I. Industry Structure and Developments:
India has a long coastline of 7517 km with about 200 ports spread over the east and
west coast of India. About 95% of India’s trade by volume and 70% by value are
transported by sea. As per the Report of the D.G. Shipping, Quarterly ended 31.12.2013,
the size of the Indian merchant shipping fleet is about 1200 vessels of 15.18 mn DWT
(10.38 mn GT) as on 31.12.2013 consisting of 836 coastal vessels and 364 overseas vessels
of Indian flag. The Indian Shipping Industry continues to be one of the world’s most
efficient and cheapest means of transportation.
The Shipping Industry in India is regulated by the Merchant Shipping Act, 1958. As this
Industry is of national importance, it has been included in the Schedule -1 of the
Industries (Development & Regulation) Act, 1951 as amended. The Ship Repair Units
("SRUs") are important to repair and maintain the Indian and foreign shipping
fleet touching Indian Ports. The Central Government is seeking to develop these two
sectors further in the following ways:
(i) Policy Press Note for Ship Repair Units (1990 Series): The Central Government has
extended continuous support and concessions by assuring the Shipping Industry of adequate
number of modern shipyards, shiprepair infrastructure and technology for the periodical
repairs and maintenance required by them under the maritime regulations. The Ministry of
Shipping has therefore issued a Policy Press Note (1990 Series) dated 10.10.1990 for
"Promotional measures and concessions for Indian Shiprepair Units" extending
various concessions and duty exemptions such as customs and central excise duty. The
Central Government has so far registered about 35 Ship Repair Units in India.
(ii) Draft Indian Ports (Consolidated) Bill, 2011: The Central Government, Ministry of
Shipping has put up for public comments the Indian Ports (Consolidated) Bill, 2011 to
replace The Indian Ports Act, 1908 and The Major Ports Act, 1963, with a view to simplify
and streamline the port regulations in India, covering 200 major and non-major ports. The
new Act will replace the Tariff Authority of Major Ports (TAMP) by the Port Regulatory
Authority and corporatize the Port Trusts. This is a welcome step for the Shipping
Industry.
(iii) The Maritime Agenda 2010-20: The Central Government, Ministry of Shipping has
also released its Maritime Agenda 2010-20 in January, 2011 which has a significant long
term impact on the Indian Maritime Industry as it seeks: (i) to improve the facilities for
the 12 major ports and 187 minor ports in India through massive investment of Rs. 2,87,000
crore through the PPP route to ensure higher growth in sea bourn traffic at ports (ii) to
increase the drafts in major ports to not less than 14 metres to cater to the larger
vessels (iii) proposes to continue the shipbuilding subsidy and grant the Infrastructure
Industry status to Shipbuilders and Shiprepair units to achieve an ambitious target of 5%
as India’s share in the global shipbuilding market by 2020 (iii) development of
coastal trade for lower cost benefit.
(iv) Taxation Benefits: The Central Government has proposed a measure of relief to the
Shipbuilding Industry in the Budget 2013 exempting vessels from excise duty. Consequently,
there will be no countervailing duty on imported ships and vessels. The Central Government
had introduced the Negative List w.e.f. 01.07.2012, granting exemption to service
providers for repair of vessels in the nature of manufacture under the provisions of the
Central Excise Rules or the vessels belong to the Government like Navy and Coast Guard
vessels.
II. Company Overview
The Major Ports Act, 1963 requires every port to have a shiprepair and dry dock
facility for vessels calling at the ports. As the Mormugao Port Trust (MoPT) has no ship
repair and dry dock facility of its own, your Company was invited by tender to set up a
composite shiprepair and dry dock facility in the Mormugao Port under a 25 year license
agreement dated 05.04.1993. Your Company pays the Port the annual license fees, hire of
port water area and use of port services like tugs and pilots for vessel movements.
Your Company operates a modern composite shiprepair yard at berth Nos. 1, 2, 3 and
4(part) under a license agreement dated 05.04.1993 for a period of 25 years with the
Mormugao Port Trust at Mormugao Harbour, Goa. The Company has installed Shiprepair
facilities consisting of a Floating Dry Dock of 60,000 DWT, 4 wet repair berths, portal
rail cranes of 35T, 50T & 70T mobile crane, power sub-station, heavy duty workshops,
fabrication centers, etc. Your Company has repaired about 14 Oil Rigs and over 585 vessels
of all types at its shipyard.
