Strong order pipeline lifts outlook for listed shipbuilding majors

Robust Navy spending and export orders are driving strong visibility for listed shipbuilders, though risks remain from client concentration and supply chains

The Indian Navy’s share in defence spending is around 21 per cent, and there is a large pipeline of orders. The three listed domestic shipyards — Mazagon Dock Shipbuilders Limited (MDL), Garden Reach Shipbuilders & Engineers Limited (GRSEL), and Cochin Shipyard Limited (CSL) — will be beneficiaries. MDL and GRSEL have robust order visibility. CSL may be dependent on a proposed aircraft carrier order.

 

GRSEL recorded a turnover of ₹6,400 crore (provisional and unaudited) for financial year 2025-26 (FY26), versus ₹5,076 crore in FY25. GRSEL delivered eight vessels to the Indian Navy in FY26. It is in the advanced stages of negotiating a contract for construction of five next-generation Corvettes. GRSEL is constructing 12 export vessels for a German client, and a dredger for export. It has inaugurated a next-generation virtual reality (NGVR) lab, and it has MoUs (memorandums of understanding) with Hindustan Shipyard, K2 Cranes & Components, Kalyani Strategic Systems, SWAN Defence & Heavy Industries, and Reintjes GmbH, Germany.

 

MDL has a capacity for simultaneous work on 10 warships and 11 submarines. MDL reported 25.9 per cent revenue growth over FY22-FY25. Its revenue growth should be in lower teens till FY28, with an operating profit margin in high teens. MDL’s order backlog (as of the second quarter, or Q2, of FY26) was ₹27,400 crore, with project 17A frigates and ONGC offshore platforms as primary revenue contributors through FY27. The book-to-bill at the end of FY25 was at 2.8, providing revenue visibility for nearly three years.

 

The submarine pipeline includes three Scorpene-class vessels and P-75(I) AIP-equipped units for ₹1 trillion-plus, which are in late-stage negotiations. Other prospects include project 17B frigates, project 15C destroyers, and landing platform docks (LPDs), bringing the pipeline to over ₹3 trillion for the next decade. MDL is diversifying into offshore vessels and commercial ships, with orders for ONGC to contribute ₹3,000 crore revenue in FY27.

 

A planned acquisition of 51 per cent stake in Colombo Dockyard Plc will launch ship repair and refit. Capital expenditure (capex) of ₹5,000 crore in Tuticorin Greenfield yard is for commercial and green ships. MDL’s R&D (research and development) expenditure for FY25 was ₹110 crore, roughly 1 per cent of revenue of ₹11,430 crore. The operating profit was ₹2,060 crore in FY25, with margin at 18 per cent. The balance sheet is debt-free. Other income contributed 36.5 per cent to profit before tax (PBT) in FY25 despite growth in operating income.

 

Capex requirements over the next decade will be about ₹17,000-18,000 crore. MDL plans to invest more in R&D. It has MoUs with the Brazilian Navy and the Naval Group, France. It has a collaboration with IIT Madras, and with many startups. The company is also working on quantum communication with the Defence Research and Development Organisation (DRDO). It is designing a Midget Submarine and developing a Fuel Cell-based Electric Vessel (FCEV) as well as “AUV Swarm Drones”.

 

CSL has an order of ₹3,240 crore from CMA of France to build six LNG container ships, raising the order book to ₹23,000 crore. CSL is the lowest bidder for Indian Navy’s Next-Generation Survey Vessel (NGSV), with estimated order value of ₹5,000 crore. The CMA order will be in cooperation with HD Hyundai Heavy Industries. CSL is entitled to the shipbuilding financial assistance scheme, for assistance of 25 per cent on the contract value. CSL is also a major contender for an LPD order, with potential value of ₹20,000 crore.

 

The Indian Navy is likely to place an order for a second Indigenous Aircraft Carrier (IAC-II) worth around ₹45,000 crore in 2029. CSL delivered the first carrier, INS Vikrant, in 2022 and is the front runner if this order happens. It is in contention for Shipping Corporation of India’s (SCI’s) expression of interest (EoI) to build eight “Very Large Gas Carriers”, or VLGCs, at an estimated value of $950 million, with six VLGCs to be built at an Indian shipyard.

 

Revenue growth in FY27-FY28 will be driven by completion of Anti-Submarine Warfare Corvettes (unexecuted value ₹3,000 crore) and Next-Generation Missile Vessel (NGMV) orders (unexecuted value ₹9,700 crore). CSL expects mid-teen annual growth in revenue through the medium term.

 

One risk for all the three shipyards is client concentration. The Indian Navy’s notoriously prolonged procurement process is an issue. Also, there is global supply chain dependence for many critical subsystems.