Cochin Shipyard Ltd:Annual Report 2023-24 Analysis

Cochin Shipyard Ltd: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Cochin Shipyard Limited (CSL) was incorporated in 1972. It was conceived as part of the Indo-British collaboration with Scott Lithgow of Scotland. The initial objective was to provide shipbuilding and ship repair services in India.

Headquarters Location and Global Presence:

The company’s headquarters is located in Kochi, Kerala, India. While primarily focused on the Indian market, CSL has undertaken international projects and collaborates with global partners.

Company Vision and Mission:

• Vision: To be a globally competitive shipbuilding and ship repair yard delivering world-class quality and sustainable solutions.
• Mission: To build and repair vessels, meeting customer needs and exceeding expectations, through innovation, technology, and a skilled workforce.

Key Milestones in Their Growth Journey:

• 1981: Launched its first vessel, MV Rani Padmini.
• 1991: Successfully built India’s first indigenous Aircraft Carrier, INS Vikrant.
• 2017: Initial Public Offering (IPO) and listing on the stock exchanges.
• Ongoing: Expanding capabilities to handle larger and more complex shipbuilding and repair projects.

Stock Exchange Listing Details and Market Capitalization:

CSL is listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

Recent Financial Performance Highlights:

Please note that financial data is dynamic and changes frequently. Refer to official CSL financial reports and reputable financial news sources for the most up-to-date information. Key areas to consider are:

• Revenue growth
• Profitability margins
• Order book value
• Debt levels
• Dividend payouts

Management Team and Leadership Structure:

CSL is led by a team of experienced professionals. The key positions typically include:

• Chairman & Managing Director
• Directors (Finance, Operations, Technical)
• Senior Management (Heads of Departments)

Any Notable Awards or Recognitions:

CSL has received several awards and recognitions for its performance in shipbuilding, ship repair, and management practices. Specific awards vary by year.

Their Products #

Complete Product Portfolio with Categories:

• Shipbuilding: Aircraft Carriers, Offshore Vessels, Platform Supply Vessels (PSVs), Tugs, Dredgers, Passenger Vessels, and specialized vessels.
• Ship Repair: Repair and maintenance services for a wide range of vessels, including naval ships, merchant ships, and offshore vessels.
• Marine Engineering Training: Training programs for marine engineers.

Flagship or Signature Product Lines:

• Aircraft Carriers (INS Vikrant and future projects).
• High-end offshore support vessels.

Key Technological Innovations or Patents:

CSL has incorporated advanced technologies in shipbuilding, including modular construction, advanced welding techniques, and digital design platforms. They also focus on automation and efficiency improvements in their processes.

Manufacturing Facilities and Production Capacity:

CSL has a well-equipped shipyard in Kochi with the following key facilities:

• Two docks: one for shipbuilding and one for ship repair.
• Modern fabrication shops.
• Advanced machinery and equipment.

Quality Certifications and Standards:

CSL adheres to international quality standards, including ISO certifications and those required by classification societies like Lloyds Register, DNV, and others.

Any Unique Selling Propositions or Technological Advantages:

• Expertise in building complex and technologically advanced vessels like aircraft carriers.
• Integrated shipbuilding and ship repair capabilities.
• Strong reputation for quality and reliability.

Recent Product Launches or R&D Initiatives:

CSL is continuously involved in R&D and innovation to develop new vessel designs, improve shipbuilding techniques, and explore alternative energy solutions for marine vessels. Recent projects might include:

• Development of hybrid/electric vessel designs.
• Improvement of modular construction techniques.

Primary Customers #

Target Industries and Sectors:

• Indian Navy
• Indian Coast Guard
• Shipping companies (domestic and international)
• Offshore oil and gas sector
• Port trusts

Geographic Markets (Domestic vs. International):

Primarily focused on the domestic Indian market, but also undertakes international projects and collaborations.

Major Client Segments (agricultural, industrial, residential, etc.):

The primary clients are in the maritime, defense, and energy sectors.

Any Notable Government Contracts or Institutional Clients:

• Major contracts with the Indian Navy for shipbuilding and repair.
• Contracts with various government agencies for building and maintaining specialized vessels.

Major Competitors #

Direct Competitors in India and Globally:

• India: Mazagon Dock Shipbuilders Limited (MDL), Garden Reach Shipbuilders & Engineers (GRSE), Hindustan Shipyard Limited (HSL).
• Globally: Hyundai Heavy Industries (South Korea), Daewoo Shipbuilding & Marine Engineering (South Korea), and other major shipbuilding yards in China, Japan, and Europe.

