Cochin Shipyard Bets On Better FY24 As It Sees Execution Peaking In Q3

Cochin Shipyard Ltd. is optimistic about FY24 as it expects execution to peak in the quarter ended December, turning around from disappointing FY23, according to Chairperson Madhu Nair.

The company has "fair bit of confidence on both ship building and ship repair," he told BQ Prime's Sajeet Manghat in an interview. Udupi Cochin Shipyard Ltd., a subsidiary of the company, also has projects that are being executed well, aiding the positive outlook, he said.

Cochin Shipyard's contractual shipbuilding order book stands at about Rs 22,000 crore compared with Rs 21,400 crore at the end of FY23, Nair said. "The pipeline looks strong, both on the European commercial functional vessels side, and the ongoing defence portfolio," he said.

Nair said the shipyard has bid for offshore patrol and fast patrol defence vessels . Additionally, the company has some mid- and large-sized orders in the pipeline, he said. According to him, the defence pipeline looks strong for the next 12-18 months.

"And on the European side, the green vessels are seeing good traction, and we have engaged with many potential opportunities," he said.

The company is also engaged in the post-commission works of the indigenous aircraft carrier Vikrant for a value of Rs 1,800 crore. This carrier is currently in shipyard's docks and will be delivered back to the navy by the end of this year, according to Nair. This would give the company a "fair bit of revenue", he said.

Cochin Shipyard has two large naval projects, the anti-submarine warfare shallow-water craft corvette or ASW SCW and the next-generation missile vehicles, that together contribute to about Rs 16,000 crore of the defence order book, Nair said.

These projects have 14 vessels combined; eight belonging to the ASW SCW corvette project, and the remaining six are part of the NGMV project.

Of the eight ASW SCW corvette project vehicles, three will be launched by Nov. 1, and the rest will follow, he said. The NGMV vessels are currently in the engineering and key equipment ordering stage, and the first of the six are to be launched in 48 months, according to Nair.

These large naval projects will help the company see "continual revenues over the next 5 years", he said.

At a given point of time, Cochin Shipyard has the capacity to built around 12-14 vessels simultaneously under various stages of construction, Nair said.

Currently, the company is building a series of eight vessels for German clients, along with the naval project, he said. "When the vessels 4 and 5 of the ASW go in, simultaneously, vessels 1 and 2 of the German vessels will also go in," he said.

The company has allotted a capex of approximately Rs 1,800 crore for the construction of a dry dock that is capable of managing LNG aircraft carriers and large tankers. The project is to be completed around December of this year, Nair said.

This dock is to be operational by May-June in 2024 after the components of a crane from Hyundai in Korea are shipped to Cochin by the end of October, he said. "We have taken orders and projects which will go into the new dock by June of 2024."

"We have our sights on the international ship repair market," Nair said speaking of the ship repair opportunities of the company. We are really unable to even handle the Indian market because there is enough potential, he said.

"Ship repair looks strong, but we are not jumping into the international market. If there are few projects coming in, we will take it; but largely there is enough in the Indian market," he said.

Cochin Shipyard has two shipbuilding projects underway, the bids for which are already submitted, Nair said. "It could be at least 12 months from now to see the initial set of orders coming."

Other orders that the company expects to work on include landing platform docks, next generation corvettes and the first interceptor vessels, according to him. "The earliest contract could be 12 months down."

The shipyard has Rs 35,000 crore worth of projects in request for information (RFI) and mid-stage, Nair said. These projects include landing platform docks, next generation missile vehicles, offshore patrol vessels, and over 100 smaller vessels called fast interceptor crafts. The RFIs and bids for these projects are to be made within the next 6-12 months, according to him.

Nair mentioned the company's areas of strengths that include naval defence projects, European green shipping and functional vessels, and strong ship repair opportunities.

"We would also look at moving up the value chain in certain technology vessels and and newer technologies," he said. The potential is fairly large in the Indian defence space and there are players with varied strengths, Nair said.