1. INDUSTRY SCENARIO
1.1 Global Scenario Shipbuilding
Geopolitical scenario brought about by the Russia-Ukraine conflict with
the consequent impact on Global Supply chains and the waning of the COVID-19 epidemic,
were key developments of the year 2022. The inevitable transition to Green Energy and the
potential disruptive changes driven by emerging digital technologies have presented
themselves as opportunities for the industry. The shipyard is well poised to capitalize on
these opportunities to develop green and state-of the art digital ships for Defense and
Commercial applications. As per a recent study by a consultancy group, Global shipbuilding
market is valued at more than $200 Bn comprising Naval ships, Commercial ships and
recreational vessels. The Military ship market is poised to be a $907 Bn worth cumulative
industry by 2027 with demand driven primarily by Asia Pacific, eastern Europe and
sub-Saharan African countries. The global naval shipbuilding market is being driven by
international events and developments such as growing tensions in the Asia-Pacific region
that have already resulted in an increased emphasis on naval modernization programs and a
resurgence of submarine inventory proliferation by countries in the region as well as NATO
and the United States. Market growth is expected, also given the need to replace older
vessels in the naval fleet of major economies and the increase in the level of
sophistication in combat technology. The global naval shipbuilding market would peak
during the first half of this decade, driven by demand for both surface combatants and
submarines. Globally, the average age of warships is as high as twenty-five (25) years and
around 180 procurement programs are under execution in various countries.
hip Repair
Ship repair market across defence & commercial customers which
together presents an opportunity worth Rs.15,000 to Rs.16,000 crore globally in the next 6
years. Global ship repair market is currently dominated by shipyards in China, Singapore
and Middle East largely due to the availability of a skilled workforce and latest
technology. Though Indias share in global ship repair is less than 1%, the
countrys location is favourable with 7% to 9% of the global trade passing within 300
NM of the coastline. Ship repair industry being labour intensive, India has the advantage
of having a strong work force to cater for the requirement. However, the untapped
potential in the Indian ship repair market can be attributed to the presence of competing
international ship repair yards on major trade routes and a capability gap of Indian yards
in repairing certain kinds of vessels.
1.2 The Indian Scenario Shipbuilding
Indian defence shipbuilding presents a large opportunity worth more
than Rs.1.5 – Rs.2 lakh crore over the next 12-15 years. Additionally, commercial
shipbuilding also presents an opportunity worth Rs.12000 – Rs.15000 crore/year with
coastal shipping, dredgers, ferries & cruises and gas carriers emerging as the biggest
segments. Further, the Maritime India Vison 2030 (MIV 2030) targets major increase
in the utilization of National Waterways and coastal routes for increased movement of
cargo and passengers. With the number of operational waterways targeted to increase from
16 to 23 by 2030, the annual cargo movement on these waterways is expected to grow from 73
MT per Annum to over 200 MT per Annum. Annual passenger movement by ferry operations is
also projected to increase from 14 crore to 70 crore by 2030. These opportunities, along
with the National thrust to transition to Green Shipping also presents a new opportunity
for shipbuilders in the country. Defence shipbuilding in India continues to remain an area
of focus of both the public and private sector shipyards. While the five public sector
shipyards including your Company are the frontrunners in the defence shipbuilding space,
private shipyards are also undertaking specific measures to enhance competence and modify
their existing shipbuilding infrastructure to suit the needs of the Indian Armed Forces.
Among the private shipyards, L&T Shipbuilding and Shoft Shipyard, which entered the
shipbuilding market as commercial shipbuilders, have been repositioning themselves as
capable warship builders. The Indian shipbuilding industrys order book is expected
to receive a boost on account of the Indian Navy and Indian Coast Guards ambitious
ship acquisition plans as these forces plan to have a fleet of 200 ships each. Their
combined shipbuilding programme spanning over next 14-15 years, indicates that they would
place orders for more than 150 warships in the coming years. The shipbuilding policy
announced by the Government of India granting financial assistance to the shipbuilding
industry (for non-defence ships) aims to help Indian Shipbuilders to be more cost
competitive at a global level. Our government has recognised the need for further
developing transportation network of the rivers and various initiatives including those
under the new ‘National Logistics Policy is expected to provide a thrust to
Inland Water Transport (IWT) and create demands for Indian built ships.
