Pipavav Defence and Offshore Engineering Company (formerly Pipavav Shipyard) has tied up with state-owned Mazagon Dock Ltd (MDL) to build warships for the Navy.
Each of the partners will hold equal stake in a proposed joint venture company, Mazagon Dock Pipavav Ltd. The equity infusion will be done in the next few weeks.
Order book
“We are the first company in the private sector to get orders for frontline warships and these are priced between $100 million and $6 billion each. The Mazagon Dock has an order book of Rs1 lakh crore and we are in the process of finalising the joint venture details,” said Mr Nikhil Gandhi, Chairman, Pipavav.
Pipavav has an order book of $1.5 billion.
Mr Gandhi said that the Pipavav Shipyard “is licensed to make five warships a year but we can enhance that to two dozen in the coming years as our yard is modular.”
Indian Navy's orders add up to $28-30 billion, but the execution is only $1 billion a year due to infrastructure and size constraints. The partners will work to fast-forward the execution of the Mazagon Dock order book using the facilities of both Pipavav and Mazagon Dock.
“The contracts to build the vessels, in general, run for 4-10 years. The JV may look at doing some backward integration too in the future,” he said. “The MDL orders can keep us busy for the next 10-15 years but we are also looking outside. This is because a lot of futuristic ships can be made at Pipavav but cannot be done at the MDL facilities,” said Mr Gandhi.
He added that no fresh investment will be made in the proposed JV as Pipavav Defence has committed to invest $1 billion in its own facilities. “Of this, $750 million has been invested and we achieved financial closure for $250 million.”