Garden Reach Shipbuilders & Engineers Limited (NSE: GRSE) Q3 2025 Earnings Call dated Feb. 13, 2025
Corporate Participants:
Gaurav Girder — Concept Investor Relations
P.R. Hari — Chairman and Managing Director
R.K Das — Chief Financial Officer
Analysts:
Ramesh Damani
Unidentified Participant
Divyesh Shah — Analyst
Ashok Shah — Analyst
Ramesh Bhojwani — Analyst
Sagar — Analyst
Sunil Shah — Analyst
Vijay Bhayani — Analyst
Namit Arora — Analyst
Krishna Doshi — Analyst
Presentation:
Gaurav Girder — Concept Investor Relations
Yeah, please. Can’t hear. Hello. Good afternoon everyone. I’m Gaurav Girder from Concept Investor Relations. I welcome you all to the analyst meet of Garden Reach Ship builders and Engineers Limited to discuss its Q3 and 9 month FY25 results. I have with us today Commodore P.R. Hari, Indian Navy, retired Chairman and Managing Director. Mr. R.K. Das, Director, Finance and Chief Financial Officer and Sandeep Mahapatra, Company Secretary and Compliance Officer. Please note this conference is being recorded. Sir, over to you.
P.R. Hari — Chairman and Managing Director
Thank you and good evening to each one of you. I actually look forward to this particular meeting because this is the only time when. I When we see each other though, we interact over the con calls every quarter, but to be frank, I enjoy this particular session. Coming to the Formalities I welcome each one of you to this conference to discuss our financial performance for the quarter ending and nine month ending 31st December 24th and also to provide you a way forward, way ahead. I’m sure most of you have been tracking the performance of the company and you’re clear about where we are and I’ll give you an overview as to what we are doing and give a glimpse of what lies in store for us. Like I normally do, I shall touch upon the financial performance, then cover the current order book, provide you the status of the ongoing projects and then give you a glimpse of what are the projects on the anvil and also highlight what we are looking for in the future. Coming to the Financial Performance I think this is the 10th quarter on a trot that both top line and the bottom line have gone up. Revenue from operations registered 38% growth over the last corresponding quarter from 923 to 1271 crores. The PAT has gone up by 11% from 88 to 98 crores and the operating profit has gone up from 37 crores to 62 crores. Operating profit margin has gone up from 4.03 percentage to 4.85 earnings per share again showing a rise from 7.70 to 8.57. Now coming to what is translated to this financial performance is of course our physical performance. Before covering that I’ll give you a glimpse of the order book. Our current order book stands at current as in 31st December stands at 23,877 crores and this comprise of 40 platforms from 10 projects. These projects are as you are aware the 3P17 Alpha I mean 17 warships for Navy coming from 4 projects 3P17 Alpha 2 survey vessels large to be already delivered, 2 more are remaining so 2 survey vessels large, 8 anti submarine shallow watercrafts and 4 new generation offshore petrol vessels. In addition to this we are also executing a project each for the Ministry of Earth Science as an oceanographic research vessel and also an acoustic research vessel for the drdo. One of the. Their DRDO organizations. We also signed a contract for eight six multi purpose vessels with a German client. And we also have two more export orders for a friendly foreign nation. Happy to inform you that we have won an order for 13 hybrid ferries from the government of West Bengal. This is the World bank funded project. This in a nutshell gives you what are the orders that we currently have in Arkiti, what we are looking forward in the immediate future. The assured orders. Our agreement with our German client was for eight ship multi purpose vessel projects. We had deliberately staggered the contract signing. Six contract for six ships have been already signed and we will be signing the contract for the balance two ships by 31st of March. In addition, we have been declared L1 for another set of research vessels for the Geological Survey of India. Two coastal research vessels. We expect the contract negotiations are currently in progress. We expect the contract to be signed by 31st March. That is our expectation. I have been talking about this next generation corvette project for a long time. I think ever since I started attending these interactions I’ve been talking about this project. Yes, the RFP has been issued, the bids have been submitted. Four shipyards have taken part in the bid. The technical evaluation has been completed and we expect the price bid to be opened in a couple of months. And let us hope together hope we become the L1 shipyard. Because the high value order and that is something which we are eagerly looking forward to. This is what is immediately on the anvil and as far as the future near future is concerned. Navy also has taken a an approval of necessity from the Defense acquisition council for seven P17 Bravo ships. There’s a follow on of the P7 Alpha that we and MDL are currently executing. This is a seven ship project. Three shipyards in the fray. Two of them will get it. So the probability is very high. And also Navy has also taken an Aon for 31 water jet FACS. Water jet they’re called follow on water jet FACS. These are small 50 meter odd vessels. 31 of them. The volume is huge. And Navy has also got an A for 120 fast interceptor crafts. In addition to that, coast guard has obtained AON for already obtained A. There is a D DC AON for 5 sorry, 6. OPVs, NOPVs and 18 fast patrol vessels. Next new generation fast patrol vessels. These are broadly what is likely to come out from both the Navy and the Coast Guard in the next one year. Some of the RFPs could come out as early as a month down the line. Two projects that I missed. Navy has also taken AON for two multi purpose vessels and five next generation survey vessels. This is what I expect to come out from now till the next one year. This is RFPs that I expected in the next one year. Now I’ll give you a glimpse of the status of the ongoing projects. As I mentioned, we are executing 10 projects. I’ll start with the naval projects, the P7 and Alpha project. Again, happy to inform you that our first ship has already undergone the basin trials. Basin trials is the harbor trials have been successfully completed. We intend putting the ship to sea for the sea trials by end of this month. So the project is going on track. And there was a question which was asked I think last time or last last time. Is the project going on track? Will you be able to deliver the ship on time? Yes, we’ll be able to deliver the ship ahead of the contracted time which is the first ship is to be delivered by August this year. The second ship by February next year and the third ship by August 2026. So we will be able to complete this project on scale, this high value project. And just to give you an updated status, we almost touched 90% progress on the first ship, almost 65% on the second ship and about 50% on the third ship. So that is the kind of progress that we have made achieved. Coming to the survey vessel Large project. This is a four ship project for the Indian Navy. Two ships have been already delivered and they have been commissioned into the Navy. Two more ships we intend delivering during this calendar year which means the third ship we expect to be delivering by June and the fourth ship by July August. So that is the way the progresses. Currently there the second ship has almost touched around 85% the physical progress and the third ship is around 72% coming to the ASW shallow water craft project. Actually this is a 16 ship project. Eight being undertaken by GRSE and eight by the Cochin shipyard. Happy to inform you that the contact was signed on the same day. Both the shipyards signed the contract on the same day. My first ship has already undergone full power trials and it is ready for delivery. We are confident of delivering this vessel by March 15th, 15th of March this year. The second and third ships are following very closely and we intend completing this project also on schedule. Our contracted delivery timeline is by October 26th, so all the eight ships we are on track will be able to deliver by October 26th. The fourth project that we are doing for the. The Indian Navy is a new generation offshore petrol vessels. There’s a four ship project on track. The first two ships we almost touched 40% progress. We intend launching these ships during the calendar year. This project naturally the project was signed only in 2023, March 30. So the project delivery timelines stretch up to 2028, 29. The last of the ships on track as of now. Now coming to the other projects that we are doing. The multi purpose vessels, we intend starting the. That’s the commercial platforms for the German client. We intend starting the production. Design activities are currently in progress. We intend commencing production by July this year. Project is on track. Being commercial results, we just cannot afford to slip on the dates. So that project is on track. The oceanographic research vessel the production has already commenced and we intend doing the first milestone activity that is a key laying of the vessel