The debt-laden ABG Shipyard plans to focus on the more lucrative defence shipbuilding orders and exit from commercial shipbuilding business eventually. This is part of its plans to restructure operations, post entering corporate debt restructuring last year.
Speaking to FE, ABG’s executive director Dhananjay Datar said that even as the commercial shipbuilding market is not looking good, given the focus on ‘Make in India’, orders from defence are expected to be on the rise, which is what ABG Shipyard would like to cash on.
The company has close to 42 orders for commercial ships, of which most are in the oil and gas industry. The value of these orders stands at a staggering $2.3 billion. However, with softening of demand in the global markets, the company saw a series of order cancellations leaving a huge inventory pile up. “We currently have only 30% of the commercial ship building orders alive,” Datar told FE. However, 70%, or $1.6 billion worth of contracts, have been cancelled.
He said that the company is talking to potential buyers to work out an escrow account mechanism where the buyers can put the entire money required for the ship in an escrow account and release payments as and when ABG requires for completing the order. Datar is hopeful that ABG will be able to clear the commercial ships inventory in the next 2-3 years.
He said that the company’s present focus is on delivering its naval orders. ABG has R1,200 crore worth of shipbuilding orders from the Indian Navy and the Coast Guard. The order includes cadet training and battle practice ships for the Indian Navy and few ships for the Coast Guard.
Datar said of these, one coast guard ship is expected to be delivered in two months. “The value of order to be delivered in two months will be around R200 crore,” he said.
The company is set to deliver a rig to the Essar Group by 2015-end. The $220-million order is expected to pare ABG’s debt to some extent.
