Garden Reach Shipbuilders & Engineers Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

1. INDUSTRY SCENARIO

1.1 Global Scenario Shipbuilding:

The global shipbuilding industry is witnessing a resurgence, driven by naval modernization, demand for greener and autonomous vessels, and global trade recovery. The global shipbuilding market size was valued at USD 150.42 billion in 2024 and is expected to grow from USD 155.58 billion in 2025 to reach USD 203.76 billion in 2033, growing at a CAGR of 3.43% over the forecast period 2025-2033. This anticipated growth is driven by economic growth in emerging markets, growth of sea borne trade, global focus on de-carbonisation and supportive government policies. Surge in naval spending amid geopolitical tensions, proliferation of autonomous and smart ships, thrust towards green vessels including retrofitting of older vessels are key indicators of resurgence of the industry. It is evident that the future of shipbuilding lies in innovation, sustainability, and strategic investments in both infrastructure and skilled workforce. With focus on innovation, digitalization and automation in ship design and construction, to achieve enhanced productivity and competitiveness, the shipyard is well poised to capitalize on the emerging opportunities.

Ship Repair

Ship repair market across defence & commercial customers which together presents an opportunity worth around Rs.15,000 crore globally in the next 5 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. The shipyard has focused on increasing its ship repair infrastructure to tap opportunities in this important sector.

1.2 The Indian Scenario Shipbuilding

Indian defence shipbuilding presents a large opportunity worth more than Rs.1.5 lakh crore over the next decade. Additionally, commercial shipbuilding also presents an opportunity worth Rs.12,000 - Rs.15,000 crore/year with coastal shipping, dredgers, ferries & cruises and gas carriers emerging as the biggest segments. Further, the Maritime India Vision 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. To achieve objectives of the Government of Indias Sagarmala program, it is estimated that Indias existing coastal and inland waterways fleet would need to be tripled over the next decade. This has the potential to create a shipbuilding demand of about 12.75 million CGT. These opportunities, along with the National thrust to transition to Green Shipping also presents a new opportunity for shipbuilders in the country. The shipbuilding policy announced by the Government of India granting financial assistance to the shipbuilding industry (for nondefence 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. Your company is leveraging these initiatives of the government to make a mark on the commercial shipbuilding sector as well.

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 15 years, indicates that they would place orders for more than 150 warships in the coming years.

Ship Repair

To capitalize on the market opportunities anticipated in the area of maintenance, repairs, refits and upgrades of Indian Navy and Indian Coast Guard ships, 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 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, increasing and improving infrastructure through better access to financial instruments, enhancing ease of doing business and improving efficiencies by creating free trade depots, maritime clusters etc. Your company remains committed to leveraging these initiatives of the government and continue to make major contributions to nation building.

2. PRODUCTS AND SERVICES

Being a Defence PSU, GRSE is primarily engaged in construction of warships for Indian Navy and Indian Coast Guard. From building 05-ton boats to a 24600-ton Fleet Tanker, GRSE has proved its mettle as the premier warship builder of the nation. Over the last 65 years, GRSE has built around 800 platforms which include 111 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. Over the years, GRSE has demonstrated top of the line 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 Vessels, Water Jet Fast Attack Crafts, Survey Vessels (Large) etc. The shipyard has also embarked on a mission to develop the capability to design and construct zero emission vessels and one such vessel "Dheu" (the largest zero emission ferry in the country) is already making news as she operates successfully on the river Hoogly. 13 more green ferries are currently under construction. Unmanned Surface Vessels, Autonomous Underwater Vehicles and Ship Based Drones are also some of the other focus areas for the shipyard, with various advanced vehicles already developed and included in the product portfolio.

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. Further, one more Dry Dock is being taken over from SMPK to provide a boost to the ship repair segment.

Apart from shipbuilding & ship repairs, GRSE has diversified into Engineering Business. The engineering product profile includes pre-fabricated steel bridges of various ranges & types and various deck machinery items such as Anchor Capstans, Boat Davits etc. The Engine Division of the company is involved in Assembly/ Testing/ Overhauling of Marine Diesel Engines and manufacture of Diesel Alternators.

