The state-run Mazagon Dock and private shipbuilder Pipavav Defence today formed the country’s first public private partnership venture to build warships and submarines for the Navy.
Pipavav Defence & Offshore Engineering Company (PDOL),formerly known as Pipavav Shipyard,will own an equal stake in the joint venture christened Mazagon Dock Pipavav,along with the state-run dockyard. The partnership will also help Mazagon Dock (MDL) to fast-track delivery of its Rs 1 lakh crore order book.
“This partnership is formed primarily to fast-forward the process of warships and submarine contracts held currently by the MDL,” PDOL Chairman Nikhil Gandhi told reporters here.
“The PDOL board unanimously approved setting up of the joint venture company with MDL to be named as Mazagon Dock Pipavav Ltd,” Gandhi said.
Apart from carrying out work for the Navy,the JV will also look at export orders from “friendly countries”,Gandhi said adding Pipavav has the capacity to carry out work on a dozen submarines and warships each at a given time due to its modular yard.
The JV will also be looking at bidding for future projects of the Navy,Gandhi said,noting the Navy is estimated to purchase assets worth USD 30 billion in the near-term.
Modalities of the joint venture like the equity to be brought-in by the partners,what kind of work to be undertaken,the quantum of work to be undertaken by Pipavav etc were not disclosed by Gandhi,saying work on many issues is under progress.
Reacting to the announcement,the shares of the company jumped 11.31 percent to close at Rs 91 on the BSE after hitting a high of Rs 92 intra-day on a day when the main gauge Sensex plunged 365 points or 2.17 percent.
Pipavav will not be investing any new fund for carrying out the construction of the ships for the Navy,apart from the USD 1-billion which it is already doing for its yard,Gandhi said.
Around USD 750 million has already been invested while the company has achieved financial closure for the remaining USD 250 million which will be utilised for building its second dry-dock,Gandhi said.
Pipavav’s present order book stands at USD 1.5 billion of which USD 665 million are from a project for the Navy bagged three months ago,Gandhi said.
Company Vice-chairman Bhavesh Gandhi said the company is presently looking to raise around Rs 1,200 crore in debt which will take up its debt equity ratio to 1.2:1 from the present 0.8:1.
On its plans to list overseas,Nikhil Gandhi said the company will soon be appointing merchant bankers but did not give any timeline for it or spell out the markets that it is looking at.
Pipavav has been on expansion spree following government clearance in March for building warships,submarines among others for the Navy. Recently,it had got orders worth Rs 2,975 crore to design and construct five naval offshore petrol vessels from the Navy.
The company has also roped in foreign partners like US-based Northrop Grumann and England-based Babcock Group to increase its presence in the defence segment.
Last December,the company had signed a protocol with Russian government arm Rosoboron Export for defence co-operation.
According to the company,it is the only shipyard in the private sector which has modular construction facilities and a huge dry dock to receive the government licence.