Key takeaways of the call

Balance order on hand as end of March 2018 was Rs 2112 crore and of which the IAC Phase II order (Only fixed cost portion and exclude cost plus portion) is Rs 767 crore, DRDO order is Rs 150 crore, 2 vessels of 500 passengers from A&N Administration is Rs 395 crore, 2 vessels of 1200 passengers is Rs 787 crore and fishing vessels order from TN about Rs 13 crore.

In addition to Rs 2112 crore balance order on hand, the company is close to sign orders worth Rs 5860 crore for 8 vessels of AWS Corvette for Indian Navy worth approx Rs 5400 crore; 56 coastal security boats from Ministry of Home Affairs amounting Rs 360 crore approx, and 10 RORO vessels for IWAI worth Rs 100 crore. Further to this the company is also expected to conclude Phase III order of IAC within current fiscal. The company is in final round of negotiation for IAC phase III orders both fixed price and cost plus portion. The company expect the fixed price portion of IAC Phase III to be aprox Rs 3000 crore and the cost plus portion include B&D of Rs 1500 crore, test and trial of Rs 1500 crore as estimated by Navy. IAC which is expected to be delivered in early part of CY2021 has to have atleast 18 months of aviation flight trials post delivery. So the cost of test and trials is also included in Phase III contract. The ship will go out to sea by early part of 2020 and then only the company will know how b&d and test & trial will pan out.

So the company will be having an order booking worth Rs 14-15000 crore in ship building including cost plus portion of IAC Phase III.

Scheduled/Planned delivery of IAC is Oct 2020 and typically the actual date may take another six months from that.

Expect 12% growth in sales revenue in FY19.

Expect the ship repair revenue to go up to Rs 800 crore in FY19. Vikramaditya that has a scheduled repair in 2019-20 is coming up for repair this year itself and with its contract value stand at about Rs 500 crore the company expects strong ship repair revenue in FY19. Repair work on Vikramaditya was commencing in next 4 months. The company is looking at two major ship repair job in non defence sector for 2 large ships in FY20 which is under negotiation currently. IAC will come up for repair in FY21 again as its scheduled repair is slotted in that year.

Construction work on New ship repair facility at Cochin commenced in October 2017 and the facility will be operational 24 months from date of start of construction work. As the new ship repair facility is a medium size one, the repair of medium size vessels will the shifted to the new one and older/existing one will focus on repair of large vessels. The new facility will give revenue of Rs 300-350 crore per annum on full operation. The company is doing about 40-45 mid size vessels at existing ship repair facility and that will be shifted to new facility once that become operational. Similarly the new Dry dock will take 36 months to complete.

Capex in FY19 is expected to be a minimum of Rs 495 crore and max of Rs 600 crore.

Margin of ASW Corvette is on lower side. While the impact of steel is largely controllable the order is however exposed to forex risk. Try to bring down price on equipment by bulk procurement.

Vikramaditya ship repair will give good margin in FY19.

Ship building revenue grew by 24% in Q4FY18 and 14% in FY18. Strong jump in revenue of shipbuilding is largely due to fixed part portion.

In FY18 IAC fixed price portion contribution to revenue is about Rs 552 crore and cost plus is about Rs 890 crore. Of shipbuilding revenue 83:17 is defence and non defence. Out of Q4FY18 Ship building revenue about Rs 183 crore in from IAC fixed price part portion.

Shipbuilding margin could be in the region of 19-20%. Margin higher than this in Q4FY18 and FY18 was largely due to higher IAC fixed price portion contract contribution to revenue.

Advance amount include Rs 400 crore received from A&N admin for building 4 vessels. The company received 60% of payment.

Comfortable EBITDA margin excluding other income 19.5-20% will remain steady. PAT margin of 16% is comfortable.

IWI contract signed is just about Rs 100 crore. Some progress is happening as far as major order outside defence space.

Currently entire order book is Indian and government.

MODU Sagar Bhushan, an oil rig owned by MIs ONGC was under repair at CSL and there was a fire incident on board the vessel on Feb 13, 2018 while the vessel was undergoing repairs. The incident resulted in damages to the vessel. The company has assessed the estimated damage cost to be Rs 18.51 crore. Company has an annual insurance cover for the vessel under Ship Repairer's liability policy with a limit of liability for anyone incident of Rs 15 crore with an annual limit of Rs 300 crore. The company has accordingly made a provision for an amount of Rs. 3.51 crore net of insurance claim, towards probable loss on this account. The company also provided Rs 9 crore of provision towards LD on this project thereby aggregate provision on this amounting Rs 12.51 crore.

Ship repair revenue in FY18 was Rs 623 crore as against Rs 543 crore. Out of Rs 543 crore in FY17 about Rs 223 crore was contributed by repair work on INS Vikramaditya. Excluding Vikramaditya the ship repair work was about Rs 300 crore there by sharp jump in Ship repair revenue in FY18. Of FY18 ship repair revenue of Rs 623 crore about Rs 400 crore is from defence vessels.

Signed MoU with Mumbai Port Trust for Development, Management & Operations of Ship Repair facility at Indira Dock, Mumbai. The company expect the revenue contribution to commence from Sep 2018 and expect a revenue of about Rs 75 crore from Mumbai facility. It will double up in next fiscal. However there will be no contribution from Hoogly and Kolkata. The company signed similar Development, Management & Operations of Ship Repair facility with Kolkata port trust.