Our order book is full for delivery up to 2012′
BY EDITOR AT 19 JULY, 2010, 2:02 AM
BY: The Indian Express Limited.
Garden Reach Shipbuilders and Engineers (GRSE), a mini-ratna company, is a premier defence PSU that has delivered 600 vessels after its takeover by the government in 1977. While supporting the country’s defence needs, GRSE foresees its profitability growing in the coming decade. Beginning its journey in 1884 with a small factory in the eastern banks of the Hooghly, GRSE is now attempting to create a global footprint. Rear Admiral KC Sekhar, chairman and managing director of GRSE, talks to FE’s Indronil Roychowdhury about the company’s prospects and its strategic importance. Excerpts:
What is GRSE’s production plan and how is it linked with the country’s defence programme?
Our plans are to first make timely delivery of orders that are placed with us. Our hands are full and our order book is quite elaborate. We have got orders for four anti-submarine warfare corvette in 2007 and we will deliver the first ship of this category to the Indian Navy in mid-2012. The navy has also placed orders for ten war jet, fast attack craft, six of which we have already delivered and the rest will be delivered by the end of next year.
The Indian Coast Guard has ordered eight inshore patrol vessels in March 2009 and we have aimed to deliver the first two by August 2011.
The ministry of home affairs has placed orders for 88 fast interceptor boats for coastal security in 2008 and we have already delivered 58. We want to deliver the rest before February 2011 because the ministry has an urgency in getting these boats, especially in the wake of the Mumbai terror attacks.
So, we need to make four-five boats a month for timely delivery and this will be a very impressive production rate. So, our order book is full for delivery up to 2012 and these are all linked with the country’s defence programme. We were not in a position to take any orders after March 2009.
What is the present order book size and when do you think you can start taking orders again?
Our present order book size is worth Rs 8,000 crore, but we have assessed that our future orders might create an order book worth more than Rs 20,000 crore. We are currently negotiating with the Indian Navy for getting an order of three (P17-A) frigates, which is a frontline warship equipped with surface-to-air missile, surface-to-surface missile, super-rapid gun mounting, anti-aircraft guns, torpedo launcher,…
chaff launcher, early warning systems, navigation & fire control radars and underwater sensors. Each of these ships would cost Rs 7,000 crore and we hope to start working on the project from December 2012 if we get the orders with the cabinet committee on security approving it.
We are also hopeful of entering the foreign market for the first time and though I shall not name the country with which I expect to sign a contract for supplying offshore patrol vessels in the next one-two months, this will be a great step forward for the Indian defence industry. We expect to sign another contract with the Indian Navy in two-three months from now and this will be for 800-tonne landing craft utility ships. We will have around 30 ships to make, putting together all these orders and there will be a time span of up to 2020 for delivering these orders. So, we are assured of a full order book up to 2020.
Aren’t you planning any augmentation for faster delivery and taking more orders?
We have taken a modernisation programme of Rs 600 core, which consists of creating a dry dock and an inclined berth with a portable shelter. These are being constructed in the main yard and a 250-tonne Goliath crane is being fitted along with setting up ancilliary shops. More than 45% of this modernisation programme has been completed and we hope it will be finished by the end of 2011. Once this is over, our ship-making capacity will double and we will be able to make four anti-submarine warfare corvette. This augmentation is necessary for implementing the orders we are looking at and will also help us serve overseas markets we are looking at on a priority basis.
But as a defence PSU, we have to be very stringent about timely delivery and take orders according to our capacity. We are pumping in another Rs 40-50 crore in the Rajabagan dockyard, which we have taken over from the Central Inland Water Transport Corporation and we are developing this dockyard to make small ships. But more capacity will entail more production, which, in turn, will require more support from the ancilliaries. This will be an opportunity in a region that is considered to be the backwaters of industrial resurgence.
You said you are expecting orders from overseas markets. Can you elaborate?
There are a lot of inquiries from African countries, SriLanka, Myanmar, Indonesia, Thailand and other Southeast Asian countries. A good number of delegations have also visited GRSE in the recent past. If these foreign enquiries fructify, then we may have to go for some more subcontracts. Currently, we implement 20% of our orders via subcontracts.
GRSE has been in profits for the last ten years, specially on the back of defence orders. Don’t you think that a bit more focus in other segments such as portable bridge-making and engineering would have enhanced your turnover and profitability?
Other than ships, we make deck machines, marine pumps and bailey bridges, in which we have a 70% market share. We have a diesel engine plant at Ranchi, where all the engines made by MTU Germany for ship’s operation and power generation are assembled and tested. Now, this diesel engine plant is part of shipbuilding, but the other segments contribute 20% to our turnover. But defence orders are the mainstay of our business and we have to increase our turnover and profitability by bagging higher value defence orders.
Our net profit in 2008-09 was Rs 55 crore, which doubled to Rs 110 core in 2009-10. Last year, GRSE’s turnover was Rs 870 crore and in this fiscal, we expect to cross the Rs 1,000-crore mark. Our bottom line may be at around Rs 150 crore. So, the higher the value of defence orders, the greater our top line and bottom line will be.
Are there any problems in listing defence PSUs like GRSE?
I don’t think there are any problems as such, but there are no instructions from the government as yet on doing the ground work for disinvestment. There are four PSU shipyards in the country—Mazagaon Dock Ltd, Goa Shipyard Ltd, GRSE and Hindusthan Shipyard Ltd—under the defence ministry. The ministry, at present, is not looking for disinvesting in any of them….
