'Acquisition will provide greater stability'

Bharati Shipyard, which had acquired a 14.89 per cent stake in Great Offshore Ltd earlier this month, pulled off a surprise last week by making an open offer for another 20 per cent equity stake at Rs 344 a share. With the promoter, Mr Vijay Sheth, virtually quitting the company last week, GOL is now under the control of Bharati Shipyard Ltd. The company’s Managing Director Mr P. C. Kapoor, spoke to Business Line about the rationale of the acquisition and the company’s long-term plans.
Excerpts from the interview:
So you have decided to take over Great Offshore?
The purpose of the open offer is to consolidate our investment in Great Offshore.
Considering the potential for the offshore services business, we have decided to increase our investment in Great Offshore. This acquisition will provide enhanced stability to the existing management and maximise shareholder value for both companies.
Do you think Rs 344 a share is a fair price?
As mentioned, it is an investment for us. We did get it at an appropriate price.
What are the synergies between the two companies?
Bharati Shipyard is a ship-building company with expertise in manufacturing offshore vessels and Great Offshore is an offshore services company.
Our investment in Great Offshore thus gives Bharati a strategic place in the offshore services segment. The investment will strengthen our consolidated position in the global offshore market.
Is the stake in Great Offshore a long-term investment?
We know the promoters for a long time. We are building ships for them. It is a friendly take over. The promoter had borrowed money against the shares, when they cost around Rs 860 a share. Then the shares went down, not because of his fault. They came crashing down Rs 250.
So naturally, the margin had to be given. After some time the lender recalled the value, and that is when we stepped in to help. We didn’t want the management to go into wrong hands.
What do you think of the potential of Great Offshore?
We see a great potential in Great Offshore; that’s why we have invested. We think it’s a good investment and it will give us good returns. There is a lot of synergy between both the businesses.
For example, most of their ships go abroad for repairs as sufficient repair facilities are not available here. Now they will get first preference.
How do you plan to raise the money?
We will raise funds through internal accruals.
Are you thinking of replacing the existing management?
No. We are quite happy with the existing management.
Will you look at merging the companies?
No, there is no such plan.
Coming back to Bharati Shipyard, how has the slowdown impacted your business?
Earlier, there were problems with some segments, such as bulk and containers, but other sectors have not been affected.
We are more in the offshore side than on the cargo side. Seventy five per cent of our business is done on the offshore side. Now we are also adding Defence. We have been doing work for the Defence sector even earlier. The scenario is changing in the country and the government is also looking at giving Defence orders to the private sector.
We have recently received Defence orders for smaller vessels such as frigates and missile boats.
Have there been any cancellation of orders?
So far we have not had any cancellations but the scenario is such that it can happen any time.
We have orders of cargo vessels but the situation with cargo vessels has slightly improved, though it is still underperforming.
Recently you bought a floating dock. What is its potential? There were others like Western India shipyard had operated floating dock earlier, but faced difficulties.
Western India Shipyard had a problem. They did not have much land with the dock. Suppose you just have the dock and no land, the working becomes very difficult.
The dock is floating, and it is fine, but it is only to bring vessels up and down.
All the fabrication and other major work has to be done outside and brought in. This is just a good addition to our facilities.
What is your order-book position?
The total on the book is Rs 5,097 crore, of which Rs 290 crore is from the Defence Department.
Outlook for the coming few quarters?
We feel it will be better than last year. We have sufficient orders for three years so, even if we don’t get orders, we won’t be affected. But that doesn’t mean we will not accept any orders.