Competitive Advantages and Disadvantages:

• Advantages: Experience with complex projects, strong relationships with the Indian Navy, integrated shipbuilding and ship repair facilities.
• Disadvantages: Potential cost disadvantages compared to some international shipyards, reliance on government contracts.

How They Differentiate From Competitors:

CSL differentiates itself through its proven track record of building complex and technologically advanced vessels, especially aircraft carriers.

Industry Challenges and Opportunities:

• Challenges: Fluctuations in global shipping markets, competition from lower-cost shipyards, technological disruptions.
• Opportunities: Government initiatives to promote indigenous shipbuilding, growth in the offshore energy sector, increasing demand for specialized vessels.

Market Positioning Strategy:

CSL positions itself as a leading shipbuilding and ship repair yard in India, focusing on high-value, technologically advanced projects.

Future Outlook #

Expansion Plans or Growth Strategy:

CSL is investing in upgrading its infrastructure and expanding its capabilities to handle larger and more complex projects. They are also exploring opportunities in new markets and technologies.

Upcoming Products or Innovations:

Focus on developing new vessel designs, incorporating advanced technologies, and exploring alternative energy solutions for marine vessels.

Sustainability Initiatives or ESG Commitments:

Focusing on green shipbuilding technologies, waste management, and energy conservation to minimize environmental impact.

Industry Trends Affecting Their Business:

• Increasing demand for environmentally friendly vessels.
• Digitalization and automation in shipbuilding.
• Growing importance of cybersecurity in the maritime sector.

Long-Term Vision and Strategic Goals:

To be a globally competitive shipbuilding and ship repair yard, contributing to India’s maritime capabilities and sustainable economic growth.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Turnover: Increased from ₹3,190.00 crores (FY22) to ₹2,330.46 crores (FY23), then significantly rose to ₹3,645.28 crores (FY24).
• Profit Before Tax (PBT): Decreased from ₹794.39 crores (FY22) to ₹448.51 crores (FY23), then substantially increased to ₹1,093.62 crores (FY24).
• Profit Before Tax Margin: 25% (FY22) to 19%(FY23), increased to 30%(FY24).
• Net Profit: Decreased from ₹586.57 crores (FY22) to ₹334.49 crores (FY23), then significantly rose to ₹813.10 crores (FY24).
• Net Profit Margin: 18.39%(FY22), 14.35%(FY23), 22.31%(FY24)
• Earnings Per Share (EPS): Decreased from ₹44.59 (FY22) to ₹25.43 (FY23), adjusting the face value, then to ₹30.91 (FY24), after a stock split.
• EBITDA Margin: 28%(FY22), 23%(FY23), 32%(FY24)
• Return on Net Worth: 13.46%(FY22), 7.56%(FY23), 16.18%(FY24).
• Net Worth: Increased consistently from ₹4,359.18 crores (FY22) to ₹4,423.42 crores (FY23) and reached ₹5,025.87 crores (FY24).
• Capital Employed: Increased from ₹4,355.75 crores (FY22) to ₹4,480.05 crores (FY23) and then to ₹4,971.89 crores (FY24).

Business Segment Performance #

• Shipbuilding: Revenue increased from ₹1,766.45 crores (FY23) to ₹2,638.91 crores (FY24).
• Ship Repair: Revenue increased from ₹564.01 crores (FY23) to ₹1,006.37 crores (FY24).
• Cochin Shipyard Limited (CSL): Revenue of ₹ 3,645.28 crores as compared to previous year’s (FY 2022-23) of ₹ 2,330.46 crores. The net profit is ₹ 813.10 crores as compared to previous year’s (FY 2022-23) ₹ 334.49 crores.
• Hooghly Cochin Shipyard Limited (HCSL): Reported a total income of ₹24.04 crores (FY24) versus ₹17.61 crores (FY23), and reported a loss of ₹30.06 crore during FY24, compared to ₹20.34 crores in FY23.
• Udupi Cochin Shipyard Limited (UCSL): Reported total revenue of ₹186.47 crores (FY24), a substantial increase from ₹47.81 crores (FY23). Revenue from operations improved significantly to ₹179.72 crores in FY24 compared to ₹39.32 crores in FY23. Achieved a profit of ₹1.11 crores (FY24), a turnaround from a loss of ₹8.67 crores (FY23).

