INDIAN

OPPORTUNITIES AND
CHALLANGES
INNOVATION NORWAY
NEW DELHI
NOVEMBER 2005
INTRODUCTION
TO
INDIA

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INDIA

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INDIA

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 INDIA - A FACTFILE

• India is a Union of States with parliamentary

system of Government

• Land area: 3.29 million square kilometres

• Capital: New Delhi

• Population: 1.1 billion Exchange rate: Rs. 45/$

• Foreign Exchange reserves: US$ 160 Billion

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 INDIA - A FACTFILE
• Exports: US$ 80 billion in FY04

• Imports: US$ 105 billion FY04

• Climate: mainly tropical with temperature

ranging from 100 - 400 C in most parts

• Time zone: GMT + 51/2 hours

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TOTAL GDP AND PPP GDP 2004
Total GDP Total PPP GDP

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Source: World Bank: World Development Indicators Database, 15/07/2005
 FDI CONFIDENCE INDEX
Highly Educated Workforce 78% 22%
Rule of Law 73% 27%
India Management Talent 73% 27%
Transparency 70% 30%
China Cultural Barriers 66% 34%
Regulatory Environment 57% 43%
Availability of M&A Targets 50% 50%
Consumer Sophistication 46% 54%
Competitor Presence 45% 55%
Tax Regime 42% 58%
Quality of Life 41% 59%
Political/Social Stability 41% 59%
Economic Reform 40% 60%
Financial/Economic Stability 39% 61%
Infrastructure 36% 64%
Production/Labor Costs 35% 65%
Government Incentives 34% 66%
Access to Export Markets 29% 71%
Market Growth Potential 22% 78%
Market Size 6% 94%

Source:FDI Confidence Index 8

AT Kearney; Oct 04 Vol 7
 LOW CONSUMPTION
GOODS (KGs) – PER GLOBAL DEVELOPED INDIA
CAPITA LEVEL

PETROLEUM 590 2600 100

PRODUCTS

STEEL 121 415 24

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OIL PRODUCERS EXPORTERS AND
IMPORTERS

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COAL

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NET ENERGY IMPORTING COUNTRIES
COUNTRY NET ENERGY IMPORTS
(mtoe)

USA 663
JAPAN 437
GERMANY 214
KOREA 177
ITALY 154
FRANCE 137
SPAIN 109
INDIA 100
CHINA 66
Source: IEA, for 2003

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INDIAN SHIPPING SCENARIO

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GROWTH PATTERN – INDIAN
SHIPPING
PERIOD COASTAL OVERSEAS INDIAN TOTAL WORLD
SHIPS MGT SHIPS MGT SHIPS MGT MGT
1997-98 234 0.643 244 6.200 478 6.843 439.0
1998-99 250 0.656 240 6.212 490 6.868 444.1
1999-00 273 0.682 240 6.231 513 6.913 449.4
2000-01 316 0.697 230 6.119 546 6.817 475.2
2001-02 336 0.734 224 6.087 560 6.821 487.0
2002-03 425 0.805 191 5.372 616 6.178 503.0
2003-04 436 0.808 203 6.136 639 6.944 533.3
2004-05 458 0.811 228 7.202 686 8.013 546.6
CAGR
Last 7 yrs 10.07% 3.37% -0.96% 2.16% 5.30% 2.28%
Last 2 yrs 3.81% 0.33% 9.26% 15.79% 5.53% 13.89%
Based on: Tonnage statement, Government of India

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 INDIA’S FOREIGN-GOING FLEET

Others Crude
Gas 13% Oil
Carriers Carriers
5% 24%

Product
Bulk
Tankers
Carriers
20%
38%

215 Foreign-Going vessels

82 bulk carriers (38%)
51 crude carriers (24%)
Based on: Tonnage statement, Government of India
44 product tankers (20%)
11 gas carriers at (5%) and
27 Others (13%).
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 INDIA’S COASTAL FLEET
VESSEL TYPE NO’S GT
TUGS 170 46404
OSVs 78 80428
GEN. CARGO VESSELS 65 98187
PASSENGER FERRIES 37 76950
SUPPLY VESSELS 32 90394
PILOT AND SURVEY 22 6639
LAUNCH
DREDGERS 21 84634
PRODUCT TANKERS 11 37385
BULK CARRIERS 9 226388
BARGES 3 1220
CRUDE OIL CARRIERS 2 50080
OTHERS 4 9683
TOTAL 454 808392
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 AGE PROFILE

