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It gives me immense pleasure to welcome you all, on behalf of the Board of Directors, to the 46th Annual General Meeting of your company Cochin Shipyard Limited (CSL). I have had the privilege of leading this prestigious organization as the Chairman & Managing Director over the last two and a half years and it has been an exhilarating journey.I take this opportunity to apprise you on the achievements of your company in the year 1718, the operating scenario and the initiatives for the future.
The Government of India has unveiled a host of initiatives aimed to develop and sustain growth of the shipbuilding and ship repair sector. The Government of India’s focus on development of Inland and coastal waterways infrastructure is an opportunity to be explored. The positive signs of progress in the sector will open up opportunities which could be converted into Company’s business. In the defence sector also, the industry outlook remained positive. However, 2017 was another difficult year for the global shipbuilding industry, with contracting remaining well below trend. However certain segments have seen ordering in the recent months. At this stage the Company will be focussing on domestic orders in shipbuilding continuously keeping a watch on appropriate projects in the international market.
The Ship repair market in India is promising and CSL with its long experience, competitive advantages and strong ecosystem of sub-vendors, service providers etc remains the dominant shiprepairer in India by a large margin. The Government of India is also keen to significantly increase ship repair activities in the country and has advised major ports to try and team up with CSL to develop ship repair capabilities in ports. We are leveraging this opportunity and are in advanced stages of discussions which could lead to CSL setting up ship repair operations in Mumbai, Kolkata and Port Blair shortly.There is a growing optimism and I would like to thank Government of India for all the support and initiatives provided for the shipbuilding and repair sector.
ACHIEVEMENTS DURING THE YEAR
Your company achieved an all time high turnover of Rs.2,355.12 crores and a Profit After Tax of Rs.396.75 crores during the FY 2018. The turnover from Shipbuilding was Rs.1,731.86 crores and that from Shiprepair was Rs.623.27 crores.
The shipbuilding front has been steady, the TDV for DRDO is in advanced stages of outfitting and the 2x 500 PAX vessels for A&N administration is presently in the erection and consolidation phase in the drydock. The 2x 1200 PAX vessels for A&N are closely following and are in the block fabrication stage. Outfitting activities are progressing well on the IAC and testing/ trials phase has been initiated on certain critical equipment. It is a matter of great pride and satisfaction that we have emerged L1 in the tender for the prestigious ASW corvette project of the Indian Navy and expect contracts to be signed shortly. These contracts will contribute approximately Rs. 5,400 crores to CSL’s turnover in the coming years.
Ship Repair continued to do extremely well and we have posted an alltime high turnover of Rs.623 crores in FY 2017-18. To our list of MOU clients like DCI and LDCL we added A&N Administration and 4 of their vessels were handled in 2017. We have handled about 116 Nos of ships, including 18 Naval vessels. We have been aggressive in our marketing efforts and have bagged the major refit contracts of ONGC’s ‘Sagar Bhushan’ and DRDO’s ‘Sagardhwani’ amidst stiff competition from public and private shipyards. We expect significant order intake in the coming year also.
2017 will be etched in history of CSL as the year in which we changed character in more ways than one. After a hugely acclaimed IPO, we became a public listed company with a market-cap of above USD 1 billion. Our major expansion projects have secured all relevant clearances and have crossed critical milestones. On November 17, 2017 the foundation stone was laid for the Rs. 970 crores International Ship Repair Facility (ISRF) project being executed in 42 acres of land leased from Cochin Port Trust. This project marks the first ever expansion outside our 170 acre campus. Subsequently in May 2018, we have awarded the turnkey contract for civil, electrical and mechanical works for the new large drydock in CSL which project is being undertaken at an overall estimated cost of Rs. 1,799 crores.
Another significant milestone was the incorporation of Hooghly Cochin Shipyard Limited (HCSL) at Kolkata, as a joint venture between CSL and Hooghly Dock & Port Engineers Limited (HDPEL) and marked the first geographical expansion of the Company. CSL holds 74% and HDPEL 24% stake in the equity of HCSL. HCSL has subsequently entered into Lease and Concession agreement with HDPEL for taking over the old units at Nazirgunge and Salkia on 60 year lease and to operationalize these facilities by putting up modern infrastructure. HCSL targets to develop various types of vessels like Ro-Ro Vessels, River-Sea Cargo Vessels for bulk, liquids, containers, Passenger Vessels, other watercrafts for the inland waterways.
