The ship repairturnover during the year was Rs.570.23 crores. The Indigenous Aircraft Carrier (IAC)contract continues to progress well and the vessel was getting ready for it first seasortie when the pandemic struck the project has entered its trials phase. All four gasturbines of the ship were started in the month of November 2019. Also a major milestoneof pre-CST docking was completed in the month of December 2019 during which extensive workon shafting underwater valves underwater painting and other docking related activitieswere carried out. These included foundations installation of Luna Kavach Rezistor E RAN40L etc. Trials of all eight diesel generators of the ship have been completed. Four airconditioning plants of the ship has been energised. Harbour acceptance trials of shipssystems such as salvage heeling & trimming bilge and firemain are progressing as perthe schedule. Trials of IPMS (Integrated Platform Management System) are also progressingsatisfactorily. Operations checks of energy distribution centers power panels RCOS/ HCOSand 24v DC transrectifiers have been completed. Phase-III contract of the ship has beensigned and its activities related to AFC and super structure outfitting is at culminationstage. Next immediate milestone is the basin trials followed by the sea trials of the shipand its associated activities are progressing satisfactorily. Work on the two 500 paxpassenger vessels for A&N Administration which has a capacity to carry 500 PAX and 150MT Cargo is also progressing well and the first vessel is ready for sea trials. Theremaining two 1200 pax passenger vessels for A&N are at the assembly / erection stage.

The work on the first two vessels in the series of 4 Nos. of 8000 Mini Bulk Carriersfor the JSW Group is progressing and is nearing readiness for erection in the dry-dock.These vessels which were originally scheduled for delivery between Augusts to December2020 has also been affected both the local effects of the COVID-19 lockdown as well asits impact on the global supply chain. Work on the construction of 9 Nos. Floating BorderOutpost vessels for the BSF has commenced while the Brows & Pontoon project for theIndian Navy is on the verge of delivery.

On the ship repair front the Company achieved a turnover Rs.570.23 crores out of whichthe turnover from Mumbai was clocked around Rs.51 crores and Rs.1.7 crores from that ofKolkata facility. We have repaired around 30 vessels in CMSRU i.e our Mumbai unit and 24vessels were repaired during FY20. In CKSRU i.e the Kolkata Ship Repair Unit we haverepaired 4 vessels during the year. The overall performance of the ship repair unit of theCompany is in line with our expectations. Cochin Shipyard is today at a very crucialjuncture of growth and development. While strengthening its core competencies inshipbuilding and ship repair the Company is looking at new avenues facilities andbusiness opportunities. While focusing on the defence and large shipbuilding orders CSLhad also taken up small ships in the fishing segment and the Inland waterways segmenttaking into consideration its vital requirement in the strategic interests of the nation.With a multi-locational operation and strategic depth the Company hopes to sustain itsgrowth in the coming years by overcoming the challenges on production loss and cash flowcaused by the pandemic through hard work focussed marketing & innovative businessmodels.

COVID-19

Shutdown of industrial activities owing to the COVID-19 induced nation-wide lockdowntowards the end of the month of March 2020 has led to serious ramification in the Indianindustry as evidenced by the contraction of industrial output in March 2020 by 16.7% asagainst the 2.7% growth in March 2019. This will have direct implication as the commercialshipbuilding industry prospects since it is dependent on world trade and the cyclicity ofoil natural gas shipping transportation and other trade related industries.

Cochin Shipyard Limited had suspended its production activities from March 23 2020 toMay 05 2020 in compliance with the instruction of the State and Central Governments forpreventing the spread of COVID-19 pandemic.

The Company has adopted various measures to prevent the spread of COVID-19. CSL chartedout a detailed standard operating procedure and issued for compliance by all concerned.CSL contributed Rs.2.5 crores to PM Cares Fund. The Company also distributed food &provisions kits worth Rs.30 lakhs to the weaker sections of the society in Kochi. All theemployees of CSL contributed their one day salary each to PM Cares Fund and to ChiefMinisters Distress Relief Fund (CMDRF). Customer connect was maintained by CSL throughdigital media to keep customers progressively apprised of the situation and to sustain theconfidence of the customer. Work requirements were prioritized ensured preparatory workswere carried out and re-started operations in minimum time. CSL in the mean time flaggedoff 4 Ro-Pax vessels for Inland Waterway Authority of India on April 25 2020 on itsmaiden voyage from Kochi to Kolkatta. The lock-down period was effectively utilized toundertake dredging activities of the CSL Jetties to facilitate berthing of vessels. Theshipbuilding order book position of the Company is unaffected and the existingshipbuilding orders have not been cancelled. As the operations were stopped w.e.f fromMarch 23 2020 only six days production was lost in FY19-20. Hence the impact on thefinancials of FY20 is minimal. There will not be any additional impact due to liquidateddamages for delay in running projects as the company has already invoked Force Majeure(FM) clause available in all the contracts by which the contractual delivery dates willget automatically extended to compensate the lock down period. Since CSL is practicallyzero debt Company except for the Tax free Bonds of Rs.123 crores debt servicing does notpose any serious impact. While there is a delay in collection of receivables from thecustomers especially from Govt. the Company does not foresee any credit risks.