Your Company carries on manufacture, repair, refurbishment, renovation and replacement
of various ship parts like hull/deck sections, steel structurals, navigational equipment,
ship engines, crew accommodation, deck equipment, communication equipment, air
conditioning and ducting, electrical and mechanical equipment, surface treatment and
anti-rust cathode protection, ship tanks, valve and pipeline repairs. These measures
enhance the life, safety, operating performance and value of the vessels.
Your Company is a factory registered under the Factories Act, 1948 and a Ship Repair
Unit ("SRU") registered with D. G. Shipping, Government of India. The Company
repairs cargo vessels, tankers, product carriers, passenger vessels, offshore support
vessels, dredgers, port craft, fishing trawlers, vessels of the Indian Navy/Coast Guard
and Offshore Oil Rigs.
Your Company is a subsidiary of ABG Shipyard Limited and enjoys continuous access to
its technical, marketing and financial support.
III. Company Strategy
Your Company has formulated a strategy for achieving a sustainable long term growth
based on its core strengths and opportunities as under:
(a) Commercial shiprepairs: Your Company is a recognised market leader in dry dock
repairs which are based on inspection and assessment of the repair volumes, cost estimates
and timely deliveries. It has repaired over 585 vessels at its facilities at Mormugao, Goa
with repeat orders from established fleet owners like DCI, SCI, PFS Shipping. Essar,
Reliance, ONGC, etc. Its floating dry dock infrastructure operates at full capacity year
round. Your Company has submitted a proposal to MPT to install a 2nd floating dry dock for
repair of smaller vessels at its existing facilities at Mormugao Port with a view to
increase repair volumes, productivity and profitability.
(b) Indian Navy and Coast Guard vessels: The Shiprepair sector is cyclic and dependent
on bulk cargo like coal, iron ore, fuel and grain. Due to recessionary conditions in the
repair of cargo vessels, the Company has concentrated on repair of non-cargo vessels from
the defense sector dominated by the Indian Navy and Coast Guard. The Indian Navy has about
171 vessels on active duty and 36 vessels under construction engaged in protecting the
sovereignty and security of the Nation and its maritime assets. In the Budget 2013-14 the
outlay for defence has been hiked to Rs. 203,672 crore (5.31%) over the previous year.
Your Company expects that repair of naval vessels will continue to be given priority in
view of the need for extensive repair and modernization of the naval fleet in the coming
years, involving large repair revenue.
(c) Deep water Oil Rigs: The demand for petroleum and liquid fuel is expected to reach
95 million barrels per day (bpd) by 2030 from the current level of 84 mn bpd. Investment
in the Gas & Offshore Industry is expected to increase to USD 45 billion in 2011. Due
to increasing oil demand, the National Oil Companies have started developing offshore
assets to meet the oil and Gas demands. Rising crude oil prices and cuts on Middle East
oil production will eventually lead to greater oil exploration activity and offshore
assets in India. It is estimated that over 75% of the Oil Rigs are of 1985 vintage and
will have to be repaired /replaced in the coming years. Your Company has established
itself as a reliable unit for composite repairs of Deep water Jack Up Oil rigs (13 nos.)
with access to large water front area and expects business from this sector to be highly
profitable, assured and continuous. Your Company caters to good clients like Transocean,
Nobel, Sedco Forex, Jindal Drilling, Aban Offshore and ONGC.
IV. Segment-wise/product-wise performance:
During the year, your Company operated only in the Shiprepair segment. No ship building
was undertaken.
V. Outlook for Shiprepairs in India:
The Global Shipbuilding and Ship repair Industry is growing at a compounded annual
growth rate (CAGR) of about 24 per cent and is likely to reach Rs.14 lakh crore by 2015
owing to rising global sea borne trade. Against this, the Indian Shipbuilding and Ship
repair Industry is growing at a CAGR of about 8 per cent and is likely to reach Rs. 9,200
crore from the current level of just over Rs. 7,310 crore [Source: ASSOCHAM Study
Report].