Major Strategic Initiatives and Their Progress #

• International Ship Repair Facility (ISRF): Inaugurated on January 17, 2024, with commercial operations commencing on August 12, 2024. Six work stations and 1.4 KM of berths.
• New Dry Dock: Inaugurated on January 17, 2024. Construction 94% complete as of March 31, 2024. Operations expected to commence by the end of September 2024.
• CSL Strategic & Advanced Solutions (C-SAS): Focused on strategic and knowledge-driven future technologies; successfully integrated India’s first indigenous HEAUV and commissioned India’s first hydrogen fuel cell-based vessel.
• Subsidiary Development: HCSL secured new orders totaling around ₹200 crores. UCSL achieved an impressive turnaround with a total revenue of ₹186.46 crores and secured order for 6 future proof dry cargo vessels.

Risk Landscape Changes #

• Increased Geopolitical Risks: Ongoing wars and tensions in Ukraine and the Middle East pose risks to global economic growth and maritime trade, potentially affecting demand.
• Regulatory and Policy Changes: New IMO and EU regulations on GHG emissions create both challenges and opportunities for green shipbuilding.
• Currency Exchange risks: Due to the nature of business, the fluctuation in global exchange rates can impact profitability.

ESG Initiatives and Metrics #

Environmental Sustainability #

• Installation of nine solar-powered EV charging docks and a 30 kWp rooftop solar power plant.
• Total solar power capacity of 1672 kWp, generating 21.47 lakh units of energy.
• Procurement of 8.04 lakh units of renewable energy from IEX.
• Annual energy savings of approximately 4.44 lakh units.
• Upgraded to ‘GreenCo Gold’ ratings from ‘GreenCo Silver’ by CII.
• Planning to establish a wind-solar hybrid power plant and expand rooftop solar capacity to 4 MWp.

Social Responsibility #

• CSR expenditure of H 14.44 crores in FY 2023-24.
• 109 projects undertaken, focusing on health, education, women empowerment, environment, and rural development.

Management Outlook #

• The Company’s current order book stands at approximately H 22,000 Crores.
• The Company is well-positioned for continued growth, with a focus on emerging markets and reinforcing leadership in established regions.
• The Company is committed to innovation, operational excellence, and sustainability to drive long-term value.
• CSL is well-positioned to capitalize on the global shift towards greener maritime solutions, aligning with the Government of India’s vision for a sustainable maritime sector.

Detailed Analysis #

Financial Position Analysis of Cochin Shipyard Limited #

3-Year Comparative Analysis (Consolidated) #

(₹ in Lakhs)

Significant Changes in Major Line Items (>10% YoY) #

(₹ in Lakhs)

• Shipbuilding Assets (2023-2024): Increased by ₹177,196.93 Lakhs (41.22%).
• Unallocated Assets (2022-2023): Decreased by 53,003.01 Lakhs (15.49%).
• Shipbuilding Liabilities (2023-2024): Increased by 111,804.52 Lakhs (35.36%)
• Unallocated Liabilities (2023-2024): Increased by ₹35,226.63 Lakhs (18.22%).
• Other Equity (2023-2024): Increased by 57,569.03 Lakhs (13.40%)
• Other Equity (2022-2023): Decreased by 6,546.59 (1.34%)

Working Capital Trends (Consolidated) #

(₹ in Lakhs)

• Current Assets have increased significantly because of an increase in “other current assets.”
• Current Liabilities also rose substantially because of an increase in “other current liabilities.”

Debt Structure and Maturity Profile (Consolidated) #

(₹ in Lakhs)

Off-Balance Sheet Items (Consolidated) #

(₹ in Lakhs)

Operating Performance Analysis of Cochin Shipyard Limited #

Revenue Breakdown by Segment/Geography #

• Shipbuilding: FY24 revenue was ₹2,638.91 crores, a 55% increase from FY23’s ₹1,766.45 crores.
• Ship Repair: FY24 revenue totaled ₹1,006.37 crores, a 78.4% increase from FY23’s ₹564.01 crores.
• Total consolidated revenue from operations: ₹3829.78 crores.
• Shipbuilding Export Revenue (FY24): ₹28069.00 Lakhs.