Expansion Plans

International Ship Repair Facility (ISRF) at Kochi

The construction works of ISRF project which commenced on November 17 2017 isprogressing in full swing. More than 95% of the piling works 50% of the deck concreting& 80% of the dredging activities are completed and the facility is expected to becommissioned in FY 2021-22. As a part of our efforts to develop Kochi as a maritime hub ofIndia CSL had set up a maritime park near to the

International Ship Repair Facility at Willingdon Island which was inaugurated byHon'ble Minister of State (Independent Charge) for Shipping Shri Mansukh L Mandaviya onSeptember 19 2019. Ten globally renowned firms in the maritime industry have alreadypartnered with CSL for setting up their units in the Maritime Park in the first phase. CSLexpects to position Kochi as a major ship repair hub with major operations in the presentship repair dock coupled with increased capacities that would be available when the ISRFis commissioned.

New 310M Dry-dock project at Kochi

Construction activities commenced in June 2018 were progressing seemingly well. Groundimprovement works are completed. RCC piling and sheet pile installation works are inprogress. Around 40% of RCC piling and 70% of sheet piling works have been completed.Contract for the supply & commissioning of 600 T gantry crane was issued on March 142019 and review of design submitted by the contractor is being carried out. However theCOVID-19 impacted heavily on the projects due to multifarious reasons viz. return ofmigrant labours disruption of material supply chain deployment of limited work forceowing to social distancing norms curfew imposed by the government during the night etc.to name a few. Further most of the equipment manufacturers the CAPEX missionarysuppliers have already invoked the force majeure clause available in the contract. So weare expecting some delays in this project. Despite of the uncertainties the projectcommissioning is targeted by December 2022.

New Initiatives

Hooghly Cochin Shipyard Limited

Hooghly Cochin Shipyard Limited (HCSL) was initially set up as a joint venture (JV)between CSL and Hooghly Dock & Port Engineers Limited (HDPEL) and pursuant to theUnion Cabinet approval HCSL has become a wholly owned subsidiary of CSL with effect fromNovember 01 2019. Construction works of two outfitting jetties at the Nazirgunge facilitywere completed on December 31 2019 as against MoU target of February 15 2020 therebymeeting the ‘Excellent' rating criteria of the CSL MoU with Ministry of Shipping. Thejetties were inaugurated on January 30 2020 in the presence of distinguished guests.Presently civil construction work is in progress and has crossed 50% mark. Further theactivities under various other work packages viz. Electrical Gas Piping Fire Fightingetc. are also progressing which are planned in line with the progress of the civil works.

The project site had to shut down its activities from March 23 2020 to June 08 2020due to the lockdown imposed by the Government Authorities to contain the spread of thePandemic. Even though the activities at the project site resumed from June 09 2020limited manpower is being employed to ensure compliance with the Guidelines issued by theGovernment Authorities on account of the Pandemic. The HCSL team is constantly monitoringthe Project and aiming at earliest completion of the project and commencement ofoperations.

TEBMA Shipyards Limited (TSL)

As part of CSL's long term strategy viz. CRUISE 2030 CSL aspires to achieve 6x-8xgrowth by 2030 and towards this the Company identified deep sea fishing vessel as one ofthe several opportunities. Since fishing vessel segment calls for a dedicated facility soas to cater to the large volume of business different from the conventional shipbuildingprocess CSL was in search of a suitable facility to enter into this segment. During thisperiod CSL found an opportunity in TSL Malpe which was undergoing Corporate InsolvencyResolution Process (CIRP) under the Insolvency and Bankruptcy Code 2016 (IBC) and biddingfor TSL through IBC was considered appropriate. Accordingly CSL submitted its ResolutionPlan which was approved by the National Company Law Tribunal (NCLT)

Chennai on March 04 2020. CSL is in the process of implementing the said ResolutionPlan.

