1. It gives me great pleasure to welcome you all to the 42nd Annual General Meeting ofCochin Shipyard.
2. The shipbuilding industry is at a very crucial phase of growth. Despite sluggishmarket intense competition and financial challenges the initiatives of the newGovernment to nurture "Make in India" has given the industry a boost for growth.It is expected that the GOI would facilitate domestic industry to infuse technology andlow cost finance so that value added high tech ships like Dredgers and LNG carriers couldbe built in India. The announcement of a new shipbuilding policy by the Finance Ministerin his budget speech has given the much needed optimism for the future growth of theindustry.
Company Performance -Shipbuilding
3. Let me begin by stating that your company continued to post excellent resultsdespite the poor shipbuilding scenario. During the year your company has recorded a growthof about in terms of both turnover and net profit. This year the Company achieved aturnover of `1637.44 crores as against Rs 1554.16 crores last year. The Profit Before Taxwas Rs 290.96 crores as against Rs 275.55 in the preceding year. The PAT for the year wasRs 194.24 crores as against Rs 185.27 crores in 2012-13. The Company contributed Rs 162.10Crores to the National Exchequer by way of taxes and duties. While the Company hascontinued to perform consistently well the directors taking a long term view of the needto conserve capital in the light of the future expansion plans of the Company haveproposed to declare a dividend of 15% per share on the 113280000 fully paid up equityshares of Rs 10 each. The total outgo of dividend and dividend tax would be approximatelyRs 19.88 crores.
4. The watershed event in the shipbuilding history of the country was undoubtedly thelaunching of the first Indigenous Aircraft Carrier (IAC) on the 12 Aug 2013. The shipgracefully and majestically floated out of the dock a testimony to the company'stechnological excellence in ship design and building. The IAC project continues to remainthe focus of the yard's activities and critical work on the shafting and erection ofsponsons & superstructure is in progress in the repair dock (Dock -1). The yard hashad to weather some rough times due to the delayed approval of the revised CCS sanctionleading to a financial crunch on the project. I am extremely glad to report that the newGovt has accorded the revised sanction to the project and the necessary funds would now beavailable. The discussions on the phase II contract are at an advanced stage and should beconcluded shortly.
5. Cochin Shipyard delivered seven ships during the year 2013-14 five ships to theIndian Coast Guard and two ships to M/s PSV Holdings Liberia. In keeping with the yard'sreputation for delivery of high quality ships the performance of the ships continued tobe appreciated by the owners.
6. The performance vis a vis the MoU signed with the GoI is assessed by the Company as'Excellent'. The final rating from the DPE is awaited.
Ship Repair Performance
7. The non availability of the repair dock wherein the IAC is docked has posed seriouschallenges to the Ship Repair business. However it is to the credit of the Ship repairdivision that innovative use of the building dock with multiple dockings and erection of a'Partition Gate" to increase the available length of the dock for ship repairactivity has taken the turnover beyond the MoU target of Rs 180 Crores. The turnoverachieved was Rs 228 crores.
8. The MoU arrangement with the Lakshadweep administration and LDCL has workedsatisfactorily with mutual benefit to both organizations. Similarly the repairs to theships of CIFNET are being carried out under an MoU. This arrangement has ensured that theships of these organizations are operationally available with minimum downtime. Theshipyard is able to carry out more efficient planning and meet the schedules for thesevessels.
Implementation of Enterprise Resource Planning System (ERP)
9. A state of the art SAP has been implemented across all business areas of theshipyard. The system 'Go live' was on 01 Jul 14. The system is expected to stabilizeshortly and improve the reliability accuracy and efficiency of all transactions.
Future Expansion Plans
10. In keeping with its growth strategy shipyard has progressed with the setting up ofthe International Ship Repair Facility on 42 acres of land of Cochin Port Trust. The phaseI of the project has been largely completed with the existing facilities being fullyutilized. The work on the phase II is proceeding satisfactorily with the appointments ofthe Project Management Consultants. All preparatory work to obtain the Environmentclearance which is critical to progress the project is progressing . It is expected thatthe clearance would be obtained in the first quarter of 2015. Towards part funding of thisproject the Company raised Rs 123 crores by issue of tax free bonds through privateplacement.
11. To keep up the momentum of growth of the Company the yard has identified the needfor a larger dry dock. A dry dock capable of docking Jack Up Rigs (JURs) semisubmersibles and accommodate ships of 200000 tonnes DWT is considered essential. Thislarger dock is necessary if the yard is to be considered for the next aircraft carrier ofthe Indian Navy which would be much larger than the IAC and cannot be built in theexisting facility. Further there is great potential for building of Liquefied Natural Gas(LNG) carriers which are required by Gas Authority of India Ltd (GAIL). Your directors hadconsidered the requirement and recommended the construction of a large dry dock at anestimated cost of Rs 1200 crores. I am happy to place on record our appreciation to theMinistry of Shipping for having accorded 'in principle' approval for the project in a veryshort time.