by July this year. On track. The acoustic research vessel preparatory activities are in progress. The contract has been concluded currently well on schedule. And so is the project that we are executing for the government of West Bengal. Thirteen hybrid ferries Last time when we met I had mentioned four things or four or five things if my memory is right. One is that next time, that is today when we meet, I should be able to give the happy news that we were expecting at that point of time regarding the commercial vessels I met my commitment. GRSE is currently in a state where multiple foreign customers are approaching us. We are taking a balance call as to which other projects we should take on what we should hold in events. So we are good with the commercial shipbuilding revenue. We had given a growth perspective. We are maintaining that rather exceeding what I had committed last time. Third was on the ship repair which was a very small vertical that we had started. We started in a very modest fashion. So today I can proudly say that the ship vertical has gained its feet and the facility that we have set up for the ship repair is fully loaded. We are executing orders including export orders on ship repairs from friendly foreign nations as well as from Navy and Coast Guard. So that ship repair vertical has stabilized. We ex right now again, in our overall scheme of things, the revenue generated from ship repair is very very modest. But we expect substantial growth in the next three to five years. And again, happy to inform you, you are already aware that the company has been upgraded into a recategorized into a schedule A company during the last financial year on September 17, if memory is right, we were upgraded into a schedule A company which is a recognition that we have been relentless. Pursuing for the last five to seven years. It’s. It’s your credit. And of course the NGC tender last time when we discussed it was still in liquid form. Deliberations were still in progress with the Navy, the tenders out. As I mentioned, we expect the bit to be opened in a couple of months. My conservative estimate is by April the bid would be opened. And again happy to inform you that are we have a memorandum of understanding with the Ministry of Defense with the government. We are a government owned company mostly 75% of 74% of shares with the government. So we have to sign a memorandum understanding. \And based on the performance parameters the the company is assessed and on a trot for two years, including 23, 24, we have been rated excellent. That’s the highest rating. And out of a score of 100 we have attained 96.5. There even you have a major contribution because the market response is one of the evaluation criteria. So thank you. So I think I’ve covered most of the aspects that we are I got to say. So I thought I will this time restrict my introductory address to the minimum. So I’m open for any questions as you deem fit, please. Thank you. Sir, can you. Can someone hand over a mic please? Normally there is a strategy like in a con call which is 1 hours. I always look at the clock. Now I am seeing you. Otherwise I will have a clock 20 minutes, 25 minutes. Then the number of questions become less. You have only 35 minutes. But today no such.
Ramesh Damani
Yeah. Again, thank you sir for your stewardship and excellent set of numbers. We are very happy shareholders here. So I want to ask you a couple of questions please. The first in the budget, there was a lot of talk about moving along maritime shipping. A 25,000 crore fund. Could you give us some color on how that would help us? And B, you mentioned a lot of orders that possibly could be opened this year. Can you quantify the expected value? Whether we get it or not, is the expected value of that order for us. Thank you so so much.
Gaurav Girder — Concept Investor Relations
Sure. Thank you. I’ll start with the orders which are on the Anvil, the next generation Corvette, the AON was taken for 36,000 crores. Which means the L1 shipyard, purely by the calculation should get around 22,000 crores. But my assessment is that could be well beyond that. Which means it could be between 25 to 30,000 crores for the L1 shipyard. L2 shipyard will get around 155 3. Around 15, 16,000 crores. This is for the next generation Corvette project. Now, I’d also mentioned that the P17 Bravo A1 has been accorded.
P.R. Hari — Chairman and Managing Director
The total value for which the Aon has been taken is around 70,000 crores. Which means each ship would be around 10,000 crores. So the L1 shipyard would get four ships and the L2 shipyard would get three ships. Here I’d like to add on that. I’ve mentioned that three shipyards and two will get it. So the probability factor is high. And our confidence is that having built the P17 and since we do not expect any major Design changes over 17 to 17 Alpha to 17 Bravo. So we will be bidding with that kind of confidence and reasonable aggression coming to the other projects. The 18 follow on or other NG.
Nowadays every. Every project you will see that NG. So that is a fad. I mean next generation, new generation. So be it. So. So it’s a 18 ship project. Ng FPV project. The order value is. It is. As of now it is likely to go to a single shipyard. So the conditions of the the financial qualification eligibility criteria are going to be stringent. Some shipyard who has got the capability. Naturally we will be there. And maybe around four more shipyards should be there. So here the order value is likely to the tune of around 3000 crores. Then there is a 5 ship survey vessel. NG survey SVL survey vessel.
Large project NGSV next generation survey vessel project for the Indian Navy. There’s a five ship project. We expect the order value to be around 3500 crores. Again this will go to a single shipyard. A 31 water jet fac project. This is a relatively low value project. We do not expect the cost of a water jet fac ship even with that NG factor to go beyond 100 to 120 crores. This again could be to the tune of around 3500 crores. Then comes the 120 fast interceptor craft. Around 2500 crores. Havoc. Okay then two multi purpose vessels for the Navy. The project is two ships are currently being constructed by Larsen Tube Row shipyard at Katupalli.
Navy has now come up with an RFP will be coming out with an RFP for two more ships. This could be to the tune of 1200 to 1400 crores. This in a nutshell gives the overall project that are on the anvil. If I miss something, maybe if a subsequent question comes I can answer. Yeah please. You Obviously the first two are the most lucrative. The ones you mentioned between them they’re how much? 1 lakh crore or something. Can you tell us the status of this do you think would be L1 L2. What do you think? What is your hypothesis working hypothesis of those projects? See, in the NGC project we are confident. Why we are confident is purely because I had mentioned this earlier, that as far as Corvettes are concerned, we have mastered. The construction of corvettes, nine Covenants, both missile. I mean surface as well as ASW are currently running in the Navy. And all nine are built by grs. That’s the kind of expertise. So here I mentioned that it’s around 36000 crores. L1 will get around 24 000. 25 to 30. Yeah. This is the first project that is on the handle. And this will open when, sir? When? When? Conservative estimate is 33 months. Optimistic two months. That means. That means as early as March end to April. That’s very close. That is something very close. Okay. And the other one, the. The Bravo. P17. Bravo. P7 Bravo. We expect the. The RFP to come out only by year end. Because the Aon was recorded I think just about a couple of months back. So we expect the RFP to come out. Okay. Again, put a moderate timing by end of the current calendar year. So if it comes by end of the calendar year, the L1 determination, you put a inefficient time of six months. From mid opening to by past experience. Which means by mid of calendar year 26 the L1 L2 shipyards will be known here. The L1 shipyard as per the Aon taken will get around 40,000 crores. And the L2 shipyard will get 30,000 crores.
Ramesh Damani
And you’re confident of that?
P.R. Hari — Chairman and Managing Director
Yes, definitely we are confident. See, it is three shipyards. Only two will get it. So we should get it. Yeah. And just to follow up, sir, on the first order that you mentioned. 36,000 crore which you get 24,000 crore. That also you said is your strength. Right. The basic. I’ll tell you by one. I mentioned the experience. Okay, experience. Maybe somebody has undergo. Still we’ll just neutralize only four shipyards who are eligible for this. Only four have been permitted to bid for this. Of the two will get it.
Ramesh Damani
Right. So it is. And also if that happens, then your order book doubles. Basically, yes.
P.R. Hari — Chairman and Managing Director
Right now my order book is naturally it is depleting.
Ramesh Damani
Yeah.
P.R. Hari — Chairman and Managing Director
Because we are executing. Last year, I think when we started the financial year it was around 22,600 crores. Now it has just gone to 23,877. Despite getting multiple orders during the current year. Right. So we are depleting an order book. But no fire. We will get a couple of orders in the coming year.