Age group Nos. DWT

< 5 years 73 1,273,800
5-9 years 88 1,528,560
10-14 years 100 1,737,249
15-19 years 137 2,385,480
>20 years 267 4,655,160
Total 665 11,580,249

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 KEY PLAYERS IN INDIAN SHIPPING
Company Turnover No. of ships owned DWT
(2004-05)
Million Euro

Shipping Corporation of India Ltd. 628 83 owned (in addition, 53 4.62 million (Plus 68,000
(SCI) ships are managed and DWT of other manned
manned ) vessels)
The Great Eastern Shipping Co. 380 42 3.02 million
Ltd.
The Great Offshore (newly formed Turnover for 2004-05 31 43,000 tons
through de-merging) merged with Great
Eastern Shipping
Mercator Shipping 49 13 (Excluding Barges) 1.34 million (Plus 6,500
tons of barge tonnage)
Varun Shipping 46 16 0.54 million
Essar Shipping 157 30 1.65 million

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 FUTURE PLANS - SHIPOWNERS
Company Vessel types
Shipping Crude oil Tankers, Product
Corporation of Tankers, Chemical Tankers,
India Ltd. (SCI) Gas Carrier, Bulk Carrier,
Liner Ships, OSVs,Passenger-
cum-Cargo Vessels
Essar Shipping VLCC, Suezmax carriers,
Product Tankers, Dry bulk
carriers, Mini bulk carriers,
Tugs
Future plans
 Expansion, modernisation & diversification of its fleet
(US$ 1.0 billion investment approved by Indian
Government)
 Exploring setting up of Joint Venture companies
 One Crude oil Tanker on order list,being built at Hyundai,
Korea, delivery scheduled at the end 2005
 Focusing on refining & marketing
 To cover the entire value chain from oil terminal to
international logistic
 Development of Vadinar Terminalling Facility with Crude
oil tankage cap. of 5.79 mill. Tankage cap. Of 6.81 mill.
Barrels.Annual throughput capacity of 200 mill. Barrels
 Plans to emphasize more on Integrated coastal trade &
transport
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 FUTURE PLANS - SHIPOWNERS
The Great Eastern Crude oil Carrier, Product  Five Product Carriers (Medium Range) expected to be
Shipping Co. Ltd. Carrier, Gas Carrier, Bulk delivered by mid 2007
Carrier  Embarking upon plans for expansion,modernization &

diversification of its fleet

The Great Offshore PSVs, AHTS, AHT, DSVs,  Takeover of three new AHTSVs and two PSVs
Harbour Tugs, Const.Barges,  Capitalizing on global opportunity in Exploration &
Drilling Units Production sector

Mercator Shipping Tankers, Bulk Carrier, Barges  New takeover from Klaveness Shipping Norway for nine
bulk carrier worth $400 m by Dec 2005
 Eyeing on 10% of Indian bulk market

Varun Shipping Tankers, Gas Carriers, Bulk  Replacement of ageing tonnage & selection, training of
Carrier, AHTS skilled seafarer
 Adding of more vessels

 Planning to invest Rs. 1,000 cores in the current financial

year
 Company with Exmar group of Belgium & IOC bid for LNG

Tanker against tender floated by Petronet LNG. If accepted

the partners will jointly float a new company in India &
operate the LNG tanker on charter for 25 years

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 ANALYSIS OF CURRENT
SHIPBUILDING ACTIVITY IN INDIA

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 MAJOR SHIP YARDS IN INDIA
 GOVERNMENT OWNED

3. COCHIN SHIPYARD LTD., COCHIN

4. HINDUSTAN SHIPYARD, VISHAKAPATNAM

 PRIVATELY OWNED

8. ABG SHIPYARD, SURAT

9. BHARATI SHIPYARD LTD.

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 MARKET SEGEMENTATION AND
POSITIONING OF INDIAN YARDS
Large Large
Large

Conventional Specialised
Vessels Vessels
CSL

? HSL

? AAGL Alcock Ashdown Gujarat Ltd.

