Pipavav Shipyard in Talks to Set Up Diesel Engines Factory

Tuesday, February 19, 2008
India’s newest private shipbuilding firm,Pipavav Shipyard Ltd, is the latest in a growing list of firms looking to enter the business of making diesel ship engines in an attempt to meet growing demand for these in India and in other parts of the world, and is talking to two multinational firms for a partnership.

Last week, Pipavav Shipyard started work on the first four of 26 Panamax bulk carriers that have been ordered by Norwegian, French and Greek fleetowners for a total of $1.1 billion (Rs4,360 crore). The contract makes Pipavav the world’s second biggest Panamax size shipbuilder by order size after Japan’s dry bulk cargo shipbuilding specialist Oshima Shipbuilding Co. Ltd.

Pipavav Shipyard, promoted by SKIL Infrastructure Ltd, will benefit from a shipbuilding subsidy scheme that ended on 14 August after a five-year run. Twenty-two of the firm’s total order book of 26 Panamax ships will be eligible for a 30% subsidy from the Indian government because the yard had booked these orders before the scheme ended, Stewart said. Under this scheme, companies building ships receive 30% of the order value as a grant from the government. Shipbuilding is a labour- and material-intensive industry and this incentive was offered to encourage companies to set up shipyards in the country. The options for four more Panamax carriers that was exercised by the yard’s customers may also become eligible for the subsidy as and when it is reintroduced by the government with retroactive effect, Stewart added. Punj Lloyd Ltd, an offshore engineering firms, holds a 25% stake in Pipavav. Other investors in the company include Singapore’s SembCorp Marine, Infrastruture Leasing and Financial Services Ltd, Industrial Development Bank of India Ltd, Exim Bank, UTI Mutual Fund, 2i Capital Pcc, Trinity Capital (Nine) Ltd, New York Life Insurance Fund, New York Life Investment Management India Fund (FVCI) II Llc. (Mauritius), ABN AMRO Asia Merchant Bank (Singapore) Ltd, Blackstone Capital, Merril Lynch, Deutsche Bank and Galleon. Pipavav plans to raise about Rs800 crore through a public issue and has filed a draft prospectus for approval with the stock market regulator, Securities and Exchange Board of India.

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