My dear fellow Shareholders
India is undergoing a major transformation under the leadership of Hon'ble PrimeMinister. The Indian economy has continued its high growth momentum. According to theInternational Monetary Fund India is forecast to grow at 7.3% in 2019 and continuing tobe amongst the fastest-growing economies in the world. A series of new initiativesinitiated by the Government have moved India into world's top countries towards ease ofdoing business. The global economy is also growing at a fast pace of 3.3% and is expectedto strengthen further in years to come.
India's defence budget for the financial year 2019-20 has been increased by 2.03% toRs. 3.01 lakh crore over last year's Rs. 2.95 lakh crore allocation.
With its long coastline and strategic geographic positioning and particularly with theincreasing dominance of other powers in the Indian Ocean India critically needs astrategic Naval presence for ensuring its territorial as well as security and economicinterests The Shipbuilding Industry directly and indirectly impacts the country'ssecurity i.e. National security Energy Food trade & Commodity security etc.
The Defence and the Strategic Sectors (like Oil & Gas) of India have a very largerequirement of ships for the Indian Navy Indian Coast Guard and Oil & Gas majors. Itis essential that such strategic sector of Maritime Security is fully dependent ondomestic capability both in the Private and Public Sectors under Make in India'initiative rather than relying on Imports.
In spite of the military threats to India from multiple fronts the defence outlay isunlikely to completely meet the operational requirements and Defence Equipmentrequirements of the defence services and there is an urgent need for indigenisation in themanufacture of defence equipment. India despite having the fifth largest defence budget inthe world procures 60% of its weapon systems from foreign markets.
The many policy level changes brought about by the Government to enhance Defenceproduction have not led to any significant increase in shipbuilding orders for theprivate sector as many of these orders have gone to PSUs/DPSUs on nomination basis.
The commercial shipbuilding industry also continues to be impacted by the Globalslowdown with the Global Active Fleet growing by only 3% last year. Further the MaritimeTrade growth through Dry bulk Tankers & Container throughput dropped in 2018 incontrast to growth in 2017.
Consequently many Indian Shipyards in the Private Sector are financially stressed andtwo of them are facing liquidation. This has adversely impacted the lenders employees andalso the economic growth.
In fact the financial stress of the shipyards is an international phenomenon and Notrestricted to India. Major Shipbuilding Countries such as Japan China and Korea havepoured in over ten billion US Dollars (US$ 10.0 bn) to support and revive theirrespective shipyards in his period of downtime of the Shipbuilding Industry worldwide.
The Company is India's leading private sector defence & Shipbuilding Company withgross non-current assets as on March 31 2019 of Rs. 168327 lakhs as against Rs. 994266lakhs a year before. During the financial year 2018-19 the Company reported aggregaterevenue of about Rs. 18463 lakhs against Rs. 41384 lakhs in the previous year andincurred a loss of Rs. 1048104 lakhs as compared to loss of Rs. 95608 lakhs in theprevious year.
While the Shipbuilding Industry is a Cyclic one the current Global downturn is aprolonged one further exacerbated by most of the Defence Ship Building orders going toPSUs/DPSUs on nomination basis.
The Company is also facing several challenges which are impacting its operations. Thereis an acute cash flow crunch as the expected Debt Resolution is yet to be actualized. Thisis impacting the progress of the existing projects leading to extended timelines andthereby leading to erosion of confidence amongst clients.
This lack of new orders has led to the significant reduction in the Company's currentlevel of operations as compared to its capacity. Considering this and based on thevaluation report taken from an independent expert the Company during the year has madeprovision for impairment of property plant and equipments and capital work in progress ofRs. 813289 lakhs and of advances and receivables for Rs. 88320 lakhs.
Our Company is currently engaged in fulfilling multiple contracts for supply of newvessels to the Indian Navy and Indian Coast Guard and maintenance / upgrade of Oil &Gas platforms.
It is currently engaged in construction of twenty ships for Indian Navy and IndianCoast Guard. The first of the five Naval Offshore Patrol Vessels (NOPV) has been launchedand is currently undergoing trials before delivery; the second NOPV has been launched andis in advanced stage of systems integration. The other three NOPVs are under differentstages of erection and assembly. Substantial progress has been made on Coast Guard
Training Ship and it is being readied for Basin trials and the three out of thefourteen Fast Patrol Vessels (FPVs) are at an advanced stage of construction.
During the year under review our Company launched first-of-its-kind the largest nextgeneration training ship for Indian Coast Guard (ICG) entirely designed by the DesignBureau of the Company. The training ship has the primary role to impart sea training tocadets including an all-round exposure to the lives of ICG officers. The vessel is 105meters long with a capacity of accommodating 242 personnel. The vessel is powered by twindiesel engines of 10400KW and can move at a speed of 20knots. The vessel is also equippedwith weapons systems and is capable of policing maritime zones of the country as well asfor search and rescue missions. The vessel's capability also includes operating atwin-engine helicopter for undertaking maritime reconnaissance.
Our Shipyard is also certified by the US Navy for servicing of warships from the USNavy's Seventh fleet. Currently it is the only Indian Shipyard to achieve this landmark.
Industry and Business Opportunities
In the Defence ship production multiple projects are envisaged for issue of RFP's(Request for Proposals) which are likely to fructify as new building contracts.
Letter to Shareholders
In case of the refit of ships and floating platforms there is huge demand due to nonavailability of ship repair facility such as Dry docks ship-lifts and floating docks inthe country. Ship repairs being applicable for maintenance of existing ships requireextensive ship repair facilities for multiple areas of engineering such as hull repairssystem repairs electrical repairs instrumentation machinery repairs joinery repairsdomestic system repairs etc. over and above the requirement of dry dock / ship-lift/floating dock for underwater hull and machinery maintenance. This is one of the majorareas of business opportunities for the Company.
Our Company has always maintained the highest governance standards and practices byadopting the "Corporate Governance
Policies and Code of Conduct". These policies and Code prescribe a set of systemsprocesses and principles which conform to the highest international standards and arereviewed periodically to ensure their continuing relevance effectiveness andresponsiveness to the needs of investors both local and global and all otherstakeholders.
We are committed to enhancing scale competitiveness efficiency and productivity ofour businesses benchmarked to global standards of excellence which shall be a disciplineto be pursued at all levels in our Company. Our projects require substantial use ofnatural resources such as land water and minerals. We take adequate care in designing ofour projects in a manner that ensure optimum utilization of natural resources. Theinterests of all stakeholders have always been our prime focus.
We remain committed to uphold stakeholders' value. Thank you stakeholders for yourcontinued support in our pursuit of achieving positive transform.
|Yours faithfully || |
| ||Debashis Bir |
| ||Whole-time Director and CEO |