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Rediff.com  » Business » Indian shipbuilders see demand from foreign shores

Indian shipbuilders see demand from foreign shores

July 10, 2008 11:02 IST
Indian shipbuilders are expected to invest Rs 20,000 crore (Rs 200 billion) in the next five to six years to enable them grab the growing demand for ships from Japan, Korea and China. The scarcity of shipbuilding yards in these countries up to 2012 will help Indian shipbuilders increase their market share globally.

Indian shipbuilding yards have started posting good profits in the past four to five years on the back of strong demand for new ships from international operators.

The central government is also planning to set up two shipbuilding yards, one each in west and east coasts, with an investment of $1.57 billion. The proposed investments will not only increase capacity, but will also put India on the global shipbuilding map along with other competitors in the region.

Today the global market leaders in shipmaking are China, Korea, and Japan, with China commanding a 35 per cent market share.

India's share of the global shipbuilding market is expected to increase to 5 per cent by 2020 from the current 1 per cent.

Ray Stewart, the chief executive officer of Pipavav Shipyard Ltd, said traditionally, Indian yards focused on the small and medium segments but the current orders are dominated by offshore supply of boats and bulk carriers. In the last 18 months, orders worth around $1 billion for building panamax vessels have come to India.

Profitability of the yards too has gone up mainly because price of ships has doubled in the last four years. In 2006, the price of a ship increased to $45 million from $20 million.

"If the government gives back the subsidies it withdrew last August, the industry can do better," said Stewart.

Cochin Shipyard's turnover trebled to Rs 720 crore (Rs 7.2 billion) in 2006-07 from Rs 235 crore (Rs 2.35 billion) in 2002-03. Net profit increased to Rs 58 crore (Rs 580 million) in 2006-07 from Rs 18 crore (Rs 180 million)  in 2005-06. Its current order book stands at more than Rs 2,000 crore (Rs 20 billion).

Revenues of Hindustan Shipyard Ltd (HSL) in 2007-08 were estimated to be around Rs 750 crore (Rs 7.5 billion), with a net profit of Rs 78 crore (Rs 780 million). HSL's current order book size is about Rs 2,000 crore.

Bharati Shipyard's net profit rose 47 per cent to Rs 107 crore (Rs 1.07 billion) in 2007-08, from Rs 73 crore (Rs 730 million) in 2006-07. The total order book position of Bharati is around Rs 4,635.35 crore (Rs 46.35 billion).

ABG Shipyard posted a 38 per cent rise in net profit at Rs 160.68 crore (Rs 1.6 billion) compared with Rs 116.29 crore (Rs 1.16 billion) in 2006-07. Current order book size is about $2.4 billion.

Pipavav Shipyard said the yard's order book is full and estimated at about $1.1 billion. The company is planning to invest around Rs 2,888 crore (Rs 28 billion)  to build a shipyard complex at Pipavav in Gujarat.

India's shipbuilding industry is aided mainly by cost competitiveness and abundant supply of cheap, skilled manpower.

T E Narasimhan in Chennai
Source: