Sucheta Dalal :Indian shipbuilders eying defence orders
Sucheta Dalal

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Indian shipbuilders eying defence orders  

November 13, 2009

The shipbuilding industry has been reeling under pressure with no sign of revival in demand; it also expects a round of cancellations and delays in scheduled deliveries due to excess capacity.  With lower demand for commercial shipbuilding in India, many shipbuilders like Larsen & Toubro (L&T) Shipbuilding Ltd, Pipavav Shipyard Ltd and State-run Hindustan Shipyard Ltd, are eying orders from the defence sector. Industry experts also feel that orders for new ships from the defence services could be higher than commercial vessels.

"Business for shipbuilding units in India is slowly starting to pick up. The demand would be more domestic than international. In domestic demand, there could be order inflow both from the commercial and defence sector, but I think, it would be more from defence," said Commodore Naresh Kumar, chairman and managing director, Hindustan Shipyard.

L&T Shipbuilding, a unit of the country’s largest engineering company L&T, is also moving ahead with its shipbuilding project in Tamil Nadu, which will take on defence contracts. "The first target  will be naval shipbuilding. We are hopeful that we will get through with building the submarines to be followed by ship repair and refits. We are also interested in commercial shipbuilding, but would be more selective in it," said MV Kotwal, director, L&T.

L&T Shipbuilding facilities at Hazira in Gujarat and Kattupalli near Chennai have the capacity to take up construction of all types of warships, including submarines. In September, AM Naik, the chairman and managing director, L&T told the media that the company will bid for building the Indian Navy’s second line of conventional submarines.

"Our shipyards in Hazira and Kattupalli have the capability to take up construction of vessels of about 7,000 to 9,000 tonnage and even warships of the size three or four times these vessels," Naik had said.

According to a PTI report, the Indian Navy is planning to procure five midget submarines for the Marine Commandos (MARCOS) to strengthen its capabilities of carrying out special underwater operations in high seas and enemy harbours. The Navy has already initiated the process of procuring these vessels and recently called for proposals from Indian shipyards including Hindustan Shipyard, ABG and Pipavav shipyards. Initially, the Navy is planning to acquire five vessels but the inductions can be doubled later.

Indian shipbuilders are expecting big orders from the defence sector, but analysts believe that only those with the capability and technical knowledge to build vessels required by the Navy would get the orders.

“Although the defence orders could be large, meeting the pre-qualification requirements for building such vessels would be a key factor. Shipyards like Pipavav Shipyard are banking on orders from the defence sector. I think very few shipyards in India have the necessary infrastructure for defence needs," said Kunal Lakhan, analyst, KR Choksey Shares and Securities Pvt Ltd.

"We do not expect significant revival in the shipbuilding industry for the next couple of years. The defence sector offers huge potential for Indian shipyards. We believe that amongst the private players, Pipavav, with its state-of-art facilities, is best placed to secure more orders from defence," added other analyst from a leading brokerage.
–Yogesh Sapkale with Amritha Pillay [email protected]

-- Sucheta Dalal