Cochin Shipyard has signed a memorandum of understanding (MoU) with the Mumbai Port Trust for management and operation of their ship repair facilities. The move will serve the increasing ship repair demands in Mumbai area. This is significant because the margins for ship repair, which are in the region of 30 to 33 percent, are almost three times that of shipbuilding, which stands at 11 to 12 percent.
In an interview with CNBC-TV18, Madhu S Nair, CMD of Cochin Shipyard spoke about the latest happenings in his company and sector.
Mumbai Port Trust had the Hughes dry dock which is very old dry dock but very effective and efficient dock, he said.
Port used to lease it out and then the work used to be done by a consortium of various sub-contractors. We will now bring in end-to-end solutions based on our ship repair domain expertise and we will make some investments also there because there are a fair bit of upgradations and revamp that is to be done, he added.
We also intend to bring in a floating dry dock into the Mumbai area. So all in all, it is a very robust situation, said Nair.
According to him, ship repair growth can happen in the Mumbai area with this new arrange.
Ship repair is doing very well and this year also we are doing exceedingly well from our Cochin operations. I would expect in the first year, that is FY19, Mumbai operations will add up another 20 percent into the topline of our ship-repair revenue turnover, he further mentioned.
Below is the verbatim transcript of the interview.
Latha: Is there anything about your merger with Dredging Corporation?
A: Definitely no. nothing with Dredging Corporation.
Sonia: Can you tell us a little bit about the MoU with Mumbai Port Trust? We understand that the ship repair business gives you much higher margins but what will this do overall to both revenues and margins?
A: Mumbai Port Trust had the Hughes dry dock which is a very old dry dock but it is a very effective and efficient dock but what the port used to do it is it used to lease it out and then the work used to be done by a consortium of various sub-contractors.
We will now bring in end-to-end solutions based on our ship remain domain expertise here and we will make some investments also there because there is a fair bit of upgradation and revamp that is to be done.
We also intend to bring in a floating dry dock in addition to the present Hughes dry dock, we intend to bring in a floating dry dock also into the Mumbai area. So all in all, we feel it is a very robust situation. The Bombay has potential, growth can happen in the Mumbai area with this new arrangement.
Latha: What is the money? How big is this order? I am asking because whether I look at last year or the six months of this year, both revenue was struggling at single digits and EBITDA is down?
A: Ship repair – we are in shipbuilding and ship repair and ship repair has seen very significant growth. So if you are looking at the figures also, ship repair over the last year – we had grown more than 30 percent on year-on-year. So ship repair is doing very well and this year also we should be doing exceedingly well from our Cochin operation. This is why we are looking at Mumbai operations.
Mumbai - I would expect straightaway in the first year, that is FY19 -- last year we have done Rs 550 crore, so straight away the Mumbai operations will add up more than about 20 percentage into the topline in year one and in year two, we expect this to be almost double.
So there is going to be significant traction and it is purely ship repair. There is no shipbuilding that will happen in Mumbai.
Latha: Overall if you can give us a guess as to what the revenue growth will be this year because it looks better than last year so this year revenue growth and on that what can be next year’s revenue growth, will it be double digits?
A: Overall we should do more than 12-13 percent in this year, FY18.
Sonia: are you expecting ship repair orders from any other state or city port trust?
A: Similar to Mumbai, we are also talking to Kolkata Port trust but the opportunities and the business potential in Kolkata is much smaller. So that is a bit of an experiment out in Kolkata.
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