AML Alang Marine
BSL Bharati Shipyard Ltd.
CSE Chowgule & Co. Ltd.
AAGL ABG
CSL Cochin Shipyard Ltd
Small

CSE DSE Dempo Shipbuilding & Eng

.
AML
BSL HSL Hindustan Shipy
ard Ltd

Conventional Specialised

Not to scale
Public Sector Private Sector Size of the circle denotes
turnover (2003
-04)

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TURNOVER FROM SHIPBUILDING

Turnover Figures of Major Indian Shipyards (from Shipbuilding)

CSL HSL ABG Bharati Linear (ABG) Linear (Bharati)

4000

3000
Rs. Millions

2000

1000

0
2000-01 2001-02 2002-03 2003-04 2004-05

CSL 1444 1193 2352 2284

HSL 667 932 472 399
ABG 857 485 2145 2743 2962
Bharati 881 594 611 1217 1926

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EXPORTS FROM INDIAN YARDS

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40
35
30

No. of vessels
25 Export
20 Domestic
15
10
5
0
2005 2006 2007

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 ORDER BOOK POSITION

TONNAGE TYPE PRIVATE GOVERNMENT

OWNED

DWT 155,660 639,560

CGT 210,540 256,368

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CURRENT ORDER BOOK BY VESSEL TYPE
(AS IN DEC. 2004)
2005* 2006* 2007*
Vessel type Nos. DWT Nos. DWT Nos. DWT
Tugs 7 9245 5 3876
Bulk Carriers 1 13300 2 60000 2 60000
Oil barges 1 369
OSVs 2 1530
Ferries 6 3060
Dredgers 1 1050
Bulk Carriers (IV) 11 20750 3 6000
Total 29 49304 10 69876 2 60000

2005* 2006* 2007*

Vessel type Nos. DWT Nos. DWT Nos. DWT
Tug 4 5850 4 5750
Bulk Carriers 5 4158 3 90000 3 90000
Tanker (Product) 2 15250 1 10000
OSVs 4 3866 4 4616 1 716
Total 11 23274 12 110466 8 96466

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 OFFSHORE VESSELS
INDIA’S OSV FLEET – BY OWNERSHIP
Owner Numbers Average
Age (yrs)
ONGC 32 19.1
SCI 10 20.8
GESCO 14 13.5
Essar 2 21
Garware 5 21
Others 15 20
Total 78 18.4

INDIA’S OSV FLEET – BY AGE Age

group No. of
(years) vessels %
< 10 2 3.3%
10-15 3 4.9%
15-20 0 0.0%
20-25 30 49.2%
25-30 24 39.3%
> 30 2 3.3%
Total 61

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 INVESTMENT PLANS - OFFSHORE
 ONGC

Year Vessels No Investment

2007-2009 MSV 01 US$ 600 million
OSVs / AHTS 17
Jack-up Rig 02
2008-2010 OSVs / AHTS 19 US$ 270 million
•

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INVESTMENT PLANS - OFFSHORE
 Shipping corporation of India
 To replace its 10 vessels in two phases
 Company will concentrate more on cargo ships in terms of fleet
expansion
 Cannot go for fleet expansion, unless ONGC gives commitment of
hiring SCI vessels on long term charter.
 Essar Shippping
 Buying one 2nd hand Tug
 Planning 3 AHTS with 6000 hp engine
 Garware Shipping
 Planning to acquire three PSV at a cost of US$ 62.4
mn
 MOU signed for delivery of a second-hand PSV
 Talks with Norwegian Shipyard for two PSVs –
scheduled deliveries in Oct-06 & April-07

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 ABG SHIPYARD
ABG Shipyard
Type DWT CGT Current Owner
1 AHTS 1,500 4,093 Fredriksen Group
2 AHTS 1,500 4,093 Fredriksen Group
3 AHTS 1,500 4,093 Fredriksen Group
4 AHTS 1,500 4,093 Fredriksen Group
5 Supply 1,300 3,840 ESNAAD
6 Supply 1,300 3,840 ESNAAD
7 Supply 1,300 3,840 ESNAAD
8 AHTS 1,500 4,093 Fredriksen Group
9 AHTS 1,500 4,093 Fredriksen Group
10 Diving Spt 1,000 3,293 Vroon B.V.
Total 13,900 39,371

