Amid the gloomy scenario in the shipping sector, an encouraging factor is the increase in ship building activity at Pipavav Defence & Offshore Engineering Ltd. According to a report by ICICI on Pipavav Defence: “On a segmental basis, the most heartening factor has been augmentation in ship building activity, which grew 47% quarter-on-quarter.”Ship building activities across the globe continue to remain muted during the July-September quarter as the index declined marginally by 1.3% on quarter. However, the company showed some pick-up in its ship building and repair activity, the report said.
Currently the company has a gross order book of Rs. 8000 crores – distributed well among commercial, defence and offshore orders. Of this, a sum of Rs. 3200 crores forms the commercial order book, Rs. 800 crores is the offshore order book and Rs. 4000 crores is the defence order book
“The company has been able to bag foreign naval deals worth Rs. 1192 crores in Q1FY13. During Q2FY13, PDOECL took up repairs and maintenance of rigs from global players like Transoceanc,” said Mr. Bharat Chhoda, shipping analyst with ICICI Direct on the company.
Going ahead, the management has indicated that it will focus on defence deals and repair and maintenance of offshore rigs from its international partners.
“Construction of 18 ships is at an advanced stage of completion. On the capex front, the conversion from wet dock to dry dock is 50% complete and is likely to be ready by FY15, thereby increasing scalability further,” Mr. Chhoda stated.
Moreover, foreign naval orders coupled with JV with MDL (Mazgaon Dock Ltd) are expected to provide stability to the order book and accentuate the execution in FY13-14. The management has indicated that MDL orders would start to flow in from Q4FY13, he observed.
For the July-September quarter, Pipavav Defence and Offshore Engineering Company’s reported 16% rise in revenue to Rs. 666 crores from the preceding April-June quarter. Net profit grew to Rs. 8 crores from Rs. 2 crores for the same period.
However, the company’s debt equity ratio continues to remain stressed. Increased interest costs which grew 3.5% on quarter and 61% on year during the July-September quarter continue to impact the net profit, Mr. Chhoda noted.
Hence, the company continues to scout for opportunities to reduce the burden by entering into alliances to raise fresh equity, he added.
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