Cost Structure Analysis #

• Cost of Materials Consumed: 56.87% of total costs in FY24 (up from 51.29% in FY23).
• Employee Benefit Expenses: ₹3,7152.57 lakhs in FY24 (up from ₹3,2363.20 lakhs in FY23).
• Subcontract and Other Direct Expenses: ₹51886.91 Lakhs in FY24 (up from ₹43078.72 lakhs in FY23).

Margin Analysis #

• Net Profit Margin: 22.31% in FY24 (up from 14.35% in FY23) - a 57% increase.
• Operating Profit Margin: 30.87% in FY24 (up from 18.04% in FY23) - a 71.09% increase.
• EBITDA Margin: 32.43% in FY24 (up from 22.89% in FY23) - a 39% increase.
• Profit before tax Margin: 30% in FY24 (up from 19% in FY23) - a 58% increase.

Non-Recurring Items #

• The company redeemed ₹100 crores worth of tax-free bonds in Dec 2023.

EPS Analysis #

• Basic EPS: ₹30.91 for FY24 (Adjusted for stock-split), up 143% from ₹12.71 for FY23.
• Diluted EPS: ₹30.91 for FY24 (Adjusted for stock-split), up 143% from ₹12.71 for FY23.

Cash Flow and Liquidity Analysis of Cochin Shipyard Limited #

Operating Cash Flow (OCF) #

• FY 2023-24: Net profit before tax was 107,093.76 Lakhs. After non-cash adjustments and changes in working capital, Net cash flows from operating activities is -17,159.36 Lakhs.
• FY 2022-23: Net profit before tax was 41,843.70 Lakhs. After non-cash adjustments and changes in working capital, Net cash flow was 1,87,649.52 Lakhs. The increase in turnover did not result in higher operating cashflow , which can be due to increase in working capital requirements, especially Trade Receivables.

Investing Cash Flow (ICF) #

• FY 2023-24: The largest component was purchase of property, plant and equipment and intangible assets for (3,043.42) Lakhs, and capital work in progress (60,338.52) Lakhs, resulting in net cash outflow. However, there’s a significant inflow from decrease in Other Bank balances of 82,540.31 Lakhs.
• FY 2022-23: The largest component was increase in capital work in progress (29,383.01) Lakhs resulting in net cash outflow. There is increase in cash from investing activities due to decrese in other bank balances.

Financing Cash Flow (FCF) #

• FY 2023-24: Primary outflows were dividend payments (23,677.27 Lakhs) and repayment of lease liabilities (3,264.62 Lakhs), and Tax free redeemable non convertible bonds(10,000 Lakhs).
• FY 2022-23: Major outflow was due to dividend payments (23,348.40 Lakhs) and repayment of lease liability(2410.06 Lakhs).

Working Capital Management Efficiency #

• Inventory turnover ratio decreased from 7.30 (FY 2022-23) to 5.57 (FY 2023-24).
• Trade Receivables turnover increased from 4.75 (FY2022-23) to 8.13 (FY2023-24).
• Trade payables turnover ratio Increased from 6.25 to 7.09

Dividend and Share Buyback Trends #

• Dividend: Total dividend for FY 2023-24 is 195% per equity share, amounting to ₹257 Crores. First interim dividend of ₹8 per equity shares of face value of H 10 and after split of shares ,second interim dividend of H 3.50 per equity share of face value of H 5 each.Final dividend proposed of ₹2.25 per share (face value ₹5). The payout ratio is 0.32.
• Share Buyback: No share buyback occurred during the reported periods.

Debt Service Coverage #

• Debt Service Coverage Ratio increased significantly from 6.95 (FY 2022-23) to 15.49 (FY 2023-24) in standalone, and from 5.59 to 11.89 for consolidated, indicating improved ability to meet debt obligations, due to increase in earnings.

Liquidity Position #

• Current Ratio: Decreased slightly from 1.39 (FY 2022-23) to 1.32 (FY 2023-24) in standalone, indicating that the company’s ability to pay has been weakened. Consolidated results show same levels.

Financial Analysis: Key Ratios and Trends #

Profitability Ratios (3-Year Trends) #

• ROE, ROCE, and all margin ratios show a significant upward trend in FY 2023-24, indicating improved profitability.

Liquidity Metrics #

• The current ratio decreased slightly, indicating a minor reduction in short-term liquidity, but remains above 1, suggesting the company can still cover its short-term liabilities.

Efficiency Ratios #

• The Asset turnover ratio is only provided for the year under review.
• Inventory turnover decreased, potentially indicating slower inventory movement.
• Debtors turnover increased significantly, showing improved efficiency in collecting receivables.