Towards this, the Company has signed a Memorandum of Understanding (MoU) with United Shipbuilding Corporation (USC) which is the largest shipbuilding group in Russia to collaborate and engage in Design, Development and Execution of High-End, State-of-Art vessels for Inland and Coastal Waterways.
Going with the Company’s plans of expanding its shiprepair business the Company signed MoUs with Mumbai Port Trust (MbPT) and Kolkata Port Trust (KoPT) for upgradation, operation and management of their Ship repair Facilities by leasing the facilities for 30 years and are in the process of signing binding agreements.
During the year the Company marked its entry into a new segment when we signed contracts for construction of 16 nos Tuna Long Lining & Gillnetting Fishing Vessels. These vessels are being built under Central Sector Blue Revolution Scheme with financial assistance from Government of India and the Government of Tamil Nadu to enable diversification of trawl fishing boats from Palk bay into deep sea fishing boats. CSL expects this novel initiative of partnering Central Institute of Fisheries technology (CIFT) and involving IIT Kharagpur, Indian Register of Shipping (IRS) and reputed OEM’s to create the impetus for further business opportunities for delivering technologically sound vessels in this hitherto unorganized but socially very relevant sector.
The Company also signed Memorandum of Intent (MOI) with Defence Research and Development Organisation (DRDO) for the export of defence vessels incorporating defence systems developed by Defence Research and Development Organisation and produced by Indian OEM’s, at the Defence Industry Development Meet chaired by Defence Minister Smt. Nirmala Sitaraman on January 18, 2018.
FIRE ACCIDENT IN CSL
Your Company has laid topmost priority in integrating health, safety and environmental (HSE) aspects into business operations. However, CSL witnessed an unfortunate fire accident on February 13, 2018, onboard MODU Sagar Bhushan, the drillship of ONGC which was docked in the repair drydock. Despite concerted efforts by the Safety and Fire department of the yard,we lost 5 precious lives in the accident and 7 others were injured. This accident happened despite CSL having one of the most robust safety systems in the country, been the recipient of successive safety awards and has been giving high emphasis on employee safety training. This accident has triggered root cause analysis, and we are determined to do a deep introspection of all our systems and safety culture. CSL has subsequently implemented various additional measures, having closer vigil on systems and is now planning a major enterprise wide exercise involving reputed external agencies to significantly upgrade the culture of safety in the company.
We have reached out benevolently to the families of the deceased by providing Rs. 10 lakhs to each family over and above all the statutory dues, have offered employment to one immediate member in the family and have offered to take care of all educational and allied expenditure of children till the graduation stage. For the injured, their salaries are being paid by the company and all medical expenditure is being taken care of.
It is a matter of great satisfaction that during these testing times the entire CSL family stood as one and received great support from the Central and State governments and from all walks of the society.
MAJOR EXPANSION PLANS
It gives me immense pleasure to inform that CSL is embarking on major expansion plans. The two major expansion plans of the company include the International Ship Repair Facility (ISRF) at the Cochin Port Trust premises and the new Drydock at the shipyard’s existing premises. These new facilities will expand the Company’s existing capabilities significantly. The new drydock will enable the yard to build and repair a broader variety of vessels including new generation aircraft carriers and oil rigs. The new International Shiprepair Facility will allow the Company to undertake repair of a broader range of smaller vessels and significantly increase shiprepair capacities. The progress on these expansion projects have been satisfactory.
INTERNATIONAL SHIP REPAIR FACILITY (ISRF)
On November 17, 2017 Shri Nitin Gadkari, the Hon’ble Minister of Shipping, Road Transport & Highways and Water Resources, River Development and Ganga Rejuvenation laid the foundation stone for the ISRF after Cochin Port Trust (CoPT) allotted the second phase land area (8.134 ha) to the Company.
The project is targeted to be commissioned by November 2019 at an estimated investment of Rs.970 Crores.
The new Dry Dock being set up by CSL at an estimate of Rs. 1,799 Crores,is expected to augment the Company’s shipbuilding/ ship repair capacity essentially required to tap the market potential of building and repairing specialized and technologically advanced large vessels such as LNG vessels, larger aircraft carriers, drill ships, and dry-dock repairs of semi-submersibles, jack-up rigs, etc. Subsequent to the receipt of all statutory clearances for the Dry Dock Project, the construction contract for the Plant & Machinery has been awarded in May 2018. Procurement process for the 600 T Gantry crane is at an advanced stage.The facility is targeted to be commissioned by June 2021.