GRSE has also diversified into weapons. An order for 30 mm Naval Gun is currently under execution in collaboration with local firm with technical support from an established foreign entity. The first gun has already been delivered successfully to the Navy after extensive testing and trials.

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) Possession to four Shipyards in Kolkata including three dedicated for Shibuilding and one for ship repairs.

(b) Dedicated Fitting out Jetty to concurrently undertake postlaunch outfitting of four large ships.

(c) ISO 9001:2015, ISO 45001:2018, ISO 14001:2015 & ISO 50001:2018 Certification.

(d) Proven capability to produce a wide spectrum of ships ranging from 5-ton boats to 24600-ton fleet tankers.

(e) Proven in-house capability for ship design in terms of good infrastructure with a seamless IT Network including Design Software.

(f) Dedicated Virtual Reality (VR) Lab for detail design evaluation.

(g) Robust E-Procurement and e-auction system.

(h) Long-standing relationships with main customers like Indian Navy and Indian Coast Guard.

(i) Well-established planning function leveraging the latest Project Management Software.

(j) Dedicated Export Cell for a multi-fold increase in the export of defence & commercial ships and engineering products.

(k) Leveraging the immense potential of startup eco system in the country for development of innovative solutions in shipbuilding, through GRSE Accelerated Innovation Nurturing Scheme (GAINS).

(l) MoUs with Centres of Excellence to enhance R&D capabilities.

(m) MoU with global firms for Indigenous development of HighSpeed Diesel Engines and Waterjet propulsion systems.

(n) Having State of Art Infrastructure for performing various operational activities.

Weaknesses

(a) Constraints of a riverine shipyard due to limitations in the depth and width of navigable channels with effects of silting in rivers.

(b) Location of the company in densely populated residential areas having narrow roads.

(c) Weak shipbuilding ecosystem in the 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 and thrust given by GoI initiatives such as Sagarmala and Jal Marg Vikas.

(c) Government policy on thrust for exports including extension of Line of Credit (LoC).

(d) Export potential especially for small and medium-size warships and patrol vessels to South East Asia, West Asia, African Countries, and Latin America.

(e) Repair and Refit of Ships for the Indian Navy and Indian Coast Guard has significant business potential.

(f) Capacity and Capability enhancement through collaboration with private shipyards.

(g) Scope for increasing business volumes in Bridges, Engineering Products, and Engines through aggressive marketing, capacity augmentation, and product diversification.

(h) Capability of developing basic design of varied range of vessels which can be utilized in rendering design and associated services to other shipyards enabling the Design Office to become a separate cost centre.

(i) Growing market for autonomous vessels and green ships.

(j) Leveraging strategic collaboration with other shipyards, such as the MoU with Modest shipyard to expand capacity.

Threats

(a) Competition from Private and Public Shipyards.

(b) Large dependency on customers at every stage of shipbuilding.

(c) Relatively low availability of ancillary industry locally to support major shipbuilding activities.

(d) Equipment delivery delays due to nomination of specific firms by customer, with potential impact of timelines.

(e) Lack of congruence with respect to the accepted Build specification of the customer.

(f) Competition for Engineering Products from small players.

(g) Emerging private sector firms in the Indian shipbuilding industry and their impact on the Indian Navy and Coast Guard shipbuilding/ship repair market.

From the above SWOT analysis, it emerges that the Company needs to leverage its strengths through Technology driven processes and strategic partnerships 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 significant 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 targeted competitive approach. Accordingly, the Companys efforts are being focused in capitalizing on such opportunities based on the Companys strengths and on minimizing the adverse effect of its weaknesses. The inherent strength of infrastructure and production facilities are also being channelized to develop reliable vendors who can continuously support shipbuilding in order to successfully capitalize on 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) Shipbuilding capacity augmentation through creation of new shipbuilding facilities on the Eastern and Western Seaboard.