Ramesh Damani
Yeah. Great. Thank you, sir. Also going to speak on the budget. What do you impression?
P.R. Hari — Chairman and Managing Director
Yes, it’s a very interesting budget. With respect to shipbuilding. Because the maritime development fund they have allotted 25k 25,000 crores. They kept a copper of 25000 crores. What the government is planning is to provide assistance in terms of either equity or debts with with 49% investment from the government and the industry should invest the balance 51% that this could be for pure shipbuilding project. Projects or creation of shipbuilding infrastructure. This is an interesting aspect that came out of the budget. And also government has already the action has commenced. Most of the coastal states have come out with RFI RFIs for EOIs for creation of ship building clusters. For example Gujarat, Karnataka, Maharashtra. Maharashtra, I’m not so sure. Gujarat, Karnataka, Andhra, Orissa and Tamil Nadu. So shipbuilding clusters are planned to be created in these states. The benefit for us or all of us would be the assistance from the Maritime Development Fund that the government is earmarked. Third is the Shipbuilding Financial Assistance version 2. The Shipbuilding Financial assistance policy was always in existence. Of course it is not applicable for warships. But since we have ventured into commercial shipbuilding and in a. In a strong way, this will definitely benefit us because the subsidy that is being allotted by the government, basically their intent is very clear that they want to boost the shipbuilding industry in India. So that will definitely give a philip to the commercial shipbuilding. These are the major aspects that I can pick from the budget. One more thing is a very interesting thing. I think I mentioned in passing last time in a con call was that the government has come out with something on recycling. That is ship breaking. If you break a ship in India, then you get 40% of scrap value as credit. You can avail the credit as an assistant direct assistance on the government. You. You build a ship in India. It’s a very enticing offer. So I think on the whole with respect to commercial ship building, the budget has been very, very increasing. More is there, but that’s fine. I think that is.
Ramesh Damani
But that helps more. Commercial doesn’t really help us.
P.R. Hari — Chairman and Managing Director
No, no, it helps us. Why it is helping us is. See when we met last time I was. Was bit hesitant. I would not say hesitant. I was just. We were just contemplating should we go in for commercial building and all we have taken register to be gone ahead. So since we have gone ahead, we would like to go in a big way.
Ramesh Damani
So if you’re going in a big way, all these things initiatives will help. So if just a good follow up on the two new contracts that we are talking about. Are they on a cost plus basis or are they on a competitive basis? I mean how would that mechanic work?
P.R. Hari — Chairman and Managing Director
Which.
Ramesh Damani
Which the two new contracts that we’re talking about.
P.R. Hari — Chairman and Managing Director
Okay. Yeah. The NGC and the. It’s a hybrid. Hybrid. There’s a fixed element for the, for the effort. There’s a valuation by the shipyard and certain equipment. It is on cost plus basis. It is not. We. We term it as fixed cost and variable cost. So it is going to be a healthy mix of both. 7%, 8%.
Ramesh Damani
The margins for that would be. Margins would be plus 8%. Plus 8%. Great. Thank you sir so much. [Foreign Speech] Please. Please sir, can you speak more about export potentiality? I think next five years or next 10 years will be for exports. So how we are prepared for the expert potentiality? Thank you. What can be the our for ship building as you just now told. What can be the our share roughly where we can stand in next five years.
Unidentified Participant
Thank you sir. Right now as on date we just about 4% of GRC’s order book is coming from exports. Our total order book is 23,877 and just about 970 odd crores is coming from exports. So but since as I mentioned it was a very. I mean we are pulsing the system but with the kind of offers that are coming, there are the queries that are coming. We are taking a calibrated approach. We have gone ahead and invested in revitalizing one of our facilities. So I know that you’re looking for figures. So you always know. I’ll say on a conservative basis we’ll be looking at two fold increase within one year and at least a fourfold increase from the current value in the next four years.
R.K Das — Chief Financial Officer
So I’m just giving a band. You mean fourfold on the amount of export that was done currently that should increase regarding these budget proposals. So how does exactly it work? Let’s say the government has proposed shipbuilding clusters in some of these states. So how exactly would it work for a company like grse? What can you do exactly? Would you be owning the cluster or having one of the facilities and somebody else also will be having facilities? I’ll try and answer in this fashion sir. Right now I’m speaking from GRC’s perspective. I’ll give build a background and then answer your question specific question. Right now we have got three full.
P.R. Hari — Chairman and Managing Director
Used usable shipyards in Kolkata GRCs plus we have hired some facility all put together our shipbuilding capacity. Last year when we met last year it was 20 ships. We have increased to 24 ships already with what we have by end of this year that means end of calendar year 25 we’ll be increasing to 28 ships. But that 28 is also grossly inadequate to meet the requirements. And that’s why I said we some of the offers we are not able to take on. So there is a need to expand beyond Kolkata.
And naturally Kolkata has got an inherent limitation of draft. So we have to whenever we do construction we match the tide and do the construction float out. So we want to come out of that once for all. It is with that intent that we will be looking at facility outside Kolkata. I am not in a position at this moment to say when but that the ball has already been set probably. Now the states which have shown interest in creation of ship building clusters are what I mentioned.
Gujarat, Maharashtra, Karnataka, Tamil Nadu, Andhra and Orissa. Because these all of them have got adequate depth. I mean the draft adequate depth is available. Now when you say a shipbuilding cluster it will definitely have the shipyard as the core of the cluster with the ancillary industry. Ancillary industry could be a manufacturing industry which supplies items for the. Then the logistic arrangement there has to be a transportation. So the cluster contains multiple facilities with the shipyard as a core of it. There would always be or there could always be a port also co located. This would in a nutshell mean water clusters.
Now within the cluster what is that the government is going to offer and what is it’s going to come from the shipbuilding? What is it? Maritime Development Fund. Like for example one of the RFIs EOIs which one of the states had come out. They are ready to provide a. They are ready to invest and provide a breakwater. Breakwater means it’s a. It’s a structure maybe a kilometer long which will protect the sea from coming inside. Which means what is within that breakwater is usable for ship construction. They are ready to create jetties, building berths where the ships can be located.
The shipyards would then need to invest in creation of dry docks and building bursts. That will be the investment from RCF. Some of them have already offered a 10 year rent free period or rent at very nominal rate. This coupled with debts that the government may give, it’s a win win for everybody that that is what we are looking for. So I think hopefully I’ve answered your question to some extent. Yes, of course, sir. I want to ask you about the ship repairs. You have been spoken speaking in your conference calls. So how exactly do you plan to grow that part of the business?
Questions and Answers:
Unidentified Participant
Especially now with this, you know, closing relation. Better relationship with America and other countries. Probably that might open up a very big revenue stream for the Indian ship repairs companies. So how exactly would GRAC plan to position itself on that? And do you see something in the near term? I think or maybe it will take a very long time.
P.R. Hari
Okay sir, I’ll put it this way. We were not into ship repairs. Just about this is 2025, just about four years back we started the process. We took three dry docks on a long term lease basis from our friends in Kolkata Port Trust smpk. We have taken over that. That is the facility which we have created dedicatedly for ship repairs. But when we started getting orders we found that itself is not adequate for us both the Navy see Navy has got dedicated ship repair units.
The across the course naval dockyard sense. But still with the kind of ships that are coming up for refit and repair they’re not able to handle the load. So few orders have come from Navy coast guard do not have any dedicated repair organization. So 100% of the coast guard orders will go to one of us. Ask Cochin shipyard LNT and some of the private players. No, the. The demand is very high but the capacity is limited. Now we have now taken over the contract is not agreement is not yet signed.
