India: More ships, less new orders for shipbuilders

made new shipbuilding orders hard to come by for local firms and that’s affecting revenue visibility. Bharati Shipyard Ltd, in particular, has been badly hit.
Bharati’s order book pending execution as on 31 December has declined to about Rs1,280 crore. At the end of the September quarter, it stood at Rs1,580 crore and at Rs1,920 crore at the end of June. Bharati’s current unexecuted order book is equal to the company’s revenue in FY10, which is not much comfort given the present environment.
On the other hand, ABG Shipyard Ltd appears relatively better placed on revenue visibility. According to a post-results note of Angel Broking Ltd, ABG’s order book pending execution stood at about Rs7,600 crore. That’s more than four times the company’s revenue in FY10.
On the operating front, though, Bharati managed to maintain profit margins (excluding the impact of subsidy) at 18%, but ABG disappointed. ABG’s operating margins fell to 17% from 18.5% in the corresponding period last year and 26% in the September quarter.
ABG’s operating performance was hit mainly due to a sharp rise in other expenditure. Net profit of both companies is lower on a year-on-year basis and sequentially as well.
Debt levels have gone up. Bharati’s debt has increased to Rs3,000 crore after it acquired Tebma Shipyard Ltd in the last quarter, while its market capitalization stood at a mere Rs415 crore on Friday.
“ABG’s current net debt has increased to about Rs2,200 crore (debt to equity at 1.8 times) in 3QFY2011 compared with about Rs1,825 crore in 2QFY2011 (debt to equity at 1.5 times),” wrote analysts from Angel Broking in their post-results note. In comparison, ABG’s market capitalization stands at Rs1,752 crore.
Needless to say, higher interest cost would add to the pressure on profitability.