Your Company is engaged in shiprepairs of older vessels upto 60,000 DWT, at Mormugao
Port, Goa and has the advantages of excellent location on the west coast, close to the
major sea bourn traffic lanes and Bombay High Offshore oilfields, low labor costs,
availability of skilled work force, use of port tugs and duty free imports for
shiprepairs. Your Company expects an increase its shiprepair volumes and profitability
over the years in view of the mandatory maritime regulations for maintenance and safety of
the vessels, restriction on marine pollution, etc. Your Company also expects an increase
in Rig repairs orders in view of the New Exploration Licensing Policy (NELP) of the
Ministry of Hydrocarbon, Government of India. Your Company is well equipped to meet the
challenges through excellence in quality, cost competiveness, timely redeliveries,
infrastructure & technical expertise.
VI. Risks & Concerns:
(i) The Central/ State Government and the Apex Court has placed restrictions on the
Mining Industry in Goa which has adversely affected the mines, bulk transport operators
like transhippers and cargo vessels. This has resulted in a lower number of cargo vessels
calling at Mormugao Port, for iron ore.
(ii) Although the Port has developed multi-cargo facility for vessels carrying cargo
like coal, coke, wood chips, fertilizer and bauxite, such vessels have not used the
Company’s Shiprepair facility.
(iii) The Shipping Industry continued to face recessionary conditions during the year.
(iv) There are inherent risks in repair of older vessels where there are delays in
re-delivery of vessels, disputes in work done, bill settlements & liquidated damages.
(v) There are credit risks & forex fluctuation risks.
(vi) Your Company has a 25 year license agreement for shiprepairs and shipbuilding
w.e.f. 05.04.1993 with the Mormugao Port Trust. The Company may suffer continuity of
business if its proposal for extension of license agreement is rejected by the Port or the
Central Government.
(vii) The Company’s shipyard is based in the Mormugao Port and is totally
dependent on the Port for pilots and tugs for movement of vessels to and from dry dock to
jetties and berths. The Port is likely to withhold/delay such services for any breach of
the provisions of the License agreement.
(viii) The Company has represented to the Central Government to review/resolve the
various disputes between the Company and the Port which is under the active consideration
of the Ministry of Shipping, Government of India.
VII. Internal control systems and their adequacy
The Company has adequate internal control systems and procedures, commensurate with
the size and nature of the Company’s operations. The financial statements are audited
by an Independent Statutory Auditor on quarterly basis with regard to the financial
effectiveness of operations, financial reports, taxation, accounting standards, statutory
compliance, etc. The Audit Committee reviews the financial reports and the internal
control systems with the Management and the auditors, on quarterly basis, and suggests
improvements for strengthening the systems. The Board reviews the recommendations of the
Audit Committee at each meeting.
VIII. Financial and Operating performance:
The Company achieved total revenue of Rs. 3409.63 lacs in FY 2014-15 as against Rs.
4518.61 lacs in the previous year. There was a net loss after tax of Rs. 3466.47 lacs for
the year as against a net loss after tax of Rs. 2690.28 lacs in the previous year. The
Company has repaired 15 vessels. The shiprepairs are progressing satisfactorily.
IX. Material developments in human resources / industrial relations front.
The Company has received the Charter of Demands for negotiations for the fresh wage
settlement which ended on 30.09.2013, in terms of the Industrial Disputes Act, 1947. The
same is under negotiations. The Company has also introduced a Voluntary Retirement Scheme
(VRS) to rationalize its workforce.
CAUTIONARY STATEMENT
The statements made in this Management Discussion & Analysis Report relating to the
Company’s objectives, projections, expectations, estimates, etc. may constitute
"forward looking statements" within the meaning of applicable laws and
regulations. Actual results may differ from such expectations. Important factors that
influence the Company’s operations such as working capital, raw material
availability, prices, Government policy and regulations, taxes, economic developments in
India and abroad, market competition, natural calamities and industrial relations.
|
By Order of the Board |
|
For Western India Shipyard Limited |
|
Sd/- |
Sd/- |
| Dated:11th August, 2015 |
Ashwani Kumar |
A. K. Agarwal |
| Place: Mumbai. |
Director |
Director |
+91-9892691696