Ship Repair
Substantial market opportunities are also anticipated in the coming
decade in the area of maintenance, repairs, refits and upgrades of Indian Navy and Indian
Coast Guard warships. To capitalize on the same, GRSE intends to increase focus on repair
and refitting of Indian Navy and Indian Coast Guard vessels. The untapped potential in the
Indian commercial ship repair market can be attributed to the presence of competing
international ship repair yards on major trade routes and a capability gap of Indian yards
in repairing certain kind of vessels. Other reasons of cost disadvantages include high
cost of financing, lack of supply of ship spares in India and technology related issues
increasing ship repair execution cycle time. However, the present global economic scenario
provides a window of opportunity to Indian ship repairers. Under ‘MIV 2030, the
government is giving a strong push with initiatives such as channelizing the domestic
demand leveraging Atmanirbhar Policy, increase and improve infrastructure through better
access to financial instruments, ease of doing business and improve efficiencies by
creating free trade depots, maritime clusters etc.
2. PRODUCTS AND SERVICES
Being a Defence PSU, GRSE is primarily engaged in construction of
warships for Indian Navy and Indian Coast Guard. Over the last 63 years, GRSE has built
around 790 platforms which include 108 warships to Indian Navy, Indian Coast Guard, Govt.
of Mauritius & Govt. of Seychelles which is the highest number of warships built &
delivered by any shipyard in the country. From building of 05-ton boats to 24600-ton Fleet
Tanker, GRSE has proved its mettle as the premier warship builder of the nation. Over the
years, GRSE has established well proven capabilities for in-house ship design & ship
building and has made significant contribution to the success of indigenous warship
construction program by successfully designing and building a multitude of complex
warships such as Frigates, Anti-Submarine Warfare Corvettes, Missile Corvettes, Fleet
Tanker, Landing Ship Tank (Large), Landing Craft Utility (LCU), Offshore Patrol Vessel,
Fast Patrol Vessels, Inshore Patrol vessel, Water Jet Fast Attack Crafts, etc. The
shipyard has also embarked on a mission to develop the capability to design and construct
zero emission vessels and one such vessel is currently under construction with delivery
scheduled by the third quarter of 2023-24. Unmanned Surface Vessels, Autonomous Underwater
Vehicles and Ship Based Drones are some of the other focus areas for the shipyard. GRSE
has created its Ship Repair Division focusing on ship repair business both in commercial
and defence segments. Towards augmentation of infrastructure for undertaking ship repair
and refits on a large scale, GRSE had signed a Concession Agreement with Syama Prasad
Mookerjee Port, Kolkata (SMPK) on 07 Oct 2021 towards development & utilisation of
three existing dry docks of Khidderpore Dry Dock (KPDD) complex of SMPK located at
Khidderpore, Kolkata. Apart from shipbuilding & ship repairs, GRSE has diversified
into Engineering Business. The engineering product profile includes pre-fabricated steel
bridges of various ranges & types, various deck machinery items such as Anchor
Capstans, Boat Davits, Pumps etc. The Engine Division of the company is involved in
Assembly/ Testing/ Overhauling of MTU Diesel Engines and manufacture of Diesel
Alternators.
3. SWOT ANALYSIS
Considering the dynamic nature of the environment, a SWOT Analysis of
GRSE was carried out and the following are identified: Strengths
(a) World class infrastructure for shipbuilding enabling simultaneous construction and
fitting out of 20 small, medium and large ships.
(b) Proven capability to produce wide spectrum of ships ranging from 5 Ton Boats to
24,600 Ton fleet tanker.