One more dry dock which is unused with the Kolkata portraits we have taken over from them. So this will augment our capacity and the revenue what we are generating from ship repair. We are actually hesitant to take more orders at this juncture because of the capacity constraints. In a year or so we’ll be able to double the revenue that we are getting from ship repairs. This is one. But that also will not address the issue. Because if you’re limiting our ship repair to Kolkata it just will not meet our requirements. So what we have done is we have formed partnership with small ship.
Very very small shipyards whom we use there as our subcontractors. Take the order at a reasonably ship repairs. The high margin and we intend doing this refit set. We already executed one in somewhere near Jamnagar. We had a collaboration with one of the private shipyards. We got the job done. We did the project management. We got a good margin out of that.
So we in addition to creating our own facility within Kolkata we’ll be having a structure where when we partner capable small shipyards do the project management, ensure quality and get good margins. Bottom line, the crux of it is that we ended almost doubling our ship repair revenue in one year.
Divyesh Shah
Sir, the US naval that 100 their fleet of 100 ships and all. They wanted to empanel a number of Indian companies to do their repairs. Have they visited grse? If not, why not?
P.R. Hari
I’ll answer this question because be it mdl, MDL is at the sea is next to them. Be it goa sea is next to them, LNT seats next to them, HSL seas next to them. We are a reverend shipyard and this is one part. So we are not comfortable to go in for. I am not getting the MLRA or MSRA or something with the US as of now at this juncture, we are not in a position to go for that. Second is, let us say we hire a facility, we collaborate with one of these counterparts there. So far this agreement has been signed nearly three or four years back. How many ships have come? Hardly anything. We can, we can count one, two, three in the last four years. At this moment we are having a wait and watch policy for the U.S. or any other place.
Divyesh Shah
Last question from my side, thanks. We have been announcing from time to time some alliances for you know, with some global companies. For instance, the marine engine production and all that. So is there any potential in terms of actual revenue terms and how it will unfold going forward? Sir? And which of these alliances you see likely to materialize more?
P.R. Hari
Okay sir, I’ll give a perspective that when we sign mous, MOU is like sowing wild oats. It’s like we do business development, we attack 100 leads. If even two leads fructify, it is success. Similarly in case of MOUs, we have had, we have live MOUs with Rolls Royce for MTU, Rolls Royce for marine diesel engines. We had one with Caterpillar and we had one with Kongsberg. I’m only speaking about engine and vortagers. Of these three, one has matured. It is a Rolls Royce MTU and it also is MTU MOU.
And when I had mentioned earlier about this 31 water jet FAC or the 18 fast patrol vessels, it is those type of engines that are going to get into these ships. Which means, let’s hypothetically say this collaboration succeeds. And it is 31 into 3, 63 engines in these ships and 18 into 2, 36 engines in the Kochgarh project. So opportunities are there. We, we were only having an mou. MOU was initially for assembly, testing and so on. So we get knockdown kits from there. We have a diesel engine plant in Ranchi. We used to button up the engine, conduct trial. We have a test bed there and then deliver. We are just transform that into co production because we found that is not attractive. Validation is nothing.
So but now we have gone for an agreement. It’s called a license agreement for co production where as per the government policy. At least 50% Indigenous content should be there for every project. So many of these foreign OEMs who are supplying 100 automatically get knocked out. So we are leveraging that government policy. To get into this 31 water jet FSC as and when it comes. As a matter of fact, I have just come back from Bangalore. I was in Bangalore for the Aero India. We had a closed door meeting with Rolls Royce to further this project. Now you may also have noticed that GRSC has assigned since you asked about MOUs with several partners. Like I’ll give you one example. We have a collaboration with Elbit Israel and their joint venture partner in India for manufacture of naval surface guns. Very attractive project. Our role in that is certain components manufacturing, project management, installation. But the margins are good. So we decided to go in for that. So that was an MOU which started off as an MOU which translated into an order we recently signed an MOU with a firm called Apollo Microsystems. It’s a listed company, Very, very good company. Had a interaction with them. We understood their business. We got into an MOU with them for moored minds which Navy requires in large numbers. So it has not seen. It has not been translated into an order at this juncture. But opportunities exist. So like I said, MoUs out of 10 if 2 fractify, it is successful.
Ashok Shah
Sir, we have three companies. One is Cochin and one is MA and one is Garden. So how is it cost to to get employee and workers compared to. Is it Kolkata is cheaper compared to Goa or the Mumbai or for the this coaching ship here.
P.R. Hari
Okay, very tricky question. See, I have been in Kolkata for the last my ninth year running in Kolkata. Before joining, I mean I quit from a naval unit in Cochin shipyard, the ISC project. I was heading the aircraft carrier project in Kochish. So I know the work culture and the employees there. And in Mazagran docks I was apart from the navy side for commissioning a P17, the Shivali class ship. So I know all the three shipyards well with JRC naturally being my home.
So if you look to answer your question about cost of labor, it is almost same at all the three places. It is almost same at all. Because see as a policy, none of us, none of the three shipyards, none of the five or six big shipyards, we are not taking too many permanent employees. The strategy by all of us is outsourced work. And we do project management core expertise in design. We retain some of the block fabrication or specialist jobs we retain. But most of the labor is through contracted workforce. The contracted workforce rates are same because we all pay central wages, central government wages. Minimum wages of central government. So I feel it is at par. Each. Each shipyard has got its own environmental issues that you discount that. But otherwise the cost of labor is more or less same. Are we looking at the. Since we are expanding at Vizag Shipping for some CPR or something like that to acquire and expand the expansion is not because of the cost of labor. Expansion is purely because one, we are stretched to our seams in Kolkata. Because we have got limited land that we have done to our best capability. Expanded it, revitalized it. Now if we take more facility in Kolkata, the disadvantage is that it is a riverine shipyard. The limitations with respect to depth will still remain heavy siltation. So we are good with what we have in Kolkata. But if you really want to expand to global shipyard where we can construct vessels of Let us say 300 meters length commercial vessels then you need areas with. It is with that intent we are likely to go out. It is still a liquid form. Discussions only are in stage at this stage. Maybe next year when we meet maybe I will be able to give you some good news of that.
Ashok Shah
And last question from my side. Sir, you just told about export market. Could we expect by end of next year around 15% order book to be from export market?
P.R. Hari
No, no. I’ll answer in this question in this fashion. I’ll try and answer in this fashion. See, you take a 10,000 ton commercial ship and you take a 300 ton warship. The cost of the warship is more than the commercial ship. Because in every ship it is the equipment and weapon and sensors that carry value. The order value. So 50% it is I. We are not even looking at it. Because see, you must also appreciate that we have been set up.
We are a company that has been set up with an intent for the maritime requirements of the nation. And there is enough. What I just mentioned. I just mentioned four or five or six projects of Navy and Koshkar that are going to come. There is enough number of orders are going to come in the near future for all. But we are not happy only with that. So that is the reason why we are going for export. One, for global recognition. Second, after we put our feet firmly on ground the margins are going to be good. So I expect right now I just mentioned that the order book position the contribution of commercial export orders just about 4%.
Maybe it could go to 10% but not the level what you’re looking for. We’re not looking at that because of this reason I mentioned.Sir. Yeah, please.
