On the NGC order - what kind of margins are we looking at?
This project has been won on competition. But this being a high-value project, I would just state - shipbuilding in conventional shipbuilding, good margin, the PAT margin would be around 7.5 percentage, and we can assure our investors and partners that we'll be getting well beyond that. So, margins will not be wafered there.
Our revenue guidance has always been in the range of 25% to 30%. However, in the first half only, we have delivered a revenue growth of around 38% year-on-year. Do we now want to revise our revenue guidance upwards?
We have been maintaining about 25% to 30% year-on-year growth and we expect to maintain similar trend during the current financial year too.
Are the older naval guns also getting replaced on the existing vessels?
I shall follow up this further. As I understand, yes, there is a need to replace the vintage guns. But at this moment, since it is evident that Navy is focusing on 30 mm guns, their focus is on smaller caliber guns. But I shall definitely revert to you with further information as and when I get with respect to the other weapon systems of the process.
The other shipyards have given some corporate actions like stock split or bonus. Is there anything on the cards for our company?
We are purely guided by DIPAM guidelines, and we are waiting for instructions from them. And as and when we get to know, our investors will be the first to know from us. At this juncture, we are waiting for further directives from DIPAM.
On the recently approved AoNs of Rs.79,000-odd crores, there was a mention of LPD. Wanted to understand the quantum of LPD that could be there, who all are in the fray for this platform, and how long it will take to build the LPD if you get the contract?
The last DAC meeting accorded AoNs for various projects including the LPD project. This is a high-value project that consists of 4-ship project. The 4-ship project with an order value likely to the tune of around Rs.35,000 crores. The three of us i.e., MDL, HSL, GRSE plus Cochin Shipyard plus L&T - these are the expected players in the field for this project. Normally, it takes about 1 year to 1.5 years for the RFP to be issued from the time of the accord of AoN. And from the time of RFP issuance, it takes about a year for the contract, including L1 declaration contract to be signed. So about 2 to 2.5 years from now, the contract is expected to be signed. As per my understanding, the project duration will be around 48 months i.e. 4 years for the first ship and every 6 months for one ship thereafter.
On Next-Generation Corvette - the awarding of contract has been delayed. Where are we actually on this, and when can we expect the decision?
At the outset, the project has not been delayed with respect to award of contract. This is a natural process. Once the L1 is declared, there will be a price negotiation and then the contract and it is a high-value order. Total order value for each ship is to the tune of almost Rs.51,000 crores. So, naturally, it will take a finite amount of time. The contract negotiations are in final stages, and we expect the contract to be signed in the next 3 to 4 months, which means in this financial year. For a major project like this, there is pre-production time that has been awarded. During this period, we will be placing orders to all our partners, the major OEMs, as well as the MSMEs. So, many of these orders could trickle-down during FY '27 starting from the first half onwards.
Until the NGC and LPD orders kick in, do you foresee that in the next 3 to 4 quarters we will face a period of significant earnings decline because we would have exhausted our order book?
When we started this financial year, our order book was around Rs.22,000 crores. In the last 2 quarters, we have actually recognized revenue to the tune of around Rs.2,942 crores whereas our order book has dropped only by around Rs.2,000 crores, which means around Rs.900 crores of orders we already obtained during this quarter. What we are doing is rather while waiting for high-ticket items like the NGC order to be contracted, we are meanwhile getting orders for small-small projects be it for commercial ships, research vessels, so that the revenue does not drop in the coming year. To answer your direct question regarding, is there any likelihood of revenue depletion in the coming few quarters? No. I don't expect that purely because, the P-17 Alpha project is very much on even as of now and so the second major project, the Anti-Submarine Shallow Water Craft project. So, I don't see any revenue depletion in the next 2 to 3 or 3 to 4 quarters.
We've seen significantly higher gross margins this quarter, but also a spike in subcontracting cost and other expenses. What were these costs attributed to?
As a strategy, our non-core jobs, including a certain amount of construction activities are outsourced. So, it is natural that as the overall revenue increases, the subcontracting cost also increases, and that is purely a natural phenomenon, and no matter of concern. Right now, we are recognizing maximum revenues from the P-17 Alpha project. The second ship has reached a stage where the trial phase has started, the equipment installation has been completed. So, this being a definite profit-making project. So, the revenue recognition as well as margins are good during this quarter. And the same trend is likely to continue in the next quarter too.
Regarding the upcoming P-17 Bravo project - when is the RFP expected?
Yes, we are also waiting for the P-17 Bravo project having now raised almost 2/3 of the P-17 Alpha project. The AoN has already been accorded by the DAC about 8 months back. We expect the RFP to come out during the current financial year. With our Bravo ship project not likely, it will be split between two shipyards, the L1 shipyard taking 4, and the L2 shipyard taking 3. So, RFP is expected during the end of Q4 FY '26.