(c) Dedicated stand-alone facility (Raja Bagan Dockyard) with an area of 33 Acres and
550 M water front for concurrent construction/ fitting out of five small ships.
(d) Dedicated Fitting out Jetty Unit to concurrently undertake post-launch outfitting
of four large ships.
(e) Proven in-house capability for ship design in terms of good infrastructure with
seamless IT Network including cutting edge Design Software and a team of over a 100 Design
Engineers.
(f) Dedicated Virtual Reality (VR) Lab for detailed design and evaluation.
(g) Well established Project Management System with latest Project Management software.
(h) ISO 9001:2015, ISO 45001:2018, ISO 14001:2015 & ISO 50001:2018 certification.
(i) A robust ERP system encompassing all areas of business operations.
(j) Competent and highly skilled human resource at all levels.
(k) In-house skill development Centre.
(l) Efficient Supply Chain Management system leveraging AI based Procurement
Accelerator.
(m) Financially strong Company with a good order book visibility.
(n) A Profit making, Dividend paying and Zero Debt Company.
(o) Long standing relationships with main customers like Indian Navy and Indian Coast
Guard.
(p) MoUs with Global OEMs for localization & co-production of Marine Diesel Engines
and Waterjets.
(q) Dedicated R&D team working on new technology areas including Green Tech,
Autonomous Vessels and AI.
Weaknesses
(a) Constraints of a riverine shipyard due to limitations in the depth and width of
navigable channel with effects of silting in river.
(b) Location of the Company in thickly populated residential areas having narrow roads.
(c) Weak shipbuilding eco-system in eastern part of India.
Opportunities
(a) Acquisition plan of Indian Navy and Indian Coast Guard aimed at significant
Expansion of fleet size.
(b) Acquisition plan of MHA & IWAI.
(c) Export potential especially for small and medium size warships and patrol vessels
to South East Asia, West Asia,
African countries and Latin America.
(d) Government policy on thrust for exports including extension of Line of Credit
(LoC).
(e) Repair and Refit of Ships for Indian Navy and Indian Coast Guard
(f) Capacity and Capability enhancement through collaboration with competent private
shipyards
(g) Acquisition of/Collaboration with suitable shipbuilding or repair yards in India
and abroad.
(h) ScopeforincreasingbusinessvolumesinBridges,Engineering Products and Engines through
aggressive marketing, capacity augmentation and product diversification.
(i) New technology Products like Drones, Unmanned Surface Vessels (USVs) and Autonomous
Underwater Vessels (AUVs)
(j) Green Energy Platforms
Threats
(a) Competition from Private and Public Shipyards.
(b) Geographical location and environment.
(c) Competition for Engineering Products from small players.
(d) Inadequate local Vendors for major shipbuilding activities.
(e) Inordinate delay in supply of certain critical equipment by customer nominated
firms leading to time overrun of projects.
From the above SWOT analysis, it emerges that the Company needs to
leverage its strengths through Technology driven processes to create a competitive
advantage for maximizing available opportunities, while continuously improving internal
efficiencies and modern HR practices towards becoming a well-diversified, globally
competitive and growth focused shipyard. There are good opportunities available to the
Company to build Defence, Commercial, Coastal Security and Inland Water Vessels and also
in the field of ship repairs. New opportunities are emerging in the export market for
Defence as well as Commercial shipbuilding which needs to be leveraged through a
competitive approach. Accordingly, the Companys efforts are being focused in
exploiting such opportunities based on the Companys strength and on minimizing the
adverse effect of its weaknesses. The strengths of infrastructure and production
facilities are channelized to develop reliable vendors who can continuously support
shipbuilding in order to address the emerging opportunities and reducing the impact of
prevailing threats.
4. OUR STRATEGIES
We intend to pursue the following principle strategies to exploit our
competitive strengths and grow our business:
(a) Thrust towards cost reduction and improvement of internal efficiency leading to
enhanced productivity.
(b) Leverage New age technology in operations.
(c) Adopt Industry 4.0 suitably in business operations of the Shipyard.
(d) Focus on enhancement of Customer satisfaction through "On-time"
deliveries and exceed Quality expectations.