Ramesh Bhojwani
Okay. Sir, Ramesh Pojwani from Meta and, sir, before you came. There was a audio video presentation. That film was excellent. It took us back to 1884 to today the progress, the progress of your company and the progress of maritime and shipbuilding in particular Navy and the Coast Guard. So that was wonderful. We came little early, so I had a chance of seeing it two, three times. Now the thought which came to me, I was in another conference where there was the. I think the commissioner from the government of Nepal or the High Commissioner head of Nepal, sorry, Vietnam. He mentioned Vietnam has a coastline of 3,000 km. India is a coastline of 7,500 km. And we need to have extremely accurate coast Guard as well as naval ships which are monitoring and which are seeing that there is no room or no leak or a weak portion, foreign access to anybody. So the thought, the thought which was coming to my mind was sir, have we developed adequately strong stealth facilities for our ships above the sea and in the submarine?
P.R. Hari
Okay.
Ramesh Bhojwani
I mean you, you have the liberty of not answering it to full, but just idea.
P.R. Hari
I’ll try and answer in this fashion. The role of coast protection is that of the Coast Guard. That’s why they called the Coast Guard. Yeah. And the role of Navy is beyond a certain. That means it is outwards. With that background Coast Guard. The government has really realized the need for augmenting the capacity and capability of Coast Guard. Just to put things in the perspective as making notes. So somewhere I have written down that Coast Guard budget for capital acquisition. They have increased I think by 26% or something in this year. That’s why they’re coming up with several RFPs. As far as technology is concerned, there is. There are multiple agencies handling the security of the coast.
One is of course Indian Coast Guard. Then there is something called merit. Each state is also involved. So to answer your question, yes, there is room for improvement. But I think Indian coastline is adequately protected. And just also to put facts on the right perspective, it’s. It was 7,516 kilometers. But after recent survey, you can check it up, you can google it is around 11,000 km. So that is a kind of coastline with all our.
Ramesh Bhojwani
That we have. Our job has virtually doubled. Virtually doubled. Sir. That was the one thought which I thought I will share with you. The second thought was your opening expression. Of the performance of Q3 and nine months. What I heard correctly. The top line, I believe it is third quarter was 1271 crore. Yes. And the PAT was 98 crore which was 4%.
P.R. Hari
Yes.
Ramesh Bhojwani
But I didn’t get the EBITDA figure because you rattled it very fast.
P.R. Hari
I deliberately rattled very very fast because I just skip over that and go now. Okay. See our revenue from operations was 1271 crores as third quarter. Third quarter, yeah. And the PAT was 98 crores and the EBITDA was 147 crores. And for the nine months we can multiply this with three. No, it is. I’ll give the figures of nine months. In nine months revenue from operations was 3434 crores. And the EBITDA was four hundred and twenty one crores. And the PAT was two hundred and eighty three crores.
Ramesh Bhojwani
Yeah. So virtually it comes into three.
P.R. Hari
Yes.
Ramesh Bhojwani
And going by this we will, we will end this year almost close to 5000 crore. Little less. Please don’t comment. One point which you mentioned further was. Okay, we are registering the 38 CAGR. Will this 38% CAGR be maintained going forward? Not only in the next year as I see in the next five years.
P.R. Hari
Okay, I’ll, I’ll. I think I’ll answer this question clearly. See our current order book of course is 23000 odd crores which hopefully will come down to around 22,000 something by end of this financial. Unless we get some fresh orders. And this is going to last including the new projects that we have signed up to 2029. The big projects. That is a P17 Alpha Touchwood. We should be able to finish by mid of next year. So the maximum revenue accrual will happen from this project I had mentioned. See this 38% CAGR.
38% perhaps is not there but we’ll be able to maintain a CAGR between 20 to 25% over a five year period. I think that gives you a clear answer. Perfect. This is absolutely accurate. The one last point is sir, where you see a possibility, definite possibility of ramping up the EBITDA and the PAT margin. See it depends upon the projects that we are getting. Project execution cycle. If the P17 Alpha project margins are good. Suppose some of the projects which we have taken at very very low margins because we need to get orders. Unless we have orders we’ll not be able to perform. So it’s a mix.
Okay, it’s a mix. In this I think I’ll preempt a question and answer. Our operating profit has really gone up. But our PAT margin, EBITDA margin. Has come down. When you compare to the last. This there’s a drop in that but it’s like a sine wave. I have been consistent in my views on this that we’ll be able to maintain pat margin above 8% this time. We have dropped in this particular quarter. It is seven point something. But on the whole by the end of the financial year we’ll be able to correct that. Wonderful. But again I’ll clarify because I know otherwise I can address more questions in one shot instead of piecemeal questions coming. If we get the COVID project, if you get the P17 Bravo project. Naturally the margins are going to be higher than that.
Ramesh Bhojwani
Sir, what I see from your body language, of course you. Till you get the order you cannot say it is in hand. But I am very sure that these orders are with you. I can’t see that. How can I say that and going forward because the priorities. I just stated the probability factor. Simple mathematics. 423 2.
P.R. Hari
So. And plus confidence. So it’s all put together. You can expect.
Ramesh Bhojwani
Thank you. And all the.
Sagar
Thank you. Yeah. Good evening sir. Sagar, you are from Vintud Investments. So just one thing. So let’s say we have three major ship building companies. Okay. We the promoter is the same. So now are we getting or taking market share for from them? Is there any competition among us or. Or it’s like sister companies. Like we are just working in parallel with each other. And there’s no PIP in market share for any of the players. That’s one. So how are we differentiating ourselves from the rest? And what better things can we do going forward? And what are the challenges that could come? Let’s say 22, 25% KEGR what you have guided. So are there any challenges or. We are quite comfortable that could be maintained.
P.R. Hari
Very interesting question. There was a time when the market share was allotted. That is the era of nomination. There was a time before, much before we got listed when we were all in a comfort zone. Which means the orders were assured. Cost plus orders. That situation has completely changed. Luckily it changed before we came to the market. By the time the orders became either hybrid, that is what I mentioned about fixed cost or variable or. Or pure fixed cost contracts.
Second thing is the government, except for very specialized projects like the submarine order which has gone to Mazan docks very recently, very specialized project or the IAC which went to Cochin shipyard about 14 years back. All other orders are coming through competition. So the market share depends upon the efficiency of the organization and the build strategy and the bid strategy that they adopt. Now, what in any shipbuilding industry you need one is you should have the dock and berth infrastructure that is a primary requirement for shipbuilding. The dock that is a dry dock where you construct the ship and the building berth and. And the jetty is where we park the ships for outfitting. Second is the infrastructure, the crane age and associated that in today’s environment, all the shipyards, major shipyards of the country, they have reasonably adequate. Of course the demand is currently more than the capacity. But that leave an out. The third is the resources, the skill, manpower. As a strategy, all the shipyards are adopting to outsourcing for non core jobs. But the skilled manpower available in the country, the whole whole of specialist shipbuilders is limited. Whoever offers the highest pay will come and work there. So there is. Since you asked, what are the challenges? One is availability of skilled resources. We are putting in measures to correct that. Also maybe training through our own funds, picking up from some particular area which is known for particular skill. And the last point is there’s a huge reliance on the supply chain system. Because ours is an industry where shipyards are primary platform integrators. We build a hull farm. Then we put this that the equipment systems button up and get a platform ready for you. I mean for us. So we have a huge reliance on the supply chain system. And this supply chain system comprise of major players like Bharat Electronics, Hindustan Aeronautics limited or global players to very, very small msmes. So there are situations we say Covid is over. Covid is not over. There are still firms who are reeling from the cascading effect. So there are challenges. But I think we are more or less tided over or tidying over these issues. Challenges very much exist.
Sagar
Just to add on that. So let’s say you said that equipments and all those things, all the three shipbuilders have. So let’s say in the top three, our capacity today is 24 ships. Can you let’s let me know like what is the capacity of the rest of the two. And the second one would be. You said we might look at an acquisition going ahead. Okay. In the next one year acquisition mode or something. So any probable ticket size that you would look for it?