Geographical expansion is the key area in focus for CSL during the year 2018-19. By teaming up with the major ports on the eastern and western coasts of India,
CSL will be able to leverage its competitive advantage in Ship building and Ship Repair to achieve new heights in the industry by exploiting the wider opportunities in Inland and Coastal Shipping. CSL has already inked MoUs with Mumbai Port Trust and Kolkata Port Trust and is confident to commence its Ship Repair Operations during this year. Subsidiary HCSL will cater to the upcoming demand for the Small and medium sized vessels for Coastal segments and Inland waterway segments specifically at NW-1, NW-2 and NW-5, which are now on the key focus of Government of India.
CSL has already received clearance for 10 Nos. Ro-Ro vessels for Inland Waterways Authority of India (IWAI) which will showcase capabilities in the emerging Inland vessel segment. CSL is keeping a close watch on new and green technologies like Electric Propulsion, Fuel Cells, LNG and Methanol fuelled engines etc in the shipping sector in India. As a first step towards its adaptation to the changing needs for alternate clean fuels, CSL is actively developing Methanol fuelled vessels for Inland Water Authority of India (IWAI) and the first vessel is expected to be in waters by 2019.
Imbibing the digital technology trends in Shipping Industry, CSL is teaming up with M/s. ABB by integrating centralized electrical and automation systems in the 1200 pax vessels being built for A&N Administration, that allows predictability in operations and focusses primarily on safety and reliability of the onboard systems. These systems also enable remote trouble shooting. These ships complying with the International Maritime Organization’s Safe Return to Port (SRtP) requirements for passenger ships will be a key differentiator and will be the First-of-its kind in this part of the world.
CSL has kept its doors open for the Innovation, Technology Inception, Automation and Modernisation in the yard, its operations and its processes; and is looking forward to take steps towards achieving a significant transformation to adapt itself to ever changing technology trends in the market.
The Company continued to comply with good corporate governance practices as stipulated by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and guidelines of the Department of Public Enterprises (DPE). The total strength of the Board of Directors as on July 18, 2018 is twelve out of which six are Independent Directors. The Company has constituted an Audit Committee consisting of three Independent Directors. A Nomination and Remuneration Committee, CSR Committee and Stakeholder Relationship Committee chaired by an Independent Director have been constituted. Shri Pravir Krishna IAS, demitted office of director on relinquishing his charge as the Joint Secretary, Shipping. Shri Satinder Pal Singh IPS, the present Joint Secretary, Shipping was appointed on the board on October 04 2017.
Shri Bejoy Bhasker took over charge as Director (Technical) on April 05, 2018 in place of Shri Sunny Thomas who superannuated on November 30, 2017. Shri Jyothilal K R, IAS, Principal Secretary (Transport) Government of Kerala, was appointed on the Board on April 20, 2018.
HUMAN RESOURCE DEVELOPMENT
The success of your company is attributable to its employees and to keep its employees motivated and well trained various programmes have been devised. On the HR front, we have institutionalized syllabus based structured training programme for our officers and workmen. Our officers are being exposed to the best practices in other industries and are undergoing courses in prestigious management institutes like IIMK, IIMA, IIMC etc. Under the comprehensive training programme titled “Young Officers Competency Development Programme” a total of 47 sessions were held over five modules and the first batch consisting of 24 executives have since completed the training. A second batch comprising of 25 Executives have also commenced training.
Various ‘People first’ initiatives like Shipyard Pariwar Prathibha Puraskar, Nethruthwa Samvriddhi Yojna, Shipyard Santwana Yojna, Mentor Mentee scheme have been well received by the CSL family and will continue on strong footing. ‘Prajyoti’ and ‘Atmajyoti’ talk series will continue to lead us in our quest for knowledge.
The industrial relation scenario has been peaceful in the Company. The recognized trade unions have resorted to various means of protests to highlight their concerns over the recently concluded Initial Public Offer (IPO). All such protests have been within the framework of legitimate and democratic trade union activities and have been peaceful.
RESEARCH AND DEVELOPMENT (R & D)
R&D policy of CSL is to enhance the company’s pre-eminence in Shipbuilding, Ship repair and other chosen fields and products through Research and Development. In-house R&D activities have been undertaken during the year 2017-18 mainly in the areas of welding procedure development and qualification of welders.
CSL is now exploring the schemes to encourage innovation-culture among the employees of the yard and is targeting to drive a change management in the organisation so as to ensure a hand-in-hand approach with technology changes.