Given your experience with P-17 Alpha, how confident are you about winning the P-17 Bravo order? And could you share the shipyards participating in the bid?
From my information, about 4 shipyards were there. So, the probability is very high. MDL, GRSE, L&P and Cochin Shipyard. These are the four shipyards who have been shortlisted for this project as of now. When we started discussing the NGC project almost 2.5 years back, GRSE has been continuously stating that with the experience gained from the projects executed by GRSE for the Navy, we will be bidding in such a fashion as to win the bid and we have won the bid. So, I would like to maintain the same confidence that with the experience of having built the P-17 Alpha frigate, we will be bidding in such a fashion to bring those people in Bravo.
On the Weapon-systems program / Naval Gun procurement - we are seeing a lot of focus from Warships and Coast Guard vessels. What is changing and why so much demand suddenly?
As a diversified company, unlike any other conventional shipyard, we are a fully diversified company, and one of our products is Weapon. So, we have started with the Naval Surface Gun in collaboration with an establishment partner and happy to inform you that we already successfully completed the acceptance trials of this Naval Surface Gun. We expect more orders from the Navy and the Coast Guard, because both Navy and the Coast Guard have requirement of the 30 mm Guns for their medium-sized and small-sized platform, which they have in large number. So, I see a huge potential on this front. We are also exploring the feasibility of further expanding our range of Weapon-system.
Currently, there are 10 guns and many would be in RFP stage. How many would be in the RFP stage, and going ahead, what can be our annual Naval Gun installations?
This gun has just been developed and the acceptance the first gun has been completed just about 4 months back. So, it is still in the stabilization phase. We have received an RFP for 7 more guns, which are under the final negotiations for contract conclusion. We have received an inquiry for nearly 50 guns. So, the opportunities are huge. But at this stage, 10 plus 7 plus 49 is what we have in our basket. 10 contract already signed, 7 still in liquid form. We expect the contract to be signed soon and the 49 at a very nascent stage.
On capacity expansion - is the greenfield shipyard anything finalized?
There is a definite need for capacity adjustment. And we are doing it in two parts. One is to create brownfield facility - we definitely would prefer in our home state i.e. West Bengal. The process has already started, areas are identified, taken on charge atleast 2 of the 3 areas, and we have started the development of these areas. As far as the West Coast project is concerned, area has been identified. The DPR preparation is currently in progress. I would put a conservative time of about 3 to 4 years for greenfield expansion plan to fructify. Right now, the DPR is under preparation. Maybe in about a year, we'll be able to put the DPR effort into action with respect to implementation. It is in the West Coast.
The AoN of about Rs.1,52,000 crores - is that pertaining to the opportunity we can look at? Is that understanding correct?
In addition to the pre-RFPs, which already been promulgated for which the order value is likely to be to the tune of around Rs.8,700 crores, there are 7 more projects for which the DAC has already accorded AoN. These include P-17 Bravo - 7, 12 Mine Counter Measure Vessels, 120 FICs, 18 Interceptor Boats, Next-Generation Fast Attack Crafts - 31, LPDs - 4 and 5 NOPVs. These ships put together and the value it comes to Rs.1,52,000 crores. This is only from the defense segment, domestic defense segment. In addition, the Ministry of Shipping has aggregated the shipbuilding demand of all the non-defense PSUs like the ONGC and so on for their commercial vessels. The number of platforms identified so far is 207. The cost should be to the tune of Rs.5,000 crores. Then comes another segment i.e. the export segment for commercial ships. So, the opportunity is available for all of us.
Our current order book is about Rs.20,000 crores, NGC is Rs.25,000 crores. By end of FY'27 with P-17 Bravo announced, could the order book be upwards of Rs.75,000 crores - is my directional assumption correct? And on Swan Energy / Swan Defence MoU - can we use that idle capacity?
Absolutely right. Right now, our order book is Rs.20,000 crores. I would like to make a slight correction to the NGC figure, that could be to the tune of around Rs.30,000 crores order. All put together, we should end the financial year with around Rs.50,000 crores. And if we get the P-17 Bravo, let's take the best-case scenario of 4 ships coming to us or the worst-case scenario of 3 ships coming to us, the order could go up exactly the way you predicted. On Swan - yes, we have signed the MoU with the Swan Shipyard. We are actually waiting for the right opportunity. We need to get the right kind of platform, which has to be profitable. Why did we go to Swan specifically, because the type of ships, 250 meters plus ship, we cannot build with the current capacity that we have. While those MoUs exist, we decided as a management strategy that we must have our own captive facility for future i.e. the reason why we are looking at the greenfield facility.
Could you give us a breakup of the Rs.20,000 crore order book across all the ship categories?
