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India has substantial fleet of ships both in the commercial as well as defence sector. There are more than 2,000 Indian owned vessels operating in Indian waters. This generates a resident demand for ship repair activities locally in Indian waters. However, due to unavailability of Infrastructure or price competitiveness, most of ocean going vessels go overseas for repair.
Following chart shows theoretical calculation of ship repair potential for Indian yards originating from Indian vessels.
As can be seen in the chart above, the estimated business potential for ship repair yard is close to INR 4,000 Crores. Indian ship repair yards could capture a higher share of market by improvement in infrastructure, increasing ship repair yard capacity and competitive performance. Excluding some of the niche markets such as gas carriers and highly specialised defence vessel, Indian ship repair yards could cater to all types of ships owned and operated in Indian waters. However, a substantial share in high value repair goes to foreign yards as shown in below chart (Ship repair expenditure of Shipping Corporation of India for its fleet in the last 5 years)
There exists an opportunity to create infrastructure for repair of large ships. This would help ship repair company attracted business that is going to international yards due to lack of infrastructure in India and competitive pricing in China. The new Modi Government's focus to change ship building perspective in India and develop India into a large shipbuilding and repair. The infrastructure have to be developed by private sector and government would provide supportive policy measures. This provides large opportunity for a ship repair company to enter Indian Ship Repair business.
India has several companies with dedicated ship repair yards. Some of the repair yards have the entire infrastructure required for undertaking ship repair. This infrastructure includes repair berth, workshops, steel fabrication and replacement infrastructure, etc. These ship repair yards can undertake dry-docking activity of ships that forms the most revenue generating activity in ship repair.
In addition to ship repair yards, there are several workshops located in and around government owned major ports in India. These workshops, take drydock or slipway on lease for repair of ships. They do not own large infrastructure required for undertaking repair. Afloat repairs and breakdown repairs of ships calling to ports for trade forms major component of workshops involved in ship repair activity.
As can be seen in the chart above, the revenue of leading ship repair yards have doubled from INR 300 Croresin 2006 to more than INR 600 Crores in 2013. Financial year 2014 saw sudden drop in cumulative revenue of major ship repair yards. Fall in repair income of Western India, HSL, ABG and Goa Shipyard attributed to fall in cumulative repair revenue of ship repair yards. ABG Shipyard and Western India shipyard lost a large number of customers due to financial difficulty. The utilisation level of their shipyard has come down. These 2 ship repair yards had major contribution to cumulative earnings in Fy-13. There exists additional opportunity in Indian ship repair industry than what is shown in above chart. This could be targeted by new entrant to the Ship repair sector in India.