Private shipyards queue up to sell minority stake to Shipping Corp

Local shipbuilders are looking to sell a minority stake to state-run Shipping Corp. of India Ltd (SCI) after it invited initial bids on Monday to buy equity in a shipyard. Domestic shipbuilders such as ABG Shipyard Ltd, Bharati Shipyard Ltd, state-run Cochin Shipyard Ltd, Pipavav Shipyard Ltd and Larsen and Toubro Ltd are expected to participate in the bid, according to two persons close to the development.
SCI, the country's largest ocean carrier with 74 ships, 33% of the total shipping capacity with Indian fleet owners, floated a tender on Monday and will appoint independent consultants for assessing bids from Indian companies.
An executive at SCI, who has been briefed on the plan, said that buying a stake in a shipyard would help the company get berths for building ships at competitive prices, enabling it to get a better internal rate of return and help it compete more effectively.
Besides, he added, it would help the yard get captive business from SCI and help it utilize capacity fully. He declined to be identified because he is not authorized to speak to the media.
Shipyards have responded positively to the development.
Pipavav Shipyard chairman Nikhil Gandhi said his company would be happy to bid for this opportunity as it is perfect fit.
"We are keen to sell a minority stake and will be filing our expression of interest to SCI," said Dhananjay Datar, chief financial officer of ABG Shipyard, India's largest private shipbuilder by revenue.
A Larsen and Toubro Ltd executive declined to comment while officials at Bharati Shipyard could not be reached.
"Picking up a stake would not assure a private company
to get a chance in building Shipping Corp.'s vessels as it is done through public tendering process. But there were instances when foreign yards did not participate in bid for SCI's vessel building programmes.... Hence Indian yards could benefit in the long run," said a shipbuilding consultant who requested anonymity. In any given year SCI is expected to repair 25-30 vessels, he pointed out.
The move to acquire stake in private shipyards comes at a time when the union government is looking to sell 10% of its 80.12% stake in SCI. The divestment is as part of a plan to raise '40,000 crore in the current financial year through share sale in state-run enterprises. SCI will also sell 10% fresh shares to part-fund expansion.
Local shipbuilders have been struggling to win orders after the global financial crisis in September 2008 upended global trade and suppressed demand for goods and, in turn, for ships. SCI's plan to integrate its operations backwards to shipbuilding was born out of the firm's experience in the boom years of 2005-07 when getting shipbuilding and repair slots at shipyards was an uphill task, the executive mentioned earlier said.
SCI plans to spend some $2 billion ('9,300 crore) to buy 30 more ships through 2015 to replace ageing vessels and also to boost capacity, chairman and managing director S. Hajara had said in a July press conference
in Mumbai.