The Ship repair market in India is promising and CSL with its long experiencecompetitive advantages and strong ecosystem of sub-vendors service providers etc remainsthe dominant shiprepairer in India by a large margin.
It gives me immense pleasure to welcome you all on behalf of the Board of Directorsto the 46th Annual General Meeting of your company Cochin Shipyard Limited (CSL). I havehad the privilege of leading this prestigious organization as the Chairman & ManagingDirector over the last two and a half years and it has been an exhilarating journey.I takethis opportunity to apprise you on the achievements of your company in the year 17-18 theoperating scenario and the initiatives for the future.
The Government of India has unveiled a host of initiatives aimed to develop and sustaingrowth of the shipbuilding and ship repair sector. The Government of India's focus ondevelopment of Inland and coastal waterways infrastructure is an opportunity to beexplored. The positive signs of progress in the sector will open up opportunities whichcould be converted into Company's business. In the defence sector also the industryoutlook remained positive. However
2017 was another difficult year for the global shipbuilding industry with contractingremaining well below trend. However certain segments have seen ordering in the recentmonths. At this stage the Company will be focussing on domestic orders in shipbuildingcontinuously keeping a watch on appropriate projects in the international market.
The Ship repair market in India is promising and CSL with its long experiencecompetitive advantages and strong ecosystem of sub-vendors service providers etc remainsthe dominant shiprepairer in India by a large margin. The Government of India is also keento significantly increase ship repair activities in the country and has advised majorports to try and team up with CSL to develop ship repair capabilities in ports. We areleveraging this opportunity and are in advanced stages of discussions which could lead toCSL setting up ship repair operations in Mumbai Kolkata and Port Blair shortly.There is agrowing optimism and I would like to thank Government of India for all the support andinitiatives provided for the shipbuilding and repair sector.
ACHIEVEMENTS DURING THE YEAR
Your company achieved an all time high turnover of Rs.2355.12 crores and a ProfitAfter Tax of Rs.396.75 crores during the FY 2018. The turnover from Shipbuilding wasRs.1731.86 crores and that from Shiprepair was Rs.623.27 crores.
The shipbuilding front has been steady the TDV for DRDO is in advanced stages ofoutfitting and the 2x 500 PAX vessels for A&N administration is presently in theerection and consolidation phase in the drydock. The 2x 1200 PAX vessels for A&N areclosely following and are in the block fabrication stage. Outfitting activities areprogressing well on the IAC and testing/ trials phase has been initiated on certaincritical equipment. It is a matter of great pride and satisfaction that we have emerged L1in the tender for the prestigious ASW corvette project of the Indian Navy and expectcontracts to be signed shortly. These contracts will contribute approximately Rs. 5400crores to CSL's turnover in the coming years.
Ship Repair continued to do extremely well and we have posted an alltime high turnoverof Rs.623 crores in FY 2017-18. To our list of MOU clients like DCI and LDCL we addedA&N Administration and 4 of their vessels were handled in 2017. We have handled about116 Nos of ships including 18 Naval vessels. We have been aggressive in our marketingefforts and have bagged the major refit contracts of ONGC's Sagar Bhushan' andDRDO's Sagardhwani' amidst stiff competition from public and private shipyards. Weexpect significant order intake in the coming year also.
2017 will be etched in history of CSL as the year in which we changed character in moreways than one. After a hugely acclaimed IPO we became a public listed company with amarket-cap of above USD 1 billion. Our major expansion projects have secured all relevantclearances and have crossed critical milestones. On November 17 2017 the foundation stonewas laid for the Rs. 970 crores International Ship Repair Facility (ISRF) project beingexecuted in 42 acres of land leased from Cochin Port Trust. This project marks the firstever expansion outside our 170 acre campus. Subsequently in May 2018 we have awarded theturnkey contract for civil electrical and mechanical works for the new large drydock inCSL which project is being undertaken at an overall estimated cost of Rs. 1799 crores.
Another significant milestone was the incorporation of Hooghly Cochin Shipyard Limited(HCSL) at Kolkata as a joint venture between CSL and Hooghly Dock & Port EngineersLimited (HDPEL) and marked the first geographical expansion of the Company. CSL holds 74%and HDPEL 24% stake in the equity of HCSL. HCSL has subsequently entered into Lease andConcession agreement with HDPEL for taking over the old units at Nazirgunge and Salkia on60 year lease and to operationalize these facilities by putting up modern infrastructure.HCSL targets to develop various types of vessels like Ro-Ro Vessels River-Sea CargoVessels for bulk liquids containers Passenger Vessels other watercrafts for the inlandwaterways.