The P-17 Alpha project, the spending remaining order balance order values around Rs.9,500 crores. The Anti-Submarine Shallow Water Craft is around Rs.3,075 crores. The Survey Vessel (Large) is around Rs.400 crores. The Next-Generation Offshore Patrol Vessel is around Rs.3,250 crores and the 30mm Naval Surface Gun is around Rs.150 crores. The Ocean Research Vessel is around Rs.750 crores, the Acoustic Research Ship around Rs.220 crores, the West Bengal Electric Ferry, again about Rs.220 crores and the Coast Research Vessels is around Rs.460 crores. The Multi-Purpose Vessels for the German plant around Rs.5,400 crores and the remaining order value on the dredger is about Rs.95 crores. So, all put together, ships building order book is around Rs.19,856 crores. 83% is coming from defence and balance 17% is coming from non-defence platforms.
On the Rs.9,400 crore figure for P-17 Alpha - is that for two ships, or is some portion of the third ship also remaining?
It consists of balance two ships plus the Base and Depot spares. In one of the earlier interactions, I have mentioned that in the overall project cost, x percentage is dedicated for the Base and Depot spares for which the customer in consultation with us decided the Base and Depot spares and these spares are for long-term maintenance of the ships. So, this actual project value for the next 2 ships, the one which is ready, almost ready for delivery plus the large ships plus the Base and Depot spares all put together, it comes to Rs.9,400 odd crores.
We are growing at about 30%, and have visibility for FY'26, FY'27, FY'28. By FY'28 we will be somewhere around Rs.10,000 to Rs.11,000 crores. You mentioned in media that after 3 years it will plateau out. Can you elaborate the revenue strategy after FY'28?
You just picked up one part of what I mentioned. I also mentioned that I said it will plateau from 2 to 4 years, up to 2 years, definitely, the spike what we are maintaining will continue, then it will plateau and thereafter, it will spike again. Because that is the time when the Next-Generation Corvette will start giving us revenue in a substantial fashion. And it is only to bridge this gap that we are taking orders at plenty for smaller and medium-sized platforms. FY '26, FY '27, you will see a definite upward movement, consistent upward movement, then it could plateau out for 2 years and then the spike will start again.
There is existing indigenized 30 mm platform, the AK630, made by the government lab. How are our guns compared to them since they are established vendors with several installations? What makes us differentiated?
These are for two different purposes. One is for anti-aircraft engagement and close in weapon-system and 30 mm is for a different purpose, it is naval and coast guard surface gun. The bore of this particular gun is 30 mm. This is the first time induction into the Indian Navy. And we see no competition at all between those guns. In some of the platforms, there could be a situation where both these guns are fitted. And the 30 mm gun is most apt as a primary one for very small platforms like the Anti-Submarine Shallow Water Crafts or the Fast Attack Crafts. In larger platforms, this particular one can be used as a secondary one. So, we do not see the proven 630 as a challenge at all. Rather, we do not see 30 mm as a challenge to 630. Both are two totally different purpose, totally different identities.
Our production and development partners are Blue Horizon and Elbit. Are we exclusively working with them or are there other vendors?
For the 50 mm gun, we are working exclusively with them.
By when will the existing 10 guns be installed?
I'll give you a broad answer. We have faced certain number of challenges in the initial phases, all stabilized now. 4 guns have already been supplied out of the 10. 3 installed, next 6 weapons supplied, the next 6 shall be supplied in the next 4 months.
Do we have any additional gun RFPs in place after these initial 10 guns are fitted?
Yes. There is an RFP which is live for 7 guns, which we expect the contract to be signed soon. And we also got an inquiry, which is live for 49 guns.
How much cash are we holding right now in our balance sheet?
Rs.3,009 crores.
How do we intend to use it?
Our own funds are Rs.283 crores and project funds are Rs.2,874 crores, which we have parked so that the payment especially from our side is for our partners or for other requirements. That is what we are planning for the current year.
Is it right to say that the best is yet to come for our company?
I would also like to assume the same, but yes, the best is yet to come.
On the planned brownfield expansion coming up in 3 pockets - will it be coming up phase-wise? When are we targeting Phase 1?
No. We will be moving concurrently. Two of the projects, the two process we should be able to operationalize within a year. And the third project between... just to suffice to say that all three we are doing concurrently, because they have physically disbursed. So, we don't have to go sequentially, we are going concurrently.
On European companies looking at India as a shipbuilding destination for commercial shipbuilding - is the margin profile likely to be similar to or better than defence building?
We started with very simple conventional platforms like Multi-purpose Vessels. Because we wanted to get an experience and a foothold into the commercial shipbuilding segment. So, for the first projects for conventional ships, we're doing with thin margins. I can do what we have for domestic ship. But for complex vessels, which are going to convert the exploration vessels or hybrid vessels, there the margins are going to be good. But we need to have a little patience because once we need to get our name established like Cochin Shipyard. Today, we have a name. But for us to get complex platforms with higher margins, little more patience is required. I expect another 1 year to 2 years, it should be very much there.