(b) Thrust towards cost reduction and improvement of internal efficiency leading to enhanced productivity.

(c) Leverage new and emerging technologies in operations.

(d) Adopt Industry 4.0 suitably in business operations of the Shipyard.

(e) Focus on enhancement of Customer satisfaction through "On-time" deliveries and exceed Quality expectations.

(f) Maximise indigenous content in warship construction.

(g) Optimise utilization of space and maximising use of integrated construction to bring down Build Period.

(h) Business Development through concerted marketing effort, focusing on Exports.

(i) Developing allied engineering Businesses with focused approach.

(j) Enhance Human Resource Development through identification of competency gaps and imparting suitable training to employees keeping overall business strategy on a focal point.

(k) Facilitate development of vibrant eco system for Shipbuilding activities in Eastern region.

(l) Product Diversification with focus of new technology products including Green Energy Platforms and Autonomous Vehicles.

(m) Fostering working partnerships with startups/industry to minimise technology gaps and leverage complementary strengths to develop cutting edge products.

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

The Shipbuilding segment continues to look promising both in the defence and non-defence segments. In this defence segment, this is primarily on account of the ship acquisition plans of the Indian Navy and the Coast Guard. A slew of initiatives already implemented and under implementation by the GoI are expected to boost the Indian shipbuilding industry in the nondefence segment.

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 110^th warship, (Survey Vessel Large INS Nirdeshak to Indian Navy) on 08 Oct 2024, a unique achievement unsurpassed by any shipyard in the country.

GRSE is operating in a highly competitive environment across all its product segments. 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 a healthy growth momentum.

In order to move forward the ship repair activity, the Concession agreement with SMP (KoPT) to develop and utilize 03 existing dry docks of SMP is being effectively utilized to boost the ship repair efforts of GRSE. Docking and repair /refit of a number of commercial as well as Indian Coast Guard Ships were successfully undertaken in this newly acquired facility during FY 2024-25. This collaboration will also contribute to the shipyards capability to take on the emerging opportunities in shipbuilding, repair and refits. The Company is also giving additional thrust to its ship repair activities by strengthening the teams.

In addition, the company has also created a dedicated "Commercial Shipbuilding" division to provide impetus in this segment with huge market potential, especially for exports. Also, your company has focused on new product development in the segments of autonomous & green energy platforms and portable steel bridges.

7. MEASURES TO TACKLE CHALLENGES

The following are the major initiatives taken to ensure sustained performance and growth:

a) Streamlining Material Management/Supply Chain Management with focus on "Ease of doing Business".

b) Vendor development & building long term partnerships.

c) Improve Project Management System for shipbuilding projects through creation of dedicated Project Management Teams.

d) Upgrade shipbuilding technology/processes through new technology adoption

e) Upgrade products of Bridges Unit, Deck Machinery Unit and Diesel Engine Plant

f) Business Development through concerted marketing effort for Exports, specifically by appointing MRs in targeted nations.

g) Product diversification with products ranging from "Warships to Weapons"

h) Creating Strategic Partnerships for Export/Special Projects

i) Measures for increasing VoP from Ship Repair (SR) Business

j) Measures for increasing VoP of Portable Bridges, Deck Machinery and Diesel Engine Businesses

k) Achieve 100% compliance for working on PLM software

l) Reduction in Revenue Expenditures

m) Efficient Risk Analysis and Mitigation Plans

n) Leverage new age Technology (ICT) for better management of operations

o) Shipyard Capacity Enhancement

p) Creation of a "Innovation & New Technology" department

q) Leveraging the Indian Startup eco system to facilitate new technology adaptation

r) Creation of Commercial Shipbuilding Department.

8. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company maintains adequate internal controls implemented towards achieving effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations which are appropriate to the nature and size of the business. The internal control framework has been designed to provide reasonable assurance with respect to recording and providing reliable financial and operational information, complying with applicable laws, safeguarding assets, executing transactions with proper authorisation and ensuring compliance with corporate policies. The Company has laid down Standard Operating Procedures and policies to guide the operations of each of its functions, to ensure integrity in conducting its business, ensuring compliance with policies, accuracy and completeness in maintaining accounting records, prevention and detection of frauds and errors. The efficacy of the various policies is evaluated for the dynamic and evolving business environment. Process owners are responsible for ensuring compliance with these policies and procedures. Continuous internal monitoring mechanisms ensure timely identification of risks and issues.

The Company has an Internal Audit Department, which monitors compliances of Companys procedures, and policies. The Audit Committee of the Board reviews the annual internal audit plan covering core business operations, corporate departments as well as support functions and significant audit observations are reported to the Audit Committee of Board of Directors. Significant audit observations and follow up actions thereon are reported to the Audit Committee. 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 in place a Board approved Risk Management Policy and Charter and implemented a structured risk management system. 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.

10. DISCUSSION AND ANALYSIS ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Performance Highlights of the Company during the year ended 31 Mar 2025 are as follows:

		(Rs. in crore)
Particulars	As on 31 Mar 2025	As on 31 Mar 2024
Gross Income	5,410.53	3,892.26
Revenue from Operations	5,075.69	3,592.64
Value of Production	5,070.98	3,588.46
Gross Profit	756.10	533.74
Profit Before Tax	703.29	480.92
Tax Expense	175.89	123.65
Profit After Tax	527.40	357.27
Net Worth	2,079.26	1,673.44
Book Value per Share (in )	181.51	146.09
Earnings Per Share (in )	46.04	31.19
Dividend Per Share (in )	13.85	9.36

Ratios Analysis:

Ratios	As at 31 March, 2025	As at 31 March, 2024	% of Variance
Debtors Turnover	22.38	29.32	-24
Inventory Turnover	1.25	0.99	26
Interest Coverage Ratio	69.13	42.86	44
Current Ratio	1.17	1.12	4
Debt Equity Ratio	0.004	0.005	-20
Gross Profit Margin (%)	13.97	13.71	2
Net Profit Margin (%)	10.39	9.94	5
Return on Net Worth (%)	28.11	23.14	21

 

		(Rs. in crore)
Import and Export	As on 31 Mar 2025	As on 31 Mar 2024
Imports consumed during the year	419.00	332.88
Exports made during the year	73.63	46.90

• Gross Revenue registered a rise of 39.01% from Rs. 3,892.26 crore in 2023-24 to Rs.5,410.53 crore in 2024-25.

• Value of Production has increased by 41.13% from Rs.3,588.46 crore in 2023-24 to Rs.5,070.98 crore in 2024-25.

• Net Profit (PBT) registered a rise of 46.24%, increased from Rs.480.92 crore in 2023-24 to Rs.703.29 crore in 2024-25.

• Inventory Turnover: Companys turnover has been significantly increased whereas average inventory levels remained similar to previous year. Hence, Inventory turnover ratio has improved.

• Interest Coverage Ratio: Interest expenses/ Finance costs are low and profits have been increased resulting higher interest coverage.

• Return on Net Worth: The Profits After Tax (PAT) increased from Rs.357.27 crore in 2023-24 to Rs.527.40 crore in 2024-25 resulting into increase in Return on Net Worth.

• Value Addition Per Employee has increased from Rs.80.97 lakh in 2023-24 to Rs.87.56 lakh in 2024-25.

• Book Value per share has increased from Rs.146.09 in 2023-24 to Rs.181.51 in 2024-25.

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 1660 persons as on 31 Mar 2025.

				Workmen
Total Employees as on 31 Mar 2025	Officers	Supervisors	Office Assistants	Direct	Indirect	Total
1690	525	189	60	767	149	916

13. ENVIRONMENT PROTECTION

Your Company contributes in all aspects towards a 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 Plants are being operated. Various environmental protection activities such as water conservation, tree plantation, disposal of hazardous waste and metal scrap, e-waste management and maximizing use of solar energy are also being diligently 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.