P.R. Hari
Can you. Sorry, can you just repeat split the questions and ask.
Sagar
So the first one was let’s say all the top three ship builders. We have a capacity of 24 ships a year. Okay, so what would it be for the other two?
P.R. Hari
Okay, 24 was just to place on record. 24 was enhanced from 20 till 2000. If you are looking at the other two shipyards, in case of Mazagran docks, they have capacity to build large ships. Their dry docks and building infrastructure is larger than ours. The numbers may be less numbers may be less numbers are less, but the bandwidth for larger platforms is more. Same goes for Cochin shipyard also. Actually Kochi has got the biggest dry dock other than Pipao. The biggest operational dry dock in India. So that will give them the flexibility of building large ships like the aircraft carrier. We don’t have that capacity. But what we have, our biggest strength is multiple dry docks of various sizes which can cater today up to destroyers. Destroyers means the ships above frigates and corvettes. So this in a number. Exactly. I will not be able to tell because that will give a. It is not an apple to apple comparison but different types capacity. In terms of numbers we definitely have the largest. But in terms of size we don’t.
Sagar
Got it. And the last one, the acquisition that we will be looking for going ahead which may or may not happen. But any particular ticket size in your mind like this much is something that we can go for.
P.R. Hari
Sorry,
Sagar
The acquisition, the VIZAC acquisition or some merger etc that you said like we may go for any particular ticket size of quantum.
P.R. Hari
See, at this moment, if at all we go, we’ll be going for a greenfield facility which will be developed maybe in a span of three to five years. We are not looking for what we have done. We have actually offset this problem by. Okay, I’ll give you an example. When we took on this anti submarine shallow watercraft project, it was an eight ship project. We were full with respect to our dock and berth infrastructure. At that point of time LNT Shipyard Kattupalli did not have any order. They had huge spare capacity. So we collaborated with them. We did part construction of these ships.
They are leveraging our core expertise of design, project management and procurement and their facilities. So that is the model which we have adopted. Not only with the LNT shipyard, one of the small shipyards in Kolkata. We had one export platform. We did part construction there. So that is the methodology which we are currently adopting. Till the time we develop a facility, a greenfield facility outside Kolkata. Which will take time. Because greenfield shipbuilding facility just does not come by switching on us. It’ll take a bit of time.
Sagar
Thank you.
P.R. Hari
Thank you.
Sunil Shah
Yeah, thanks. Sir. Sir, when we talk about the next generation covert, the eight in number project. You stated there are four bidders for the same. Can you get the names of those bidders? We are there. It’s open. So is it open information?
P.R. Hari
No, it’s open information. It is Goa shipyard, Shipyard, Mason docks and grsc. Okay, this is the four ships shipyards. Right?
Sunil Shah
Sir, another question and this is more to understand the ship. Ship building capacity. What I want to know is that essentially if there is a shipyard we are making the hull of the ship. Once the hull is made, can we launch the ship in the sea and then those gadgets can be uploaded there? And the shipyard is again available to make another hull of another ship. So that when we say we are increasing the capacity, it means that you make the hull roll it over on the sea. The work is happening on that ship as well, simultaneously. And you know. So is that the right way to understand this is. Could you. Could you make me understand?
P.R. Hari
Okay, I’ll. I’ll try and give the background. See, in today’s shipbuilding methodology, we do not just make hulls. As the hull is being prepared built. Actually the shipbuilding starts with cutting off a plate. Then we assemble the plates in some shore location, which means on the dock. Then these are lifted by cranes put into the dry dock. Which means. Suppose if a ship has got 20 blocks. 20 blocks are constructed at multiple locations. Then they are jumboized into the within the dry lock.
Now as we do it, we do pre outfitting. Which means there are certain mandatory equipment. Like the main propulsion engines or the power generation equipment or the AC plants have to go in at the time of launching. Because once we launch, because there are various technical requirements to be met when the ship is in dry dock and after the ship is moved, then we of course moved. We moved the ship.
Do the balance buttoning up the system integration when the ship is afloat at the jetty while the next ship comes in. You’re right. Exactly. That is. So when we say. When I’m telling. We are currently constructing 40 platforms. Naturally on the same breadth. I have stated that we are building capacity is 24 is purely by this method. While 24 ships are at various stages of construction building berth or dry docks. Few of them are at the jetties doing outfitting, being ready for trials and delivery.
So you’re right. That’s a methodological.
Sunil Shah
Sir, one clarification regarding this NG corate 36,000 crore order. You said L1 instead of 22 or 24,000, it can end up becoming 25 or 30,000 crore. So how is that. Actually that means the whole 36,000 will end up becoming 45,000. I’ll tell you the thing.
P.R. Hari
See, when in any AON is taken. You have seen examples before. Also any AON is taken. AON is based on an assessment of the customer at that point of time. But in reality, because AON would have been taken in this case, it was taken almost two and a half years back. A one was 30 months. Now I think 33, 34 months have passed. The times have changed. The equipment costs have gone up. It is our assessment. It’s purely an assessment that the 36,000 could go up to 42,000. 45,000. So conservative.
Conservative estimate is that the loan shipyard could get in the range of 25 to 28,000, let us say. So it is mostly inflation. Not that some specifications have been added to the project and all. Specifications and all. It’s mostly inflation. Which is a reality. Right? Which is a reality.
Sunil Shah
Fair. Thank you, sir.
P.R. Hari
Which means justifiable inflation.
Vijay Bhayani
Sir, if I can ask one question, sir, going forward, there are those clusters which are getting developed, right? So we are at maybe reasonably very, very good utilization of our possible capacity at Calcutta. The clusters which perhaps. So what are the thoughts over there? What is it that you would like to have as a company for Garden Reach? Because you have been there with Kochi, we have been there with Moscow and you stated those large ships can be made at Buzgaon, but we don’t have the capacity. So what would be that key thing in those clusters that you will be looking at going forward?
P.R. Hari
One is the cluster would be in a place where adequate depth is there. So that all our constraints or whatever, juggling what we do, we manage. But then it’s after a lot of juggling, technical juggling, that we do, that we built so that problem would be addressed once for all. Second is the capacity to build huge commercial ships, the warships. We are not much worried because we intend limiting our. Because I think this question was asked sometime before whether we would like to go for submarines or. No, we are not planning to because that requires around 20 years of expertise to be built up.
So our vision with respect to warship building would be to destroyer level and with commercial ship build commercial ships to super carriers or Panamax vessels. So that is so for that two requirements. One, the dry lock has to be adequately big. And second, the depth should be adequate. At least 16 to 20 meters of depth.
Divyesh Shah
Fine. Thank you, sir.
Namit Arora
I have two questions. Sir, here. Yeah, please. So I have two questions. First, can you talk more about the probable timeline of the three projects? Corvettes, frigates and destroyers. On the basis of rfp, the actual order signing of the contract and order booking. And the second one is without considering the new projects. When will be the current order book exhausted by.
P.R. Hari
Okay, I’ll answer the first question without considering the current. Without considering these three projects or the. Or the export platforms that we are very confident of getting. Keeping that aside, the current order book will expire by 2029. Coming to the first question, I’ll take it in three parts. The next generation corvettes, the bid likely to be open conservative within three months. That is April, I think. And from the time the bid is opened, the price bid is open. Technical bids already opened and we are cleared. All four of us are cleared. So it will take knowing the systemic efficiency or inefficiency. It will take around six months for the contract to be sent and the revenue recognition from that will commence from 2027. That is ideal for us because that is when our dependent. Will start that is when the COVID will pad up should pan up P17 Bravo by end of the calendar year. That means 2025 end the RFP could come out from RFP to L1 determination it could take Having seen the experience of NGC it could take around seven months for the from the RFP to price bid opening and from there one year for contract, six months for contract signing and two years for revenue recognition. Which means if P17 Bravo comes through the revenue recognition will start from 2029 NGD the next generation destroyer is still in liquid form. Would not like to comment on that because it is still under discussion. They have not even taken an AON for that.