12. The Company intends to raise capital to meet its expansion plans through ajudicious mix of debt and equity options. Your Board has approved a proposal to raisefunds by way of an IPO by issue of 22262500 shares of Rs 10 each. This proposal isunder the active consideration of the Ministry of Shipping. The necessary changes to thestructure of the Company as also its Articles of Association to enable the Company to gothrough with the IPO are being processed.
13. The Company continued to comply with good corporate governance practices asstipulated by the various statutes and the guidelines issued by the Department of PublicEnterprises (DPE). The total strength of the Board of Directors as on date is 11 out ofwhich five are Independent Directors. The yard has constituted an Audit Committeeconsisting of three Independent Directors to review financial results internal controlmeasures audit recommendations etc. A Remuneration Committee chaired by an IndependentDirector makes recommendations on the performance related pay policy of the Company. ACorporate Social Responsibility and Sustainable Development (CSR & SD) Committee hasbeen constituted to provide fillip to the CSR sustainable development initiatives of theCompany. A Contracts and Capex Committee has been constituted chaired by an IndependentDirector reviews and recommends high value contracts and capital expenditure proposals.
14. Shri Ravikumar Roddam demitted office as the Director (Finance) on 30 April 14 onsuperannuation. Shri P Vinayakumar Director(Technical) superannuated on 31 May 14. Onbehalf of the Board and on your behalf I would like to place on record our appreciationfor the contributions made by both of them during their tenures on the Board. Shri PaulRanjan was appointed as Director Finance on 01 May 14 and Shri Sunny Thomas took over asDirector (Technical) on 01 Jun 14. On your behalf I would like to extend a very warmwelcome to the new incumbents and I am confident that the Company would benefit by theircontributions. I also take this opportunity to place on record our sincere gratitude toShri LN Vijayaraghvan Independent Director who demitted office on expiry of his term on16 Sep 14.
15. The Company continues to have good harmonious industrial relations with thepermanent work force. This is remarkable considering the labour environment prevalent inthe state. The shipyard has a participative style of management with the employees. Apartform the meetings with the recognized unions a structured mechanism to interact with theemployees through shop committees and joint shop councils has been very effective. Regularmeetings are held wherein the employees are encouraged to give their perspective onvarious issues and voice their concerns.
Research & Development
16. The Shipyard continues to place emphasis on carrying out Research and Developmentactivities. This has helped the shipyard improve its productivity and quality. Inparticular the developments in the areas of welding has ensured faster and better qualitywelds. Distortion control studies which working with aluminum has resulted is blocks ofhigh quality for the Fast Patrol Vessels whose superstructure is fabricated from aluminumto reduce top weight. Accuracy control studies in association with Indian Institute ofTechnology are on going and are expected to result in superior quality blocks.
Marine Engineering & Training Institute
17. The Marine Engineering Training Institute continues to be rated excellent for theninth consecutive year by the independent rating agency CARE. A total of 108 marineengineers passed out from the institute in the year 2013-14.
Integrated Management System
18. The yard 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 Standard.
Corporate Social Responsibility (CSR)
19. The Company continued to fulfill its obligation as a good corporate citizen throughits CSR initiatives. In accordance with the guidelines on CSR and SustainabilityDevelopment as per the Companies Act 2013 CSL identified and sanctioned 33 minor andmajor CSR and Sustainability projects at a total estimated cost of Rs 4.25 crores. Out ofthese 22 projects have been successfully completed and the balance 11 are in progress.
Bench Marking vis a vis Domestic Shipyards
20. A bench marking exercise vis a vis the other domestic shipyards was undertaken byan independent consultant as directed by the Ministry of Shipping. I am extremely pleasedto state that your Company has been rated highest across various parameters with respectto the other yards.
21. The Company is going through challenging times. There is an imminent need toupgrade and climb up the value chain to remain at the top. New technology needs to beidentified and sourced skill sets needs to be honed infrastructure requires to be put inplace and succession planning carried out. This is by no means an easy task. However I amconfident that the shipyard has adequate talent and is fully geared up to meet thechallenges and ensure that Cochin Shipyard remains at the top and fulfills its mission toemerge as a leading shipyard in this geographic region.
22. The industry is going through troubled times. The new government with its emphasison reviving the manufacturing sector should provide the blue print for the development ofthe industry as a whole. The expected policy initiatives in the form of a comprehensiveshipbuilding policy should provide the necessary directions to revive and nurture thevital industry.
23. In conclusion I am confident that the Company would continue to grow and maintainits impressive performance with the support of the Government of India Government ofKerala and the Board of Directors. Their invaluable advise guidance and encouragement hashelped the Company to face the various challenges and move ahead in all its endeavors andreach the present level of performance. Last but not the least I would like to express myheartfelt gratitude to each and every employee of the Company for their faith dedicationand commitment to Cochin Shipyard.
Cmde K Subramaniam