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BHARATI SHIPYARD
Bharati Shipy ard
Ty pe DWT CGT Current Owne r
1 MPP 6,500 6,359 MK Shipping B.V.
2 MPP 6,500 6,359 MK Shipping B.V.
3 MPP 6,500 6,359 MK Shipping B.V.
4 MPP 6,500 6,359 MK Shipping B.V.
5 MPP 6,500 6,359 MK Shipping B.V.
6 MPP 6,500 6,359 MK Shipping B.V.
7 Products 5,250 4,135 Al Jaber Transport
8 Ro-Ro/Lo-Lo 5,000 4,733 Nor Lines AS
9 Ro-Ro/Lo-Lo 5,000 4,733 Nor Lines AS
10 PSV 2,200 5,450 Groupe Bourbon
11 PSV 2,200 5,450 Groupe Bourbon
12 AHTS 1,700 6,240 Halul Offshore
13 AHTS 1,700 6,240 Halul Offshore
14 Ro-Ro 5,000 6,540 Sea-Cargo AS
15 Ro-Ro 5,000 6,540 Sea-Cargo AS
16 AHTS 2,200 6,560 Great Eastern Shpg.
17 AHTS 2,200 6,560 Great Eastern Shpg.
18 AHTS 2,200 7,040 Great Eastern Shpg.
19 AHTS 2,500 6,560 Great Eastern Shpg.
Total 81,150 114,935

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CHOWGULE SHIPYARD
Chowgule Shipy ard
Ty pe DWT CGT Current Owner
1 MPP 4,450 4,047 Apollo Shipping
2 MPP 4,450 4,047 Apollo Shipping
3 MPP 4,450 4,047 Apollo Shipping
4 MPP 3,600 3,835 SKS (Ship) Ltd.
5 MPP 3,600 3,835 SKS (Ship) Ltd.
6 MPP 4,450 4,047 Union Transport Plc
7 MPP 4,450 4,047 Union Transport Plc
8 MPP 4,450 4,047 Union Transport Plc
9 MPP 4,450 4,047 Union Transport Plc
10 MPP 4,450 4,047 Union Transport Plc
11 MPP 4,450 4,047 Union Transport Plc
12 MPP 4,450 4,047 Befracht. Schoning
13 MPP 4,450 4,047 Befracht. Schoning
14 MPP 4,450 4,047 Befracht. Schoning
Total 60,600 56,234

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ALCOCK ASHDOWN SHIPYARD

Alcock Ashdown Shipyard

Type DWT CGT Current Owner
1 Products 3 000 3 774 Gudami International
2 Products 3 000 3 774 Gudami International
Total 6 000 7 548

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COCHIN SHIPYARD
Cochin Shipyard
Type DWT CGT Current Owner
1 Bulk 30,000 10,795 Clipper Group
2 Bulk 30,000 10,795 Clipper Group
3 Bulk 30,000 10,795 Clipper Group
4 Bulk 30,000 10,795 Clipper Group
5 Bulk 30,000 10,795 Clipper Group
6 Bulk 30,000 10,795 Clipper Group
7 PSV 3,500 8,672 Fredriksen Group
8 PSV 3,500 8,672 Fredriksen Group
9 PSV 3,500 8,672 Fredriksen Group
10 PSV 3,500 8,672 Fredriksen Group
Total 194,000 99,458

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HINDUSTAN SHIPYARD

Hindustan Shipyard
Type DWT CGT Current Owner
1 Bulk 30,000 10,795 Good Earth Maritime
2 Bulk 30,000 10,795 Good Earth Maritime
3 Bulk 30,000 10,795 Good Earth Maritime
4 Bulk 30,000 10,795 Good Earth Maritime
5 Bulk 53,000 15,397 Good Earth Maritime
6 Bulk 53,000 15,397 Good Earth Maritime
7 Bulk 53,000 15,397 Good Earth Maritime
8 Bulk 53,000 15,397 Good Earth Maritime
9 Bulk 53,000 15,397 Good Earth Maritime
10 Bulk 53,000 15,397 Good Earth Maritime
11 RoPax 1,560 13,800 Shpg. Corp. of India
Total 439,560 149,362

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 DELIVERY SCHEDULES
 For the first time (deliveries scheduled in 2006), the order book for
exports has overtaken the domestic orders (in numbers as well as DWT
terms).

 Even when viewed in terms of numbers, greater number of vessels will

be delivered in 2006 to the foreign owners.

 Also, the vessels delivered in 2006 will be of a much larger average

DWT. This can be inferred from the fact that despite near tripling of DWT
in the period 2005 to 2006, the number of vessels have nearly halved.