Namit Arora
Thanks. So thank you for very detailed and candid answers to all the questions. I had a question around your investments in technology, automation and people. So if you could give us some thought process on, you know, the efforts you are making in terms of benchmarking GRSE with not just the other options in India but even with some international, you know, peers etc. And some investments that you may be considering in either technology, automation, people etc to build capabilities of the organization.
P.R. Hari
Thank you. Technology augmentation or upgradation is a focus area for us on two codes. One is for creation of new products, I’ll come to that. And second one is second aspect is for improving our own efficiency. Just to give an example, when we got this multi purpose vessel contract from the German client we had been put through a wringer. Two classification societies came assessed our capacity, capability, our processes and then only clear they give suggestions something which we did not have a certain painting process which is normally used in commercial shipbuilding. We do not have the facility.
So they said this has to be created and we have done that. So technology adaptation towards process improvement is a focus area for us. We already have a robotic building machine doing work for us and so on. Now this is one part second is for new product. We. I mean many of you may not know we have a our product range have also got autonomous vessels, fully green vessels. See initially we did a project for a It is actually the country’s largest ferry, fully electric ferry, fastest ferry. But revenue wise it is peanuts. But we still went in for that. Why? Because we wanted to first establish our capability and then make an inroad.
Because we took that, we subsidized it under RND fund. Because we did that we got qualified for the next World bank funded project. So we are fully focused on. These two aspects, that means technology for one, new product creation, technology for process improvement. I feel we are on the right path. A lot of room for improvement, but we are on the right path.
Namit Arora
Got it. And so on the people side, have you also been making efforts in terms of training etc just to improve efficiencies there also. But on the people side, training of manpower, etc. I know you mentioned contract and labor etc. But just some.
P.R. Hari
Okay, I’ll thank you. See people. I’ll just split it into three parts. People as in my core. I would not say core, my permanent man. It’s very, very limited. Just about 2000 people. And of these 2000 people personnel around 520 are officers. Which means we are a very top heavy organization. Deliberately so these officers, most of them are from the top education institutions of the country, most of the many of them from the IITs and NITs. So the, the technological, knowledge wise we are good.
We have some of the best facilities in India. With respect we have a virtual reality lab, a top end virtual reality lab which we just took six years before we. But we still, we realize that that six years before is no obsolete. So we are upgrading that. So so that is the kind of focus we have on people and technology. Coming to the. What I mentioned was since we have taken our strategy, we have adopted a strategy of outsourcing our non core jobs like simple welding, plumbing, cabling.
That pool of manpower is inadequate for a nation. Right now we are good to go. We have around 6,000 people working in our premises on an average per day. But maybe, maybe in a year or so, year or two, when the bigger projects come, we’ll find it difficult and we are prepared for that. We have found out methods where we have worked out strategies to improve the numbers of qualified people in our premises.
Namit Arora
Got it. And so my final question was on risk management in terms of when you bid for projects, you know, estimation because these are very large value projects and you obviously need to make a lot of assumptions on raw materials, etc. So just some thoughts on how strong is the organization on whether it’s bid evaluation, bidding, you know, price quotations and risk management because that also means supply chain and procurement. Thank you.
P.R. Hari
Absolutely right. Actually we have learned the hard way but luckily the impact was on minor projects. We have a robust risk management system, a board level risk management committee which assesses the various risks starting from environmental to financial risks. Every bid, every bid that is submitted is with my CFO’s concurrence and cleared by me every bid, be it small or big. It is with that kind of prudence that we do and any decision. Sometimes we take a project deliberately. A marginal cost that that is for our existence or for getting an entry. But that is a decision, not an error. So that’s what I want. Thank you very much and all the best to the international. Thank you.
Krishna Doshi
Excuse me, sir. So I had a question. So I just wanted a percentage number. Like on an average, if we are building a ship, then how much percentage of that ship is being imported?
P.R. Hari
Okay. Thank you, ma’am. Indigenization has been a focus area of the government, whatever terminology. And there are so many initiatives taken by the government to improve or increase the indigenous content. The last three projects that we have completed, that is the including the surveyors large I considered completed because the equipment ordering everything is over. Survey vessel, large project, the landing craft utility and the anti submarine covet.
All three projects we have 85% plus indigenization coming to weapon intensive platforms. Now. Indigenization as a service, as a. If you’re looking at warship building, 100% of the hull is indigenous. Around 70% of the auxiliary machinery is indigenous. Around 50% of the weapons are indigenous. All put together, the figure I mentioned, around 85% plus is indigenous content.
Krishna Doshi
Okay, thank you sir. And my second question was regard with regards to the budget. So we did see that this time, you know, the Ministry of Defense had to give give back somewhere around 13,000 crore back to the Ministry of Finance. So I just wanted to know like, you know, why is there so much delay in the process? Why are we not being able to to spend? And we also know that, you know, we somewhere need to expedite the process now. Because there is also a dire need for a lot of replacements and for a lot of, you know, new things to be bought. So what is causing all this delay? Why are we not being able to spend?
P.R. Hari
My appreciation. It is my appreciation because it is actually for the Ministry to answer. But I’ll give. Since you asked a question, I’ll give an appreciation. Now suppose if the NGC contract had been signed during the last financial year, a certain amount of payment goes as the first stage payment. They would have perhaps fact. I’m just giving an example. So it is not the fund expenditure is not because of the delays in execution of the project. It is perhaps in the delays in the process itself. That is the point I would like to convey. And again, it is a sinusoidal pattern.
It is not that every time the the funds are surrendered, there will be occasions. In the last financial year, I understand around 13,000 crores are surrendered by the Ministry of Defense. Maybe the next year they’ll make up for it. That’s all I can say at this moment to answer your question.
Krishna Doshi
Okay. Thank you.
Unidentified Participant
I had a question. So you mentioned about subcontracting. So what part of our revenue as let’s say percentage of revenue in value terms and in volume terms will be subcontracted outside the entity.
P.R. Hari
Can you. Sorry, could you. What percentage of the revenue.
Krishna Doshi
Will be sub. Will be subcontracting. So that will be manufacturing that will be made outside the entity outside our shipyard.
P.R. Hari
Okay. I’ll put it this way. If you take a project cost in the project cost, around 65% come from the equipment and sensors that we ProCure. And around 20% comes from the labor, that is the resources, human resources that go into of that 20% of that 20%, around 70 to 75% is outsourced. We retain the core strength. Core strength means, let us say the shafting work which drives the ship. We retain the competency. The complex block fabrication, we retain the competency. The design, 100% design is done in house because that is the most important factor.
We retain that. If you put it in percentage, if you are purely looking at percentage, it may not give you a correct picture because the design, if you have to, you have to give value also to that. So if you look at value come cost, in that case, around 40 to 50% would be outsourced of the labor part and the balance is done in house.
Unidentified Participant
Sir, I have a question. Yo. Yeah, please, please, ma’am. Yeah. So as for the budget, there is a lot of advantage for ship breaking. You did mention a little bit about it. But can you give us more clarity as to how do we plan to take it forward and use the benefits of it? Do we plan to have a separate section or how are we planning to planning to utilize that?