CSL-Mumbai Ship Repair Unit (CMSRU)

CSL entered into an agreement with the Mumbai Port Trust on October 20 2018 toupgrade operate and manage Ship Repair Facility at Hughes dry-dock and berth nos. 5 6 7and 8 of Indira Dock of Mumbai Port. Subsequent to the execution of the agreement CSL hascommenced the ship repair operations in Mumbai on January 18 2019. Postoperationalization and repairs of around nine vessels at CMSRU in financial year ending2019 CSL has successfully undertaken repairs to 24 vessels during the FY 2019-20. Thisincludes submarine separation operation of Indian Naval submarine INS Vela through M/s.MDL & repairs of guided-missile destroyer INS Delhi. Other services undertaken fromthis new facility this year include - repairs of 5 SCI vessels including the major repairto Samudra Nidhi 2 vessels of the Indian Coast Guard in addition to providing repairservices to many private owners/ agencies. CSL had also taken up repairs for a foreignclient and successfully completed repairs to accommodation barge SS-3 of M/s. Bayu MaritimBerkah Indonesia.”

CSL-Kolkata Ship Repair Unit (CKSRU)

CSL signed the agreement with Kolkata Port Trust on March 28 2019 for operations andmanagement of ship repair facility at Netaji Subhas Dock (NSD) for a period of 30 years.The new venture is being managed by separate unit of CSL known as “CSL-Kolkata ShipRepair Unit (CKSRU). CSL commenced ship repair operations at NSD on October 10 2019 withdocking of naval vessel ‘INS Kavaratti'. The first commercial repair vessel‘Greatship Vidya' an Anchor Handling Offshore Support Vessel was docked at CKSRU inJanuary 2020. The Honorable Prime Minister of India Shri Narendra Modi formallyinaugurated the CKSRU facility on January 12 2020 at a function held as part of thecommencement of the Sesquicentenary Celebrations of the Kolkata Port Trust. CSL iscurrently in the process of setting up the necessary infrastructure facilitiesrecruitment of dedicated manpower vendor empanelment and developing the ship repairecosystem at CKSRU.

CSL-Andaman & Nicobar Ship Repair Unit (CANSRU)

CSL has entered into an agreement with the Andaman & Nicobar (A&N)Administration on November 28 2019 to commence operations at Marine Dockyard at PortBlair a facility that is currently being operated directly by the A&N Administration.Under the ambit of this agreement CANSRU shall assist the Administration in developing anoverall ship repair ecosystem at Andaman & Nicobar Islands. CANSRU shall also assist& associate in augmentation and modernization of existing facilities. Focus on skilldevelopment in consultation with the Administration and technical institutions located inthe Islands is also part of the mandate of the agreement. The agreement is for a periodof 30 years during which CSL is expected to spruce up the operational efficiency of thedockyard as well as improve the overall ship repair ecosystem in the island to ensurefaster turnaround and minimise downtime of the vessels which are the lifeline for theIslands. CSL has since nominated its first set of executives for CANSRU. A CSL teamconsisting of officers representing various key departments conducted a dipstick audit ofCANSRU as mandated in the agreement and the dipstick audit report has also been prepared.Submission of the same and further progress on the operational aspects will be possibleonce COVID restrictions are lifted. The recruitment process of CANSRU manning team hasalso been initiated at CSL.

Corporate Governance

The Company continued to comply with good corporate governance practices. The Companycomplies with the applicable regulations of Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 and also theGuidelines on Corporate

Governance issued by the Department of Public Enterprises except that the Company wasshort of three Non-Official Part Time (Independent) Directors including a women directoron the Board for the period from March 21 2019 to July 28 2019 as required underRegulation 17(1) of Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015. CSL being a government company the power toappoint Directors vests with the President of India and the Company has taken all possiblesteps within its power to comply with the above requirements. The Company also submits itsquarterly progress reports on corporate governance within 15 days from the close of eachquarter to the Ministry of Shipping as recommended by the DPE in this regard. The Reporton Corporate Governance forms part of the Directors' Report.

Human Resource Development

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. The Companyconducted two customized management development programmes in association with the IndianInstitute of Management (IIMK) Kozhikode. A one week programme on “GeneralManagement”' was conducted at the IIMK main campus covering 24 executives up to thelevel of Senior Managers. One day customized programme was conducted at IIMK Kochi campusfor top management on the topic “Macro Economic & Financial Imperatives forIndustry”.

