 "INS Tarkash, Navy Ship, Indian Navy")
The Defence Acquisition Council (DAC) approved naval orders worth ₹8.45 trillion over FY22–25, which is over 3x the amount for the preceding three years. There are orders worth ₹2.35 trillion lined up in FY26–27, approximately 3.1x the combined order book of the three listed PSU shipyards.
The combined order books of Mazagon Dock Shipbuilders (MDL), Garden Reach Shipbuilders & Engineers (GRSE), and Cochin Shipyard (CSL) have been stagnant since FY19 though their combined revenue has risen from ₹8,900 crore in FY19 to ₹12,400 crore in 9MFY25 (not annualised). The warship project pipeline is lumpy and subject to long delays. The earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin is also a function of the complexity of design. There are many design changes and clarity with respect to costs and margins emerges only at later stages.
There is visibility on orders worth at least ₹2.12 trillion during FY26–27. This includes six P75I submarines, three Kalvari-class submarines, next-generation Corvettes, and P-17B Frigates, plus smaller vessels. There could also be a third aircraft carrier.
The DAC plans to order three Kalvari-class submarines with Mazagon Docks (MDL) on a nominated basis in FY26 at an order value of ₹36,000 crore. There is a ₹70,000 crore order for six P75I submarines in FY27 based on competitive bidding with a foreign vendor, MDL-ThyssenKrupp Marine Systems (TKMS).
The Next-Generation Corvettes (NGCs) are a planned class of eight anti-surface warfare corvettes for a project cost of ₹36,000 crore. Price bids could be opened in H1FY26 with the lowest bidder (L1) to deliver five units. An order worth ₹70,000 crore for P-17B frigates could also be finalised on competitive bidding with L1 getting four ships.
Order visibility beyond FY26-27 is promising with likely orders for eight Next-Generation Destroyers at an estimated cost of ₹80,000 crore. There’s also the plan to design and build an Indian submarine with a prototype by CY28 – this could result in an order for 12 submarines with a value of ₹1.2trillion-₹1.5 trillion. There could also be an order for an aircraft carrier.
Apart from new builds, shipyards may target the global ship repairs market. The repair business requires an ancillary ecosystem for spare parts. MSRAs (master ship repair agreements) signed by MDL, L&T, and CSL with the US Navy can potentially open an $8 billion opportunity for defence repairs.
CSL’s standalone revenue at ₹1,650 crore for the January-March quarter Q4FY25 rose by 35 per cent year-on-year (Y-o-Y) and 54 per cent quarter-on-quarter (Q-o-Q). CSL reported an Ebitda margin of 15.3 per cent, a decline of 790 bps on a Y-o-Y basis. As a result, standalone Ebitda at ₹250 crore declined by 11 per cent Y-o-Y, but increased 5 per cent Q-o-Q. Reported PAT at ₹280 crore was attributed to 96 per cent Y-o-Y growth in other income. The gross margin of 39.7 per cent in Q4FY25 saw an expansion of 120 bps Y-o-Y, but higher provisions at ₹117 crore (up ₹15 crore Y-o-Y) weighed down Ebitda margins. The ship repair segment was up 178 per cent Y-o-Y. The order book of ₹22,500 crore is over 4x the annual bill and the repair business may be an upside.
MDL saw revenue increase 2.3 per cent Y-o-Y to ₹3,170 crore but Ebitda and PAT declined 83 per cent and 51 per cent Y-o-Y to ₹90 crore and ₹33 crore. Other expenses surged 436 per cent Y-o-Y and management has made provisions for losses on two contracts. PBT margins should stabilise at 15 per cent. Revenue growth reached 20 per cent, but there is revenue guidance of 8-10 per cent for next two financial years. MDL anticipates much better margins as new orders come in, raising the book from current ₹32,000 crore to over ₹1.25 trillion.
GRSE is also looking at growth, with an order book of ₹22,680 crore comprising 40 platforms, including 16 warships. This includes the P17 Alpha frigates and Anti-Submarine Shallow Watercrafts. To support long-term growth, the company is scaling capacity from 24 to 28 ships, targeting 30-ship capacity in the next two years. This could lead to valuation re-ratings.