Leverage Metrics #

• Debt/Equity ratio decreased to near zero, suggesting a shift towards equity financing and a nearly debt-free status.
• The interest coverage ratio increased considerably, showing that the group can easily cover their interest expenses.

Industry Comparison #

The provided data lacks industry averages for comparison. Therefore, highlighting deviations from industry standards is not possible.

Segment Performance Analysis of Cochin Shipyard Limited (CSL) #

Revenue and Profitability Metrics #

In FY2023-24:

• Shipbuilding: Revenue reached ₹2,638.91 crores, a 55.07% increase from ₹1,766.45 crores in FY2022-23. Profit before tax was 59920.68, up from 20777.90.
• Ship Repair: Revenue reached ₹1,006.37 crores, a 78.41% increase from ₹564.01 crores in FY2022-23. Profit before tax was 36320.76, up from 9548.18.
• Total CSL revenue was 3645.28, up from 2330.46.

Market Share and Competitive Position #

• CSL is a leader in the Indian shipbuilding and ship repair market.
• The ship repair division contributes over ₹1,000 crore.
• Globally, CSL secured the 4th position in orders, excluding large shipbuilding nations.

Key Products/Services Performance #

• Shipbuilding: Primarily driven by the Indigenous Aircraft Carrier (IAC) project and orders from European clients for Hybrid Service Operation Vessels (Hybrid SOVs) and electric vessels.
• Ship Repair: Performance boosted by major orders from the Indian Navy and commercial clients, with significant growth in the Mumbai, Kolkata, and Andaman & Nicobar units. The International Ship Repair Facility (ISRF) contributed.

Geographic Distribution and Market Penetration #

• Domestic: Operations are spread across Kochi (Kerala), Mumbai (Maharashtra), Kolkata (West Bengal), Port Blair (Andaman and Nicobar Islands), Howrah (West Bengal, HCSL subsidiary), and Udupi (Karnataka, UCSL subsidiary).
• International: Secured orders from European clients for specialized vessels. Key export markets include Norway, Netherlands, Cyprus, USA, Germany.

Capital Expenditure (CAPEX) #

• The total capital expenditure incurred was ₹ 561.58 Crores, pertaining to modernization and expansion, renewals and replacements, new dry dock, ISRF, and other units.

Operational Efficiency Metrics #

• The Company upgraded SAP to S/4HANA to improve management control.
• ISRF and New Dry Dock will expand shipbuilding and repair capacity.
• Maintained an Integrated Management System (IMS) under ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018 standards.

Growth Initiatives #

• CSL Strategic & Advanced Solutions (C-SAS) division is focusing on knowledge-driven future technologies. Key projects include hydrogen fuel cell vessels, autonomous underwater vehicles (HEAUV), and autonomous surface vessels (ASV).
• Expansion projects: ISRF and the new 310 Meter Dry Dock.
• Subsidiary companies, HCSL and UCSL, are expanding their order books.
• Focus on green shipping technologies (hydrogen fuel cell, hybrid electric vessels).
• CSL’s Marine Start-up Support Programme ‘USHUS’ is fostering innovation.

Cochin Shipyard Limited (CSL) - Segment-Wise Risk Analysis (FY2023-24) #

Shipbuilding Segment #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Diversification into green vessels (hydrogen fuel cell, hybrid SOV, zero-emission feeder container vessels) & strategic technology partner.
• Control Effectiveness: Partially Effective. The Company secured new international orders for green vessels.
• Potential Financial Impact: Order to new generation green technology vessels.

Operational Risks #

• Severity: High
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Integrated Management System (IMS) under ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018. Investment in regular HSE training and competency assessments. Evaluation of subcontractors based on HSE performance.
• Control Effectiveness: Effective. Organizational HSE Index percentage increased by 24% compared to 2022.
• Potential Financial Impact: Frequency rate of CSL for the year 2023 stands at 0.32.

Financial Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: The Company is making significant investments in energy conservation equipment.
• Control Effectiveness: Improving. Energy savings of approximately 4.44 lakh units per annum. Capital investment on energy conservation equipment was ₹78 lakhs.
• Potential Financial Impact: Turnover increased by 56% YoY to ₹3,645.28 crores. Shipbuilding income increased to ₹2,638.91 crores (from ₹1,766.45 crores in FY23).