(e) Maximise indigenous content in warship construction.
(f) Optimise utilization of space and integrated construction facility to bring down
Build Period.
(g) Business Development through concerted marketing effort, focusing on Exports.
(h) Developing allied engineering Businesses with focused approach.
(i) Enhance Human Resource Development through identification of competency gaps and
imparting suitable training to employees keeping overall business strategy on a focal
point.
(j) Facilitate development of vibrant eco system for Shipbuilding activities in Eastern
region.
(k) Product Diversification with focus of New technology products including Green
Energy Platforms and Autonomous Vehicles.
5. SEGMENT-WISE / PRODUCT-WISE PERFORMANCE
The Ministry of Corporate Affairs vide Notification dated 23 Feb 2018
granted exemption to the companies engaged in defence production to the extent of
application of relevant Accounting Standard on segment reporting. Hence, the segment-wise
/ product-wise performance is not appended to this Report.
6. OUTLOOK
While the overall Indian Shipbuilding industry has witnessed healthy
growth in the recent past, Defense Shipbuilding segment looks promising on account of the
ship acquisition plans of the Indian Navy and the Coast Guard.
Your Company is predominantly in the defence shipbuilding segment and
has gained sufficient expertise in large, medium and small size ships required by Indian
Navy and Indian Coast Guard, in particular, and generally enjoys excellent reputation for
ships that it has built. Your Company has delivered its 108th warship (a Fast Patrol
Vessel to Indian Coast Guard) on 31 Dec 2022 thereby achieving the distinction of being
the only Shipyard in the country which has achieved the feat of crossing the coveted 100
mark.
GRSE is operating in a highly competitive environment across all its
product segments. The private shipbuilding players are competitors for orders from Defence
sectors where the Company has predominant business. Despite competition from International
and Indian Shipyards in Public and Private sector, your Company continues to make efforts
to secure shipbuilding orders at domestic and international level and is maintaining the
growth momentum. In order to move forward the ship repair activity, a Memorandum of
Understanding (MoU) followed by a concession agreement have been signed between GRSE &
SMP (KoPT) to develop and utilize 03 existing dry docks of SMP which are strategically
located. The close proximity of this facility provides a boost to the Ship repair efforts
of GRSE. Docking and repair /refit of a number of commercial as well as Indian Coast Guard
Ships were successfully done in this newly acquired facility during FY 2022-23. Under the
said agreement, both GRSE & SMPK, Kolkata look forward to developing a dynamic
partnership in exploring new business opportunities in Ship repair & refit of defence
& commercial segments, leading to revenue generation and contributing to skill
development, infrastructural up-gradation and employment generation in Kolkata. This
collaboration will also contribute to the future strategy of GRSE to take on additional
shipbuilding activities including repair & refit of ships. The Company is also giving
additional thrust to its ship repair activities by strengthening the teams.
7. MEASURES TO TACKLE CHALLENGES
The following are the major initiatives taken to ensure sustained
performance and growth:
a) Develop Design Department into a Centre of Excellence.
b) Revamping of Material Management / Supply Chain Management.
c) Vendor development & building long term Partnerships.
d) Improve Project Management System for shipbuilding projects.
e) Upgrade shipbuilding technology / processes.
f) Identify and implement new measures to improve productivity at GRSE
g) Upgrade products of Bridges Unit, Deck Machinery Unit and Diesel Engine Plant
h) Business Development through concerted marketing effort for Exports.
i) Developing Businesses other than shipbuilding as separate profit centres
j) Creating Strategic Partnership for Export / Special Projects
k) Measures for increasing VoP from Ship Repair (SR) Business
l) Measures for increasing VoP of Portable Bridges, Deck
Machinery, marine pump and Diesel Engine Businesses
m) Achieve 100% compliance for working on PLM software
n) Reduction in Revenue Expenditures
o) Improvement of Ease of Doing Business (EoDB)
p) Efficient Risk Analysis and Mitigation Plans
q) Leverage new age Technology (ICT) for better management of operations
r) Shipyard Capacity Enhancement
s) Creation of a "Innovation & New Technology" department
t) Leverage Indian Startup eco system to facilitate new technology adaptation
8. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
The Company has an adequate system of internal control implemented
towards achieving effectiveness and efficiency of operations, reliability of financial
reporting and compliance with applicable laws and regulations which is appropriate to the
nature and size of the business. The system comprises well defined organisation structure
and procedures issued by management covering all vital and important areas of activities.