The “Young Officers' Competency Development Programme” covering youngmanagers upto the level of Deputy Managers was conducted. A second batch comprising of 25executives have completed the sessions. Third batch of 32 executive trainees completed 40sessions of the programme. The faculty for this programme is primarily drawn from in-housetalent as well as retired executives. As part of facilitating knowledge transfer astructured training programme for workmen in the trades of welder pipe fitter structural& engineering fitters and electrical covering 155 workmen was held during the year.

Industrial Relations

Industrial relations scenario of the Company continued to have cordial climatethroughout the year. During the year CSL introduced various employee welfare measuresincluding paternity leave to male employees of the Company including for valid adoptionof a child below the age of one year special leave for employees undergoing treatment forinfertility reimbursement of medical expenses to employees undergoing infertilitytreatment etc. Realising the importance of good health of employees and as an initiativeunder the people first policy of CSL a scheme for periodic health check-up for allregular employees of the Company was introduced during the year. The scheme also providesfor early cancer detection screening for female spouses of employees. The Companydisbursed full salary to the entire work force for the COVID-19 lock down period tomaintain employee morale. In addition special quarantine leave were granted to thoseemployees personnel on contract basis and trainees residing in containment zone.

Research and Development (R&D)

R&D activities have been undertaken during the year mainly in the areas of weldingprocedure development and qualification of welders. Weld procedure development has beenundertaken in-house for welding of lower thickness of grade AH 36 plate using Twin wiredSAW process with copper backing .The weld procedure specification has been prepared andqualified to weld thickness from 9 mm to 13 mm of AH 36 grade steel plate. This newprocess saves considerable amount ofman hour and effort since turning of large weldedplates is avoided by enabling to complete the welding in one side only. The procedure hasbeen validated by IRS Classification Society. Capacity development and training in weldinghave been carried out during the period under the Memorandum of Understanding withWelding Research Institute (WRI) Tiruchirappalli a research institute under Bharat HeavyElectricals Limited (BHEL).

Integrated Management System

Cochin Shipyard maintained its Integrated Management System (IMS) under the ISO9001:2015 Quality Management System and ISO 14001:2015 Environmental Management Systemstandards. The last surveillance audit was successfully completed in September 2019. CSLwill be upgrading its Health and Safety Management system to the latest ISO 45001:2018 inSeptember 2020.

Corporate Social Responsibility

During the year the Company was required to spent Rs.12.33 crores in socially impactfulCSR projects. The Company exceeded the target and the actual spent was Rs.15.29 crores.The Company focused on the theme “School education and healthcare” as prescribedby the Government of India and spent 75% of its total CSR spent on the theme against themandate of minimum 60%. In the aspirational district of Wayanad the Company hassanctioned Rs.255.50 lakhs during the year out of which Rs.129.87 lakhs has been paid.

Accolades

The Company continued to post exemplary performance with reference to the MOUparameters set by GOI for the year 2019-20. 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 2019 for recognition of contribution in thecategory ‘innovative and effective deployment of CSR fund' and also in specificcontribution in the category ‘health & hygiene' NIPM Best Corporate CitizenAward 2019 from National Institute of Personnel Management in recognition of its CSRinitiatives in ‘healthcare' sector Rotary International CSR Excellence Award 2019Outstanding Safety performance award 2019 from Department of Factories & BoilersGovt. of Kerala in the category of very large engineering/automobile repairing andservicing textiles and coir with more than 500 workers and various awards forimplementation of the official language.

Conclusion

CSL is presently in an extremely challenging and competitive business environment. CSLhas always been able to portray its competitive advantage & capabilities for baggingcontracts amidst stiff competition. While strengthening its core competencies inshipbuilding and ship repair the Company is looking at new avenues facilities andbusiness opportunities. With a multi-locational operation and strategic depth the Companyis poised for expected growth and development in the coming years. I convey my thanks toall the Board Members for their valuable contribution in propelling this greatorganization. I thank the Ministry of Shipping other offices of Government of India theGovernment of Kerala West Bengal and Maharashtra and the Andaman and NicobarAdministration for their unstinted support. Finally I would like to take this opportunityto thank all the shareholders employees and other stakeholders of the Company for thetrust reposed in and solicit continued support to fulfil your expectations.

Thanking You

Jai Hind

Madhu S Nair

Chairman and Managing Director DIN : 07376798

.