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EXPANSION PLAN – COCHIN SHIPYARD
Cochin Shipyard: planning to invest around Rs.160 crores (Rs. 1.6 billion) to
develop:
Open building space with provision for launching powered by
a hydraulic system;
Additional fabrication facilities
20-30% increase in the yard’s capacity.

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EXPANSION PLAN – ABG SHIPYARD
 ABG Shipyard: investing Rs. 3.75 billion for setting up a new
shipyard in Dahej, Gujarat. It is expected to be operational by
2006. The new yard will be able to:
 Build vessels up to 300 m length, including Aframax
and VLCCs
 Adopt state-of-the-art shipbuilding technologies and
 Production integration through CAD/CAM & ERP

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 EXPANSION PLAN – BHARATI
SHIPYARD
 Bharati Shipyard is investing in expansion and modernization of its
Ratnagiri shipyard at an estimated cost of Rs. 650 million. On
completion, the yard will:
 Build vessels of a maximum length of 170 m, including
Handysize
 Have a dry dock of 176 x 33meters instead of wet dock
 Raise the capacity of its gantry crane to 120 tons with a
span of 50 meters

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 PROPOSED SHIPYARDS

 L&T Shipyard

 Cochin Port Trust plans a large shipyard

 Pipavav Shipyard

 Adani Shipyard

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GROWTH LIMITATIONS - INDIAN
SHIPPING
Twin ills

 Endless bureaucracy and

 The seductive narcotic of protectionism (C.Horrocks, Intl.Chamber of

Shipping).

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FUTURE DEMAND FOR EQUIPMENT
 Design & consultancy services
 Naval architecture and marine engineering services
 CAD/CAM software
 Design & detailed engineering services
 Training
 NC Plasma plate cutting machines
 Plate and frame bending machines
 Pipe bending machines
 Goliath cranes
 Surface preparation equipment
 Paint spraying equipment
 Synchro-lifts
 Testing and laboratory services
 R&D 43
 IMPORTED MARINE EQUIPMENT &
COMPONENTS: MARKET SIZE

2005-06 2006-07 2007-08 2008-09 2009-10

At current growth rate (10%) 51 56 62 68 75

At 20% growth after 2007-08 51 56 67 81 97

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 PROCUREMENT AND DECISION MAKING
PROCESS
 The mechanism for selection and approval of equipment to be
installed onboard is specified in the shipbuilding contract.

 The contract also provides for substitution by mutual agreement in

case the specified make is not readily available.

 Often, the owner selects the main equipment. At times, the yard
suggests the make and type and the owner approves it.

 There is a difference in the way in which equipment selection is

undertaken by the public and private sector yards.
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 PROCUREMENT AND DECISION MAKING
PROCESS
Public sector yards
 Required to go through elaborate tendering process for each vessel
 Difficult to standardise since each time, a different supplier may secure the order
 Cannot establish long-term relations and obtain attractive discount and credit
terms with a group of suppliers because of the tendering process
 The decision-making is often slow and payments could be delayed.
Private sector yards
 Quick decisions are taken based on price, credit terms and project delivery
schedules
 Standardisation and Efficient Supply Chain Management is possible

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 GOVERNMENT POLICIES
 Automatic Approval for investments

 Release of foreign exchange

 Retention of sales proceeds in foreign exchange

 30% subsidy from the government coffers

 Foreign Direct Investment

 Tonnage tax benefits

 Draft National Maritime Development Policy is ready

 Freedom to government owned shipping companies

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CONCLUSIONS

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SUCCESS STORIES –SUPPORTING
HISTORICAL EVIDENCE
 TELECOM

 INFORMATION TECHNOLOGY

 AUTOMOBILES

 AUTO ANCILLARY

 BUSINESS PROCESS OUTSOURCING

 STEEL MANUFACTURE

 PHARMACEUTICALS

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 OUR RECOMMENDATIONS
 LOOK AT THE MARKET IN TERMS OF MEDIUM AND LONG
TERM POTENTIAL

 TO DO SO IT IS ADVISABLE TO HAVE A PROACTIVE

STRATEGY IN PLACE

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 OPTIONS

 HIRE YOUR OWN MARKETING PROFESSIONAL

 TIE-UP WITH AN AGENT

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 INNOVATION NORWAY
 ROADSHOW – VISIT TO MAJOR SHIPYARDS IN 2006

 INFORMATION SERVICES

 RESEARCH

 ADVISORY SERVICES

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