State-run defence public-sector undertaking (PSU) Mazagon Dock Shipbuilders (MDL), which has charted an ambitious foray into commercial shipbuilding, scouts for equity partners for proposed ₹20,000 crore shipbuilding clusters at Dighi in Maharashtra and Dugarajapatnam in Andhra Pradesh, a senior executive said.
The company signed memoranda of understanding (MoUs) worth ₹30,000 crore with the Maharashtra and Andhra Pradesh governments over three days. It expects to secure the requisite approvals by December, Chairman and Managing Director (CMD) Captain (retired) Jagmohan told Business Standard in an interaction.
The two MoUs envisage the creation of shipbuilding clusters, each capable of supporting an annual output of 1.2 million gross tonnage (GT).
“We will execute these in phases. The first phase will have a capacity of 500,000 GT. We expect an investment of ₹20,000 crore over the next five to seven years, with the Maritime Investment Fund (MIF) funding the equity component of the shipyard. To begin with, MDL will form a joint venture with the MIF, managed by SBI Ventures, with each holding a 50 per cent stake,” Jagmohan said.
The MIF is a ₹20,000 crore equity fund under the ₹25,000 crore Maritime Development Fund (MDF), announced by the government as part of its ₹69,725 crore package to revitalise the shipbuilding and maritime sector. The MDF comprises the MIF, which provides equity-based financing for maritime ventures, and a ₹5,000 crore Interest Incentivisation Fund, which offers interest support to reduce borrowing costs for shipyards and other eligible maritime businesses. The MIF is designed to mobilise private and institutional capital alongside government funding.
Jagmohan said two dedicated project companies would be set up under the main holding company, with their operations and finances ring-fenced.
MDL is already in talks with large corporations that regularly use vessels for their business and trade requirements, seeking to bring them on board as equity partners. Jagmohan said the company envisaged a commercial structure similar to that of Petronet LNG, whose shareholders include public-sector oil companies and GAIL (India).
The proposed investment will be financed through a mix of 70 per cent debt and 30 per cent equity. Across the two clusters, the company expects to require about ₹6,500 crore in equity.
Responding to concerns that MDL might have taken on too much by committing to two large shipbuilding projects, Jagmohan said the company had the financial strength and experience to execute them.
“If the investment is split 50:50, I have to spend around ₹3,000 crore. Our cash in hand can easily accommodate that investment. So, as far as the equity portion of the two shipyards is concerned, there is absolutely no problem,” he said.
MDL had emerged as the sole suitor to become the anchor investor in both proposed shipbuilding clusters.
The next challenge is to raise the remaining 70 per cent of the project funding. Investors from the US and Germany have already expressed interest, Jagmohan said. The company is also in talks with international maritime equipment manufacturers to bring them on board as co-investors. However, he added, MDL would not dilute its stake below 26 per cent at any point.
In the long term, MDL is also considering an initial public offering of the shipbuilding venture to raise additional capital. Jagmohan said the company would consider the proposal after the shipyard becomes operational.
India aims to become one of the world’s top five shipbuilding nations by 2047, with a targeted annual output of around 4.5 million GT.
Under the Maritime Amrit Kaal Vision 2047, investments of close to ₹80 trillion are envisaged over the next 21 years, including ₹54 trillion in shipbuilding.
