L&T Shipbuilding, part of the $16-billion engineering conglomerate Larsen & Toubro (L&T), is eyeing around Rs 9,000 crore orders over the next three years, mostly from the Navy.
L&T diversified into shipbuilding earlier this decade and is yet to make money in the segment.
The company, which has two facilities — at Kattupalli near Chennai and Hazira in Gujarat — is also expecting revenues to the tune of Rs 3,000 crore over the next three years, L&T Shipbuilding Managing Director and Chief Executive B Kannan told PTI.
“There was a slowdown in the shipbuilding industry for quite some time both in the commercial as well as defence sectors.”
“But with the government now opening the defence sector to private players, we see a huge opportunity and expect to bag a sizeable amount of orders to be awarded by the Navy in the coming years,” he said.
The company is expecting to bag at least Rs 9,000 crore worth of orders over the next three years, he said, adding the government’s focus on improving national security and ring-fence the Indian Ocean Region will drive growth in the sector.
“While bids for some contracts are already prepared, some may be finalised in the coming months. Some of these orders were the ones which were to be handed out between 2013 and 2015 but have been delayed and have now started moving. We expect there will be momentum from next year and some more ship orders will be coming in,” Kannan said.
“Currently very few orders are being given to the private sector. We hope over time, there would be level playing field between the public and private sector and the latter would be given more orders. It’s only time before private sector shipyards demonstrate their capabilities in a very strong manner,” Kannan said.
The company is also expecting to bag one contract to develop amphibious assault ships, also called landing platform docks (LPD).
The defence ministry has issued an RFP for developing four such LPDs, out of which two will be developed by private sector shipyards while the remaining will be produced by Hindustan Shipyard.
Each of these ships, between 35,000 and 40,000 tonnes, will cost around Rs 6,000 crore and are expected to be delivered over the next 10 years.
“We are at L1 position in one of these projects and we hope we will bag the contract when it is finalised next month,” he said.
L&T Shipbuilding is currently executing projects worth around Rs 3,000 crore, which includes a Rs 660-crore contract for design and construction of high-speed patrol vessels for the Vietnam Border Guard.
“We are also executing three orders from the domestic market which are at various stages of completion. The order in Vietnam is our first export order, to be delivered in the next two-and-half months. With these orders in hand, we expect to garner revenue of around Rs 3,000 crore in the next three years,” Kannan said.
He further said this first export order opens a gateway to different markets and a large number of systems as it has to deliver the products customised according to the client’s demands.
Private sector players like Adani, L&T and Reliance Defence have been showing interest in the defence sector after the government allowed private participation.
Last December, the Cabinet had cleared a Rs 4,000-crore 10-year policy aimed at boosting commercial shipbuilding and ship repair industry.
The policy includes grant of ‘right of first refusal’ for domestic shipyards for government purchases, tax incentives and grant of infrastructure status for shipbuilding and ship repair industry.
“A policy for the grant of financial assistance to shipyards, after delivery of ship, to counter cost disadvantages at 20 per cent of the contract price or the fair price, whichever is lower; such assistance is to be reduced at three percent every three years and will be given for all types of ships,” the Shipping Ministry had said.