Shipbuilding stocks set sail

Shares of domestic shipbuilding companies on Friday hit the upper circuit after the government issued new guidelines for the shipbuilding industry.

Bharati Defence and Infrastructure Ltd (formerly Bharati Shipyard) hit 20% upper circuit, while ABG Shipyard Ltd hit 10% upper circuit.

Both of these are shipbuilding companies and both have been having a very good run on the bourses lately.

There is a sense of optimism on these counters after the Govt yesterday issued guidelines for award of tenders for shipbuilding and repair works for PSUs, wherein Indian shipyards will be granted 'right of first refusal' to enable them to compete with foreign players.

The Ministry of Shipping stated that Govt departments or agencies including PSUs procuring any type of vessels for governmental purposes or for their own use or requiring ship repair shall henceforth, till 2025, grant 'Right of first refusal' to Indian shipyards to enable them to match the lowest rate offered by the foreign bidder.

The Govt has issued guidelines for evaluating and awarding tenders for shipbuilding, dry-docking and ship repair works for government departments or agencies, including PSUs.

The Govt has stated that from 2025 onwards, only Indian-built vessels shall be procured by such departments and agencies for governmental or their own work.

Such departments and agencies have to undertake bulk tendering for their entire vessel related requirements with deliveries starting from FY18.

It was also decided that prior experience in building or repairing a specific type or size of vessel shall not be a criterion for determining the eligibility of Indian shipyards, provided the shipyards possess adequate capability.

This is a part of the Govt’s ‘Make in India’ initiative wherein the Govt approved financial assistance of 20% for ships built in India.