Bharati Shipyard Delays Fundraising, New Units

Bharati Shipyard Ltd. has put on hold plans to build two manufacturing facilities, and delayed plans to raise $200 million to expand a partly owned units. The shipyards in eastern India,

part of an equal joint venture with Apeejay Shipping Ltd., won't be built for the next two to three years due to weak demand for big ships, said P.C. Kapoor, Bharati's managing director.
"The facilities were planned for super-sized vessels, and will be revived only if... there is demand," he said.
Bharati, in 2007, formed a venture with Apeejay Shipping to build shipyards for large vessels, including crude carriers. At that time, the companies said they would invest 20 billion rupees in the venture. The yards were in addition to the shipbuilder's six manufacturing facilities in India, in Ratnagiri, Ghodbunder, Goa, Dabhol, Mangalore and Kolkata.
But the plan ran into rough waters over unavailability of land, and is now stalled due to unfavourable market conditions.
While the rebound in global trade has turned around the fortunes of shipping companies, demand for new ships and vessels remains low. There's a high inventory of new ships, and companies are yet to take deliveries on existing orders, analysts said. The demand-supply mismatch is unlikely to stabilize over the next twelve months, they added. Moreover, rising prices of raw materials, including steel, have hurt shipbuilders' margins.
Bharati, which has an order book worth 50 billion rupees, already has seen a couple of European clients ask for deferral in deliveries, Mr. Kapoor said.
The company expects to start delivering vessels in the beginning of 2013, he said, but also is preparing for more delays.
"Some more order deferral can happen," Mr. Kapoor said. "There is a recession in Europe; companies are facing a lending crunch and are in turn asking us to go slow."
European clients make up the largest block, contributing 20% to 25% of Bharati's revenues.
Bharati's problems also extend to plans for its partly owned oilfield-services provider Great Offshore. The company acquired a majority stake in Great Offshore in various stages, after a long bidding battle with ABG Shipyard Ltd. It, currently, owns close to 50% stake in the oilfield services provider.
Bharati had planned to raise up to $200 million in December, but found "the sentiment was totally negative at that time and it still is," said Mr. Kapoor, who also is the executive director of Great Offshore.
Bharati had appointed four investment banks -- HSBC (NYSE:HBC) PLC, Citibank N.A., Edelweiss and Fortune Financial Services India Ltd. -- to manage its fundraising.
But the banks have been asked to put the fundraising plans on hold for now.
"The plans for Great Offshore expansion are there, but they have been slowed down," Mr. Kapoor said.