The internal control system ensures that the resources of the company are optimally used
for business purpose and safeguard from loss, misuse and physical impairment. Process
owners are responsible to ensure compliance with these policies & procedures. An
independent Internal Audit mechanism is in place for conducting audit of various
operational and financial matters and for monitoring compliances of companys
procedures and policies with well-defined annual audit programme. Based on the report of
Internal Auditors, process owners undertake corrective action(s) in their respective
area(s). Significant audit observations and corrective action (s) thereon are reported to
the Audit Committee of the Board of Directors. The Company is also subject to Audit by
Comptroller & Auditor General of India. The Audit Committee reviews adequacy and
effectiveness of your Companys internal control environment and monitors the
implementation of audit recommendations.
9. RISK MANAGEMENT
The Company has a Board approved Risk Management Policy and
comprehensive Enterprise Risk Management framework in place for identification,
assessment, treatment and reporting of the risk. The Companys Enterprise Risk
Management (‘ERM) process is based on ISO 31000 standards. Risk Management
Committee (‘RMC) of the Board provides oversight and sets the tone for
implementing the ERM framework across the organisation. It reviews the status of key
risks, progress of ERM implementation across locations, as well as risk governance. The
key risks faced by the company are analysed by the Risk Management Steering Committee
(RMSC), which is responsible for adopting & implementing the risk management framework
and leading the risk management initiative across the company. The Chief Risk Officer
(CRO) is the convener of RMC & RMSC. Risk management committees at unit level analyse
risks associated with their respective areas, prepare mitigation plans, ensure
implementation and also inform the top management. The Committee updates the Board from
time to time on risk management and mitigation to ensure that executive management
controls risk by means of a properly designed framework. The major risks and concerns of
the Company are:
Delay in the deliveries may materially and adversely affect our
reputation, operations and financial conditions.
Unsatisfactory quality of work performed by subcontractors could result
in a negative impact on our business, reputation and financial conditions.
Non-availability of critical imported raw material in the international
market coupled with exchange rate fluctuation and volatile prices adversely affects the
financials and the competitive edge of the Company.
The Company is operating its business on fixed price contract and
competitive bidding basis. Since, many of the projects are long construction period, the
Company will not able to pass on the increase in price of the raw material and equipment
to its customer.
Changing laws, rules and regulations and legal uncertainties, may
adversely affect our business and future earnings.
The waterfront of our Company is prone to siltation and involves
constant maintenance of dredging to maintain the water depth.
Dependence on limited customers for new contracts and quantum of
allocation of Defence budget.
Risk of natural disasters and pandemic.
