'CSL is looking to consolidate its position in the defence space, both in shipbuilding and ship repair. At the same time, we would like to maintain our leadership position in the commercial shipbuilding and ship repair'
In an interview with Moneycontrol, Cochin Shipyard Limited’s chairman and managing director, Madhu Nair, talked about the company’s maiden dividend pay-out target, contracts for indigenous aircraft carriers and anti-submarine warfare and company's growing interest in passenger vessels.
Here are the edited excerpts:CSL recently released its half yearly results for FY18. What is your overall target for the financial year and how well are you on course to achieve it?
We would like to state here that the nature of business in which Cochin Shipyard operates is not very amenable to a quarter to quarter comparison of results. As you are aware our projects, both shipbuilding and ship repair, span over a medium or long period and hence an annual comparison of results would be more insightful. The company is targeting a growth of about over 12 percent year-on-year (YoY) and is targeting areas like defence, engineering heavy commercial vessels, Inland Waterways vessels in the shipbuilding front and strong push on the ship repair front especially defence projects for achieving the growth.
The company presently has an order book of around Rs 2,600 crores. It is also expected that the Phase III contract for indigenous aircraft carrier (IAC) will be entered into by next financial year. Apart from this we have emerged as L1 (lowest bidder) for eight anti-submarine warfare (ASW) Corvettes for the Indian Navy worth for Rs 5,400 crores for which contract is yet to be signed.
Post IPO, we have emerged L1 in an order for eight ASW Corvette for Rs 5,400 crores, which is a positive development. Union Minister for Shipping, Nitin Gadkari, laid the foundation stone for the new International Ship repair Facility on 17 November 2017, which is one of the projects for which we raised funds during the IPO. As regards return for shareholder, as per the directives issued by Department of Investment and Public Asset Management (DIPAM), every Central Public Sector Enterprise (CPSE) is to consider a minimum dividend of 30 percent of profit after tax (PAT) or 5 percent of net worth whichever is higher. We would strive to adhere to this directives to the maximum extent.
There are no plans as of now.CSL, lately, has veered more towards defence related manufacturing than commercial ship building? What led to the shift? Will CSL gradually phase out commercial ship building segment?
Globally commercial shipbuilding had been going through a very difficult period. In comparison, the Indian defence shipbuilding industry looks endearing in the light of the ship acquisition plans for Indian Navy and Coast Guard. However the company will continue to have a strong presence in both segments, so that we can have diversified product mix. The company is looking at Inland Waterways as an emerging opportunity in the commercial segment.Could you please breakdown your present revenue inflow between commercial and defence space?
The revenue inflow from defence space is around 75 percent of our revenue.Given today’s geopolitical concerns and security pressure, what is your vision for CSL and what kind of projects can we expect CSL to take up in future?
Cochin Shipyard is looking to consolidate its position in the defence space, both in shipbuilding and ship repair. At the same time, we would like to maintain our leadership position in the commercial shipbuilding and ship repair, as well. The new dock, International Ship repair Facility adjacent to our present facility and the Joint Venture at Kolkata would help us in this approach through focus on the Inland Waterways and Coastal Segment. We are also looking at consolidating our ship repair business through presence in major ports. Discussions in this regard have been commenced.
Both these segments compliment and support each other and are equally important in our overall scheme of things. Shipbuilding provides us about 75 percent top line with modest profits whereas ship repair provides the balance 25 percent top line, however, with much higher margins. A prudent mix of both businesses helps us in controlling our overheads and optimally leveraging our infrastructure and resources.You have previously talked about CSL venturing into international ship repair business. Please, elaborate your vision for the same and tell us about the expected plan of action?
Once our International Ship repair Facility and the new dry dock projects are completed, we expect to have the requisite repair slot availability and subsequently market our ship repair services aggressively towards international clients, especially ships which frequent Indian ports. Our target would be to look at major fleet operators with a view to have frame agreements based on pre allocated slotting, preferential terms etc.What are your plans for dry docks?
CSL today has two dry docks – 275 x 45m and 255 x 42m, amongst the largest in the country. We are now proposing to build an even larger new Dry Dock which will be a stepped dock with a minimum clear length of 310 metre, width of 75 metre at the wider part till a part of the dock length, and width of 60 metre at the remaining part. The new dry dock with 2 x 600MT cranes would help us to take up building and repair of specialised and technologically advanced large vessels such as Liquefied Natural Gas vessels, indigenous aircraft carriers of higher capacity, jack up rigs, drill ship etc. This would help us to diversify our offerings further.Are there any other segments that CSL might venture into? Cruise liners or ferry? Please elaborate on these.
The company is keen on various types of passenger vessels – both domestic and international.Lastly, what are your expectations, concerns (if any) and plans from the joint venture with Hooghly Dock and Port Engineers Ltd?We feel that Hooghly is located very strategically with reference to the National Waterway No1 and could play a crucial role in supplying and maintaining vessels for the route. We shall strive to make this joint venture herald a new segment in the Indian inland water transport space.