Towards this the Company has signed a Memorandum of Understanding (MoU) with UnitedShipbuilding Corporation (USC) which is the largest shipbuilding group in Russia tocollaborate and engage in Design Development and Execution of High-End State-of-Artvessels for Inland and Coastal Waterways. Going with the Company's plans of expanding itsshiprepair business the Company signed MoUs with Mumbai Port Trust (MbPT) and Kolkata PortTrust (KoPT) for upgradation operation and management of their Ship repair Facilities byleasing the facilities for 30 years and are in the process of signing binding agreements.
During the year the Company marked its entry into a new segment when we signedcontracts for construction of 16 nos Tuna Long Lining & Gillnetting Fishing Vessels.These vessels are being built under Central Sector Blue Revolution Scheme with financialassistance from Government of India and the Government of Tamil Nadu to enablediversification of trawl fishing boats from Palk bay into deep sea fishing boats. CSLexpects this novel initiative of partnering Central Institute of Fisheries technology(CIFT) and involving IIT Kharagpur Indian Register of Shipping (IRS) and reputed OEM's tocreate the impetus for further business opportunities for delivering technologically soundvessels in this hitherto unorganized but socially very relevant sector.
The Company also signed Memorandum of Intent (MOI) with Defence Research andDevelopment Organisation (DRDO) for the export of defence vessels incorporating defencesystems developed by Defence Research and Development Organisation and produced by IndianOEM's at the Defence Industry Development Meet chaired by Defence Minister Smt. NirmalaSitaraman on January 18 2018.
FIRE ACCIDENT IN CSL
Your Company has laid topmost priority in integrating health safety and environmental(HSE) aspects into business operations. However CSL witnessed an unfortunate fireaccident on February 13 2018 onboard MODU Sagar Bhushan the drillship of ONGC which wasdocked in the repair drydock. Despite concerted efforts by the Safety and Fire departmentof the yardwe lost 5 precious lives in the accident and 7 others were injured. Thisaccident happened despite CSL having one of the most robust safety systems in the countrybeen the recipient of successive safety awards and has been giving high emphasis onemployee safety training. This accident has triggered root cause analysis and we aredetermined to do a deep introspection of all our systems and safety culture. CSL hassubsequently implemented various additional measures having closer vigil on systems andis now planning a major enterprise wide exercise involving reputed external agencies tosignificantly upgrade the culture of safety in the company.
We have reached out benevolently to the families of the deceased by providing Rs. 10lakhs to each family over and above all the statutory dues have offered employment to oneimmediate member in the family and have offered to take care of all educational and alliedexpenditure of children till the graduation stage. For the injured their salaries arebeing paid by the company and all medical expenditure is being taken care of.
It is a matter of great satisfaction that during these testing times the entire CSLfamily stood as one and received great support from the Central and State governments andfrom all walks of the society.
MAJOR EXPANSION PLANS
It gives me immense pleasure to inform that CSL is embarking on major expansion plans.The two major expansion plans of the company include the International Ship RepairFacility (ISRF) at the Cochin Port Trust premises and the new Drydock at the shipyard'sexisting premises. These new facilities will expand the Company's existing capabilitiessignificantly. The new drydock will enable the yard to build and repair a broader varietyof vessels including new generation aircraft carriers and oil rigs. The new InternationalShiprepair Facility will allow the Company to undertake repair of a broader range ofsmaller vessels and significantly increase shiprepair capacities. The progress on theseexpansion projects have been satisfactory.
INTERNATIONAL SHIP REPAIR FACILITY (ISRF)
On November 17 2017 Shri Nitin Gadkari the Hon'ble Minister of Shipping RoadTransport & Highways and Water Resources River Development and Ganga Rejuvenationlaid the foundation stone for the ISRF after Cochin Port Trust (CoPT) allotted the secondphase land area (8.134 ha) to the Company. The project is targeted to be commissioned byNovember 2019 at an estimated investment of Rs.970 Crores.
The new Dry Dock being set up by CSL at an estimate of Rs. 1799 Croresis expected toaugment the Company's shipbuilding/ ship repair capacity essentially required to tap themarket potential of building and repairing specialized and technologically advanced largevessels such as LNG vessels larger aircraft carriers drill ships and dry-dock repairsof semi-submersibles jack-up rigs etc. Subsequent to the receipt of all statutoryclearances for the Dry Dock Project the construction contract for the Plant &Machinery has been awarded in May 2018. Procurement process for the 600 T Gantry crane isat an advanced stage.The facility is targeted to be commissioned by June 2021.