The Company takes up various skill development initiatives within and outside the Company. CSL is a member of Strategic manufacturing sector skill council which has been set up to take forward the Skill India Mission. An exclusive skill development programme for Pipe Fitters under the Strategic Manufacturing Sector Skill Council (SMSSC) Scheme had been conducted and 18 participants mostly workmen drawn from the sub contract pool of workmen in CSL and trainees attended the programme.
INTEGRATED MANAGEMENT SYSTEM
The Shipyard continues to be compliant with the Integrated Management System (IMS) consisting of ISO 9001 Quality Management System, ISO 14001 Environment Standards and OHSAS 18001 Occupational Health and Safety Standards.
CSL will be upgrading its Quality Management system and Environmental management systems to the latest ISO 9001:2015 and ISO 14001:2015 standards respectively by September 2018.
CORPORATE SOCIAL RESPONSIBILITY
Your Company continues to fulfil its obligation towards society through its CSR initiatives. The Company has identified and implemented socially impactful projects in a time bound manner. The total amount spent on CSR projects during the year 2017-18 was Rs 8.57 crore as against the mandated amount of Rs 8.54 crore as per the provisions of the Companies Act, 2013.
INITIAL PUBLIC OFFER
The Initial Public Offer (IPO) referred earlier comprise of 3.39.84.000 equity shares of Rs 10 each consisting of (a) 1.13.28.000 equity shares by way of offer for sale by GOI and (b) 2,26,56,000 equity shares by fresh issue, was opened on August 01, 2017 and remained opened till August 03, 2017. The Company filed the prospectus with the Registrar of Companies, Kerala on August 04, 2017.
The issue price was fixed at Rs. 432 per share. However, the Retail Individual Investors and the Employees of CSL were given a discount of 5% (approx.) and the shares were offered to them at Rs. 411 per share. The Company listed its equity shares at BSE Ltd. and NSE of India Ltd. on August 11, 2017. The issue was subscribed 76.18 times and a whopping Rs. 1,442.93 crore was raised. With more than 20 lakh applications, CSL’s IPO was celebrated by the capital markets and was recorded as one of the most successful IPOs in recent history. I believe it is the strength and reputation of the company that generated investor interest in us.
The excellent performance of your company has won appreciation from various quarters. The Company is all set to maintain its “high level” rating against the MOU targets set by the Department of Public Enterprises, Government of India for the year 2017-18. However, the final rating from the Department of Public Enterprises is awaited.
Cochin Shipyard has received the Kerala State Energy Conservation Award 2017 in the category of ‘Large Scale Energy Consumers’ and Kerala State Renewable Energy Award 2017 from the Government of Kerala. The Company has won the MKK Nair Memorial Award for the Second Best Productivity Performance from Kerala State Productivity Council. The Company has also received the KMA excellence award for best CSR activities undertaken, India Seatrade Award 2017 for the Shipbuilding & Repair Yard of the Year, Bureaucracy Today CSR excellence award for Rural Development, from Bureaucracy Today, Top exporter (PSU) at Kochi award from customs for the calendar year 2017, Corporate citizen award by Public Relations council of India for the year 2018 and Award for Best Stall in the IND EXPO 2017 from the Ministry of MSME.
CSL is presently in an extremely challenging and competitive business environment. It is very important that we develop, maintain and strengthen our core competencies. CSL has always been able to portray its competitive advantage & capabilities for bagging contracts amidst stiff competition. The vast opportunities posed by the Inland waterways segment and the huge expansion plans of CSL would help the Company to reach greater heights. Along with its qualities of hardwork, dedication and commitment,
CSL has to maintain its competitive edge by continually developing and adapting itself with the fluctuating market needs and technology advancements. The changes that we have to bring into our system are to be advance, modern, economically viable and sustainable. I strongly believe that this yard will strive towards achieving the commanding heights in Ship building and Ship Repair Industy, and I believe that each and every employee of CSL with their indomitable spirit would be the pillars of growth for the Company and will work towards this common goal of the organisation; and of the country.
I convey my thanks to all the Board Members for their valuable contribution in propelling this great organization.
I thank the Ministry of Shipping, other offices of Government of India, the Government of Kerala and West Bengal for their support.
Finally I would like to take this opportunity to thank all shareholders for the trust and support and solicit continued support to fulfill your expectations.
Madhu S Nair
Chairman and Managing