The Hindu Business Line : Pvt shipbuilding cos investing Rs 18,500 cr to expand capacity

Says Mr V. Kumar, Managing Director of Bharati Shipyard and Secretary of the Shipbuilders Association of India: “The industry is not only expanding capacity, but is also moving up the value curve”.

Amit Mitra

Mumbai Nov 15

Buoyed by the surge in demand for new ships globally, Indian shipyards are ramping up investments to expand capacities.

It is estimated that private shipbuilding companies are planning to invest about Rs. 18,500 crore in the next five to seven years. L&T and Pipavav Shipyard lead the list with a capital expenditure programme of Rs. 3,000 crore each, followed by Good Earth Marine Group with Rs. 2,000 and ABG Shipyard, Adani Group and Bharati Shipyard with Rs 1,500 crore each.

Says Mr V. Kumar, Managing Director of Bharati Shipyard and Secretary of the Shipbuilders Association of India, “The industry is not only expanding capacity, but also moving up the value curve.”

Currently, the industry is present in the medium and small vessel segments, but the planned investments are targeted at construction of larger and complex vessels.”

Large, complex vessels

L&T, for example, is poised to build a new $500 million shipyard fit to build very large crude carriers, with a proposed capacity of five VLCCs and 20 Panamax vessels.

Similarly, ABG’s new shipyard at Dahej will build handymaxes initially, but later move into the VLCC space.

Bharati is building a large facility in Mangalore on a greenfield site to complement its four existing yards.

Pipavav is planning to enter the offshore fabrication market through a tie-up with Punj Lloyd, which recently picked up substantial shares in the company.

Even shipping companies are planning to get into shipbuilding. Shipping Corporation of India plans to set up a facility with a joint venture partner and talks are on with some Korean shipyards, while Mercator Lines has put up on its drawing board plans to build a $247 million yard at Palghar in Maharashtra.

Growing industry

“As the industry continues to move from its existing nascent stage to a rapidly growing industry, it will yield huge benefits to the economy. The economic impact of shipbuilding is very similar to infrastructure sectors such as roads and ports rather than conventional manufacturing,” a study by KPMG says.

In fact, during the last five years, the private sector shipyards had invested about Rs 843 crore, as compared to Rs 43 crore between 1997 and 2002. Between 2002 and 2007, these yards have managed to bag orders worth Rs 14,877 crore, as against Rs 816 crore in the previous five years.

However, the industry is still far from realising its full potential, according to the KPMG report.

The present boom in global shipbuilding demand presents significant opportunity for India to consolidate its presence in the global market.

“With its large technical pool, one of the major potential upsides of the shipbuilding sector can be the relocation of design and engineering activities from the existing expensive locations of Europe and the US, replicating the trend witnessed in the IT sector,” the report says.

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