Geographical expansion is the key area in focus for CSL during the year 2018-19. Byteaming up with the major ports on the eastern and western coasts of India CSL will beable to leverage its competitive advantage in Ship building and Ship Repair to achieve newheights in the industry by exploiting the wider opportunities in Inland and CoastalShipping. CSL has already inked MoUs with Mumbai Port Trust and Kolkata Port Trust and isconfident to commence its Ship Repair Operations during this year. Subsidiary HCSL willcater to the upcoming demand for the Small and medium sized vessels for Coastal segmentsand Inland waterway segments specifically at NW-1 NW-2 and NW-5 which are now on the keyfocus of Government of India.
CSL has already received clearance for 10 Nos. Ro-Ro vessels for Inland WaterwaysAuthority of India (IWAI) which will showcase capabilities in the emerging Inland vesselsegment. CSL is keeping a close watch on new and green technologies like ElectricPropulsion Fuel Cells LNG and Methanol fuelled engines etc in the shipping sector inIndia. As a first step towards its adaptation to the changing needs for alternate cleanfuels CSL is actively developing Methanol fuelled vessels for Inland Water Authority ofIndia (IWAI) and the first vessel is expected to be in waters by 2019.
Imbibing the digital technology trends in Shipping Industry CSL is teaming up withM/s. ABB by integrating centralized electrical and automation systems in the 1200 paxvessels being built for A&N Administration that allows predictability in operationsand focusses primarily on safety and reliability of the onboard systems. These systemsalso enable remote trouble shooting. These ships complying with the International MaritimeOrganization's Safe Return to Port (SRtP) requirements for passenger ships will be a keydifferentiator and will be the First-of-its kind in this part of the world.
CSL has kept its doors open for the Innovation Technology Inception Automation andModernisation in the yard its operations and its processes; and is looking forward totake steps towards achieving a significant transformation to adapt itself to ever changingtechnology trends in the market.
The Company continued to comply with good corporate governance practices as stipulatedby the Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 and guidelines of the Department of Public Enterprises(DPE). The total strength of the
Board of Directors as on July 18 2018 is twelve out of which six are IndependentDirectors. The Company has constituted an Audit Committee consisting of three IndependentDirectors. A Nomination and Remuneration Committee CSR Committee and StakeholderRelationship Committee chaired by an Independent Director have been constituted. ShriPravir Krishna IAS demitted office of director on relinquishing his charge as the JointSecretary Shipping. Shri Satinder Pal Singh IPS the present Joint Secretary Shippingwas appointed on the board on October 04 2017. Shri Bejoy Bhasker took over charge asDirector (Technical) on April 05 2018 in place of Shri Sunny Thomas who superannuated onNovember 30 2017. Shri Jyothilal K R IAS Principal Secretary (Transport) Government ofKerala was appointed on the Board on April 20 2018.
HUMAN RESOURCE DEVELOPMENT
The success of your company is attributable to its employees and to keep its employeesmotivated and well trained various programmes have been devised. On the HR front we haveinstitutionalized syllabus based structured training programme for our officers andworkmen. Our officers are being exposed to the best practices in other industries and areundergoing courses in prestigious management institutes like IIMK IIMA IIMC etc. Underthe comprehensive training programme titled "Young Officers Competency DevelopmentProgramme" a total of 47 sessions were held over five modules and the first batchconsisting of 24 executives have since completed the training. A second batch comprisingof 25 Executives have also commenced training.
Various People first' initiatives like Shipyard Pariwar Prathibha PuraskarNethruthwa Samvriddhi Yojna Shipyard Santwana Yojna Mentor Mentee scheme have been wellreceived by the CSL family and will continue on strong footing. Prajyoti' andAtmajyoti' talk series will continue to lead us in our quest for knowledge.
The industrial relation scenario has been peaceful in the Company. The recognized tradeunions have resorted to various means of protests to highlight their concerns over therecently concluded Initial Public Offer (IPO). All such protests have been within theframework of legitimate and democratic trade union activities and have been peaceful.
RESEARCH AND DEVELOPMENT (R & D)
R&D policy of CSL is to enhance the company's pre-eminence in Shipbuilding Shiprepair and other chosen fields and products through Research and
Development. In-house R&D activities have been undertaken during the year 2017-18mainly in the areas of welding procedure development and qualification of welders.