P.R. Hari
Okay. Ma’am, the intent of the government is actually to lure coax the shipbuilders to build ships in India. The target globally, I think our share is single digit figures, low single digit figures of the global commercial fleet. The stated target of the government is to increase this to 20% by 2047. It’s a long drawn process. For that you need the ship owners. You can’t impose something on the ship owners without giving them a carrot. The carrot that has been given is that if you break a ship within India, like if I am a ship owner and next time when I construct a ship within India, I can use that credit. 40% of the scrap value of the ship broken would be credited into my.
Operator
Shipbuilding, I’ll get that kind of financial assistance. So it’s a, it’s a very smart way to get the ship owners to build ships in India as well as GRSE is concerned. See the fact is we are shipbuilders. We are core shipbuilders. We are not looking at this moment for marrying shipbuilding with ship breaking. But, but then as an ambitious, really ambitious shipyard we are open to such options in the future. But at this moment, see all these things are budget promulgated. They have not been translated into policies yet. It might take a couple of months.
We’ll see if anything attractive comes out of that. We’re open for that. But at this moment it is still a stated or statement in the budget.
Unidentified Participant
Thank you so much.
Divyesh Shah
Sir, my question is since we are a government PSU and last from one year we as a common layman gets a feeling that government is something slow in decision making in every aspects as far as defense is concerned which which was there in last three, four, five years back. So since you are close to the government, what is your personal honest opinion? Whether slowdown has happened at government level because they are concentrating more on a social part of it rather than so I think defense says we feel that it has taken a backseat. So what is your personal.
P.R. Hari
So we are not totally owned by government, we are owned by you also. Anyway, but I would not like to consider that any decision is slow because if you see you watch 20, 2520 the calendar year onwards, multiple projects, RFPs are going to come out. Only when you see the RFPS coming in you will see some momentum. Coast guard at least three RFPs have been converted to orders in the last financial year. Three RFPs they have converted into orders. Navy, NGC, the whatever I mentioned they are all at least six, seven of them RFPs are going to come out in the next one year.
So I don’t think any decision making delays are there. Second is all these schemes which they are coming up be it from the Ministry of Shipping or made from the Ministry of Defense, both are coming from the same government of India. So initiatives wise and decision wise. In my appreciation as a PSU cmd I don’t think there is any.
Divyesh Shah
But vision is too big as far as vision is concerned. But ground level reality I think there is looks like there is some slowdown.
P.R. Hari
Sir, I would like to put it this way. Vision, it’s like very interesting. Talks are gone about quantity of work, 90 hours per. Week, 75 hours per week. But I have a very. I mean I’ll come back to your point. I just want to lay the foundation for that. And subsequent to that another business head tell that it is a quality that matters. It is not quantity. So there I have a point. Quality comes only with tons and tons of quantity. And that quantity comes from time. Time. Otherwise quantity cannot come. And if quantity is not there, quality cannot come. Similarly. Vision. Yes, to get the vision, like I was just addressing one of the queries. The vision is to obtain 20 share in the global commercial shipbuilding fleet by 2047. That itself is a. So that itself is a very ambitious efficient from 2% or 3% to get to 20%. But for that 20%, the initiatives what they have listed shipbuilding COP, maritime corpus maritime Development Fund. They are all actual initiatives that are being taken. Similarly, in warship building. Both the Navy and the Coast Guard have stated. I mean they are not excised. Their perspective plans indicate ships Navy wants to go threefold in the next seven to 10 years. Maybe too ambitious. Coast Guard wants to double their fleet by 2030. But for that to happen, the RFPs have to come out. The ships have to be built. The process has started. In my appreciation as a CPSC head is that the process has started. The foundation laying, the concrete laying will take a finite amount of time. But once it is laid, it will move fast. This is my appreciation, sir.
Krishna Doshi
Thank you.
P.R. Hari
Pleasure.
Sunil Shah
So just on similar lines and just to add to the question which was there sir, historically have we seen any point of time that one. Hence I’ve. You know, as investors, we just want to make sure.
P.R. Hari
I’ll tell you sir, the bits were opened in August. August 24th. The. The techno commercial bits opened in August 24th. The technical clearance have been accorded to all the force naturally because if they’re shortlisted as we qualify for that by November or December. I don’t remember. Yes, there is a marginal delay. I am giving a conservative timeline of it slipping over to next year. But you see, sir, because these are high value orders.
So when a high value order is there, naturally the government would not like to short circuit a process. It takes time from our perspective. I want the order yesterday. I want the price bit we opened yesterday. But having been on the other side, I also understand their compulsions. Yes, there are delays, but the delays are not unseemingly.
Sunil Shah
Park it on a shelf. Not those types. Yeah, so history has also never. We have never seen such a case happen historically for any of the defense orders where RFQs were there tenders were. Invited from participants and.
P.R. Hari
I am not able to recollect maybe yes, sir. But I am not able to recollect any of the RFQs getting.
Sunil Shah
Not getting converted into it.
P.R. Hari
No, not getting converted into an order. There could be delays.
Sunil Shah
Sure.
P.R. Hari
Not cancelled.
Sunil Shah
Perfect, sir. That. That’s.
P.R. Hari
But it always happens. It always happens.
Sunil Shah
Yeah. So patience is the name of the game. So we are there but just to make sure. Absolutely.
Gaurav Girder
Thank you, sir. With this we conclude the Q A session.
P.R. Hari
I think someone has already raised hand. I think we should give a fair chance.
Unidentified Participant
Thank you. So, what’s your cash?
P.R. Hari
I hope your question is not tricky question. It’s like I should not put my foot in my own mouth. Ask some general question. How are you doing? And all this.
Unidentified Participant
Two questions. What’s your cash and bank balance as on December cash and a.
P.R. Hari
Simple question. This was straightforward question. Let us. Can you. I’ll let D.F. answer this question.
R.K Das
Yeah, I am through cash and bank balance. This is 4th as in 34 31-03-2031 December 2024. 3214 crores. Out of that our own fund is 577 crores.
Unidentified Participant
Okay. And the second question is on your provision. So next year as you will be completing P17 Alpha for next two years you will be taking a provision for that. Mainly for liquidated damages and for other onerous contract which is a general norm. Now how much is a percentage of your sales? Would that be because that will impact specifically on your margins. These are your high value contracts. If you can share some numbers.
R.K Das
Yeah. Provision liquidate damages. We are making Provision as per. In. As 115. And the provision is made only when we’ll exceed the delivery schedule as in date whatever. Already CMB has told that the project what we are executing the delivery schedule has not exceeded. Major project is P17 Alpha First Sip. Our delivery is August 2025 and we are hopeful that we’ll deliver prior to that.
P.R. Hari
See, I just mentioned earlier when my introductory talk that the first activity when we are confident of delivery of a ship is the harbor trials. We completed the harbor trials and we intend sending the ship for the first contractor sea trials during this month. We are confident of delivering the ship the first ship well beyond the. Well ahead of the.
Not beyond well ahead of the contractor delivery. So we are not unduly concerned about Unless some force measure condition happens. We are not entirely principal.
Gaurav Girder
Thank you. Thank you, sir. Thank you everyone. With this we conclude the Q and A session. I would request Commodore Piahari sir to give his closing remarks and thereafter we can join us for the high tea. Thank you, sir. Over to.
P.R. Hari
Thank you, ladies and gentlemen. It’s as I mentioned, it’s always a pleasure because I am not well today because I have been traveling for the last four days, in and out of Kolkata, I mean Kolkata to Bangalore, Bangalore to Kolkata, back today to Bombay. Next week, Delhi. So I’m a bit down. But after interacting, I’m back to normal. Thank you.
Gaurav Girder
Thank you. Thank you, sir. It.