10. DISCUSSION AND ANALYSIS ON FINANCIAL PERFORMANCE WITH RESPECT TO
OPERATIONAL PERFORMANCE
The Performance Highlights of the Company during the year ended 31 Mar
2023 are as follows:
| Particulars |
As on 31 Mar 2023 |
As on 31 Mar 2022 |
| Gross Income |
2,762.98 |
1,915.77 |
| Revenue from Operations |
2,561.15 |
1,754.45 |
| Value of Production |
2,547.84 |
1,745.28 |
| Gross Profit |
350.86 |
294.38 |
| Profit Before Exceptional Items & Tax |
305.22 |
264.93 |
| Exceptional Item |
- |
-7.69 |
| Profit Before Tax |
305.22 |
257.24 |
| Tax Expense |
77.09 |
67.71 |
| Profit After Tax |
228.12 |
189.53 |
| Net Worth |
1,413.82 |
1,257.89 |
| Book Value per Share (in Rs.) |
123.42 |
109.81 |
| Earnings Per Share (in Rs.) |
19.91 |
16.55 |
| Dividend Per Share (in Rs.) |
6.20 |
5.80 |
Ratios Analysis:
| Ratios |
As at 31 March, 2023 |
As at 31 March, 2022 |
% of Variance |
| Debtors Turnover |
25.33 |
10.65 |
138% |
| Inventory Turnover |
1.20 |
1.68 |
-29% |
| Interest Coverage Ratio |
48.10 |
181.04 |
-73% |
| Current Ratio |
1.07 |
0.93 |
15% |
| Debt Equity Ratio |
0.007 |
0.008 |
-13% |
| Gross Profit Margin (%) |
12.70 |
15.36 |
-17% |
| Net Profit Margin (%) |
8.26 |
9.89 |
-17% |
| Return on Net Worth (%) |
16.14 |
15.07 |
7% |
| Import and Export |
As on 31 Mar 2023 |
As on 31 Mar 2022 |
| Imports made during the year |
461.24 |
194.88 |
| Exports made during the year |
59.78 |
60.94 |
Debtor Turnover: Debtors turnover ratio in FY 22-23 has been
improved to 25.33 as compared to 10.65 in FY 21-22. Trade Receivables have reduced during
the year on realization of outstanding receivables from various customers.
Inventory Turnover Ratio: Around 15 ships under various projects
are under concurrent construction at GRSE and business partners premises. Hence,
inventory has increased almost by 143%.
Interest Coverage Ratio: Interest charge on Bank Overdraft and
Finance Cost Increased by Rs. 504 lakh during the year.
Gross Revenue registered a rise of 44.60% from Rs. 1,915.77
crore in 2021-22 to Rs. 2,762.98 crore in 2022-23.
Value of Production has increased from Rs. 1,745.28 crore in
2021-22 to Rs. 2,547.84 crore in 2022-23.
Net Profit (PBT) registered a rise of 18.65%, increased from Rs.
257.24 crore in 2021-22 to Rs. 305.22 crore in 2022-23.
Value Addition per Employee has increased from Rs. 45.30 lakh in
2021-22 to Rs. 54.60 lakh in 2022-23.
Book Value per share has increased from Rs. 109.81 in 2021-22 to
Rs. 123.42 in 2022-23.
11. HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS
The details regarding Human Resource Development and Industrial
Relations are more specifically covered in the Directors report.
12. MANPOWER
The employee strength of your Company was 1747 persons as on 31 Mar
2023.
| Total Employees as on 31 Mar 2023 |
Officers |
Supervisors |
Office |
|
Workmen |
|
|
|
|
Assistants |
Direct |
Indirect |
Total |
| 1,747 |
491 |
181 |
56 |
811 |
208 |
1,019 |
14. ENVIRONMENT PROTECTION
Your Company contributes in all aspects for clean and green environment
by systematically integrating best practices to bring in cleaner technologies and greening
the environment through recycle, reuse and reduce approach. Effluent and Sewage Treatment
Plant are being operated. Various environmental protection activities such as water
conservation, tree plantation, disposal of hazardous waste and metal scrap, e-waste
management and use of solar energy have been carried out.
14. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
EARNINGS AND OUTGO
Relevant information in this regard is disclosed in the
‘Directors Report.
15. CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY (CSR)
Relevant information in this regard is disclosed in the section
‘Annual Report on CSR Activities provided at Appendix – "E" of
the Directors Report.
Cautionary Statement- Certain statements made in the Management
Discussion and Analysis Report related to the Companys objectives, projections,
outlook, expectations, estimates and other may constitute ‘forward looking
statements within the meaning of applicable laws and regulations. Actual results may
differ from such expectations, projections and so on whether expressed or implied. Several
factors could make significant difference to the Companys operations. These include
climatic conditions and economic conditions affecting demand and supply, government
regulations and taxation, natural calamities and so on over which the Company does not
have any direct/indirect control.
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