CSL is now exploring the schemes to encourage innovation-culture among the employees ofthe yard and is targeting to drive a change management in the organisation so as to ensurea hand-in-hand approach with technology changes.
The Company takes up various skill development initiatives within and outside theCompany. CSL is a member of Strategic manufacturing sector skill council which has beenset up to take forward the Skill India Mission. An exclusive skill development programmefor Pipe Fitters under the Strategic Manufacturing Sector Skill Council (SMSSC) Scheme hadbeen conducted and 18 participants mostly workmen drawn from the sub contract pool ofworkmen in CSL and trainees attended the programme.
The Shipyard continues to be compliant with the Integrated Management System (IMS)consisting of ISO 9001 Quality Management System ISO 14001 Environment Standards andOHSAS 18001 Occupational Health and Safety Standards.
CSL will be upgrading its Quality Management system and Environmental managementsystems to the latest ISO 9001:2015 and ISO 14001:2015 standards respectively by September2018.
CORPORATE SOCIAL RESPONSIBILITY
Your Company continues to fulfil its obligation towards society through its CSRinitiatives. The Company has identified and implemented socially impactful projects in atime bound manner. The total amount spent on CSR projects during the year 2017-18 was Rs8.57 crore as against the mandated amount of Rs 8.54 crore as per the provisions of theCompanies Act 2013.
INITIAL PUBLIC OFFER
The Initial Public Offer (IPO) referred earlier comprise of 33984000 equity sharesof Rs 10 each consisting of (a) 11328000 equity shares by way of offer for sale by GOIand (b) 22656000 equity shares by fresh issue was opened on August 01 2017 andremained opened till August 03 2017. The Company filed the prospectus with the Registrarof Companies Kerala on August 04 2017. The issue price was fixed at Rs. 432 per share.However the Retail Individual Investors and the Employees of CSL were given a discount of5% (approx.) and the shares were offered to them at Rs. 411 per share. The Company listedits equity shares at BSE Ltd. and NSE of India Ltd. on August 11 2017. The issue wassubscribed 76.18 times and a whopping Rs. 1442.93 crore was raised. With more than 20lakh applications CSL's IPO was celebrated by the capital markets and was recorded as oneof the most successful IPOs in recent history. I believe it is the strength and reputationof the company that generated investor interest in us.
The excellent performance of your company has won appreciation from various quarters.The Company is all set to maintain its "high level" rating against the MOUtargets set by the Department of Public Enterprises Government of India for the year2017-18. However the final rating from the Department of Public Enterprises is awaited.
Cochin Shipyard has received the Kerala State Energy Conservation Award 2017 in thecategory of Large Scale Energy Consumers' and Kerala State Renewable Energy Award2017 from the Government of Kerala. The Company has won the MKK Nair Memorial Award forthe Second Best Productivity Performance from Kerala State Productivity Council. TheCompany has also received the KMA excellence award for best CSR activities undertakenIndia Seatrade Award 2017 for the Shipbuilding & Repair Yard of the Year BureaucracyToday CSR excellence award for Rural Development from Bureaucracy Today Top exporter(PSU) at Kochi award from customs for the calendar year 2017 Corporate citizen award byPublic Relations council of India for the year 2018 and Award for Best Stall in the INDEXPO 2017 from the Ministry of MSME.
CSL is presently in an extremely challenging and competitive business environment. Itis very important that we develop maintain and strengthen our core competencies. CSL hasalways been able to portray its competitive advantage & capabilities for baggingcontracts amidst stiff competition. The vast opportunities posed by the Inland waterwayssegment and the huge expansion plans of CSL would help the Company to reach greaterheights. Along with its qualities of hardwork dedication and commitment CSL has tomaintain its competitive edge by continually developing and adapting itself with thefluctuating market needs and technology advancements. The changes that we have to bringinto our system are to be advance modern economically viable and sustainable. I stronglybelieve that this yard will strive towards achieving the commanding heights in Shipbuilding and Ship Repair Industy and I believe that each and every employee of CSL withtheir indomitable spirit would be the pillars of growth for the Company and will worktowards this common goal of the organisation; and of the country.
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 Governmentof Kerala and West Bengal for their support.
Finally I would like to take this opportunity to thank all shareholders for the trustand support and solicit continued support to fulfill your expectations.
Madhu S Nair
Chairman and Managing