Annual Report FY 2010-11 - Pipavav Shipyard

Annual Report 2010-11
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Subsidy:
In the past the Indian Government had encouraged participation of Indian companies in the commercial shipbuilding sector
by providing subsidies of 30% of the price of the vessel to the shipbuilders. The Government is considering extension of
the shipbuilding subsidy scheme. However, in the event the Government of India decides not to notify a new subsidy
scheme, it could affect the profitability of this segment.
No Steady Order Flow and probable Order Cancellations:
Your Company has an outstanding order book of around USD 1.5 billion. In view of the difficult economic conditions
worldwide the momentum of orders being sustained is a concern. The possibility of orders cancellation can not be denied.
Shortage of specialized labour in the Maritime Sector:
Increasing sophistication of vessels and associated equipment as well as stringent pollution prevention norms in the
maritime sector have led to greater importance on a well-designed education system for the maritime sector. Lack of such
maritime institutes imparting the necessary knowledge creates a shortage of skilled technical force in India.
III. OUTLOOK
The financial year 2010-11 was a year of milestones for the Company. In November 2010, the Company was awarded the
Warship Production License by the Department of Policy & Promotion, Ministry of Commerce & Industry, Government of
India. Your Company is the first Indian Company to have been awarded the license. Your Company entered into strategic
partnerships with SAAB Dynamics, Northrop Grumman and Babcock group. These tie-ups will allow the Company to use
their technical expertise to indigenously produce defence equipment, hardware and develop aeronautical technology.
Going forward, the FY 2011-12 will mark the progress of the Company after all the key pillars have been established. As
the Company has received the Warship Production License, the Company is ready for a new and exciting year of growth.
Two Panamax vessels built by your Company are ready for delivery.
Your Company will continue to develop global standards in capabilities, technology and size. The order book is expected
to grow multi-fold on the back of increasing defence demand, greater demand for offshore assets, and the significant
need for repair for vessels visiting/ passing through Indian waters. Your Company is also well-poised with modern heavy
engineering facilities to undertake both civil and non-civil heavy engineering projects, whether be the construction of civil
nuclear reactors or land based heavy defence machinery such as tanks. With offshore activities shifting to deeper waters
and increasing demand from the naval sector, Indian industry will undergo a dynamic change in the coming years.
Having invested in state of the art facilities and having developed a world-class heavy engineering infrastructure with
attached dry dock, your Company stands at the forefront of private sector companies ready to capitalize on increased
opportunities provided in the defence and offshore oil and gas assets space and is set to experience robust growth and
profitability going forward.
IV. RISKS AND CONCERNS
Your Company is exposed to risks that are inherent to its businesses and the environment within which it operates.
The Company is exposed to normal industry risk factors such as competition, economic cycle, uncertainties in the
international and domestic markets, Foreign Exchange Risk, Liquidity and credit risks. Your Company manages these
risks by maintaining conservative financial profile and by following prudent business and risk management practices.
The Company’s risk management framework establishes risk management processes, helps in identifying, assessing and
mitigating risks that could materially impact the Company’s performance in achieving its business objectives. The risk
management framework ensures compliance with the requirements of Clause 49 of the Listing Agreement entered into
with the Stock Exchanges.
V. FINANCIAL PERFORMANCE
During the financial year 2010-11, your Company registered the operating income of Rs. 859.93 crore i.e. increase of
36.63% over the financial year 2009-10. Your Company earned profit before tax of Rs. 48.16 crore as compared to previous
year loss of Rs. 48.66 crore. Operationally, the interest cost was at Rs. 119.01 crore compared to the previous year interest
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cost of Rs. 72.99 crore.
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