The shipping sector is going through tough times. The bulk carrier segment is showing no signs of recovery and the Baltic Dry Index (BDI; it tracks worldwide international shipping prices of various dry bulk cargoes) has been around 1,500 since March. From 2,988 points in September last year, it has been on a dip, touching a low of 1,043 in February this year. In such a scenario, private shipyards in India are looking to stay afloat on the back of offshore orders, coupled with defence sector procurement that the government has now opened for non-state companies.
P C Kapoor, managing director, Bharati Shipyard, said, “These two sectors (offshore, defence) are very promising, so we are focusing on these.”
His views are echoed by ABG Shipyard, whose executive director and chief financial officer, Dhananjay Datar, said: “This year, we see demand coming from the defence sector but that will be based on the tenders that the navy floats. Growth is coming from the offshore segment, too.”
RIGS, DRILLS DEMAND
Datar said the company had a capacity to build four oil rigs at a time and was operating at full capacity. “The earliest deadline to deliver a rig is in June next year and then we will deliver rigs every six months,” he said.
Bharati Shipyard is currently making a shallow draft rig for Great Offshore, where Bharati holds 49 per cent stake.
Kapoor said, “The rig is worth $200 million and will be ready by the end of the current year.” Adding that the company was in talks with a Mexican company for a contract on a similar oil rig.
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Datar is bullish on the offshore segment. He said, “Of our total order book of Rs 14,900 crore, about Rs 4200 crore worth of orders are for this segment. And, it will only grow. If you see this asset class, there are around 460 jack-up rigs in the world. Of those, only 60 are the ones which can go deeper than 350 feet. We are making those jack-up rigs now.”
Indian offshore companies are also witnessing some contracts. Aban Offshore and Global Offshore, earlier Garware Offshore, signed contracts with Petrobras of Brazil. Aban signed a five-year contract last month with Petrobras for a drill ship. Global Offshore, in March, signed a four-year contract worth Rs 1.95 billion with Petrobras for deployment of a large platform supply vessel.
In April, Global Offshore bagged a three-year contract for its anchor handling tug-cum-supply vessel, with an oil exploration and production company in the west coast of India. Varun Shipping signed a Rs 690-crore, four-year contract with Petrobras for three anchor handling tugs-cum-supply vessels.
MILITARY OPENING
Apart from the growth in the offshore segment, the shipyards are also focusing on the newly opened Indian defence sector. Kapoor said its order book for the sector was just Rs 500 crore (its total order book is Rs 13,000 crore) but expected to expand it manifold.
He said, “You can’t set targets for this but I can say defence will form a major part of our order book in a year's time. We plan to more than double our defence order book.”
ABG has defence orders worth Rs 970 crore. Datar said, “The navy’s audit regarding our facilities and the capability to deliver, etc, are complete and (they) have approved us.
The size of the defence market in India is huge. According to the tenders that I am seeing, there is an opportunity of Rs 18,000-20,000 crore worth of business in the next three years for ship-building for the defence sector.”
Currently, apart from the public sector shipyards, only four private shipyards have been approved by the Navy to build vessels. These are Bharati, ABG, Larsen & Toubro and Pipavav Defence and Offshore Engineering Ltd, earlier called Pipavav Shipyard. Pipavav recently got a nod to build warships for the navy and has 40 per cent of its orders from the defence sector.
Datar said, “Our preference for orders is for offshore vessels, rigs and the defence sector. We are very choosy now when it comes to order, as the capacities are full.” He noted the BDI was very low and showing no signs of recovery. Kapoor said, “The bulk cargo segment is still depressed and will take at least one and a half years to recover.”