Compliance/Regulatory Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable.
• Mitigation Strategies: Adherence to Presidential directives and guidelines on reservations. Compliance with Sexual Harassment of Women at Work Place (Prevention, Prohibition and Redressal) Act, 2013.
• Control Effectiveness: High. CSL had two complaints, and one was resolved.
• Potential Financial Impact: Not quantified.

Emerging Risks #

• Severity: High
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: The Company is also working towards building capability in advanced technologies to tap business potential in new emerging vessel segments such as autonomous, hybrid/ electric vessels and alternative fuels.
• Control Effectiveness: Not quantified.
• Potential Financial Impact: Not quantified.

Ship Repair Segment #

Strategic Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Decreasing
• Mitigation Strategies: Development of the International Ship Repair Facility (ISRF). Expansion of ship repair units to Mumbai, Kolkata, and Port Blair. Focus on entering new areas of ship repair market.
• Control Effectiveness: Partially effective. ISRF commercial operations commenced. CMSRU completed repairs for 104 vessels since operationalization.
• Potential Financial Impact: Not Quantified.

Operational Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Same as shipbuilding, with additional focus on expanding repair capabilities and infrastructure.
• Control Effectiveness: Improving, supported by infrastructure developments.
• Potential Financial Impact: Not Quantified.

Financial Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Decreasing
• Mitigation Strategies: Diversifying service portfolio, focusing on efficiency gains, securing long-term contracts.
• Control Effectiveness: Effective. Ship repair income increased significantly to ₹1,006.37 crores (from ₹564.01 crores in FY23).
• Potential Financial Impact: Contribution of ship repair turnover increased, indicating successful risk mitigation.

Compliance/Regulatory Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Same as shipbuilding.
• Control Effectiveness: High.
• Potential Financial Impact: Not quantified.

Emerging Risks #

• Severity: medium
• Likelihood: low
• Trend: Stable.
• Mitigation Strategies: CSL is well poised for vibrant ship repair business times in the future.
• Control Effectiveness: Not quantified.
• Potential Financial Impact: Not quantified.

Strategic Direction: Analysis of Cochin Shipyard Limited #

Long-Term Strategic Goals and Progress #

• CSL aims to be a leading international shipyard for constructing merchant and naval ships, offshore vessels, and structures, and a market leader in India for ship repairs.
• CSL is aligning with the Government of India’s net-zero targets by 2070 and is actively involved in green initiatives.
• The inauguration of the International Ship Repair Facility (ISRF) and New Dry Dock significantly enhances CSL’s ship repair and shipbuilding capabilities, supporting the Maritime Amrit Kaal Vision 2047.
• CSL is transitioning towards utilizing 100% green energy, planning a wind-solar hybrid power plant and expanded rooftop solar capacity.
• CSL is establishing itself on the map of international companies adopting sustainable means for their operations.
• UCSL has demonstrated an improvement in the ship building sector.
• HCSL has demonstrated capabilities for catering to the construction and repair needs of inland and coastal vessels.

Competitive Advantages and Market Positioning #

• CSL has a diversified operational segment and a good product mix.
• CSL possesses expertise in both shipbuilding and ship repair, serving defense, commercial, domestic, and international sectors.
• CSL has partnerships with renowned global firms, enhancing its credibility and competitive edge.
• CSL’s strategic focus on green vessels and technologies gives it a competitive advantage.
• CSL is positioned to meet needs of smaller and medium sized vessels.

Innovation Initiatives and R&D Effectiveness #

• CSL’s Strategic & Advanced Solutions (C-SAS) division focuses on knowledge-driven future technologies, including autonomous underwater vehicles (HEAUV), autonomous surface vessels (ASV), and hydrogen fuel cell technology.
• CSL successfully integrated India’s first indigenous HEAUV and commissioned India’s first hydrogen fuel cell-based vessel.
• CSL has a Marine Start-Up Support Programme, ‘USHUS - Nurturing Aspirations’, with an awarded ₹ 170 Lakhs for five startups.
• CSL has an enhanced capability for 3D modeling and simulation.
• CSL developed a vessel automation system.

M&A Strategy and Execution #

• Hooghly Cochin Shipyard Limited (HCSL) became a wholly-owned subsidiary of CSL in 2019, focusing on inland and coastal vessels.
• Udupi Cochin Shipyard Limited (UCSL) was acquired in 2020 through the Insolvency and Bankruptcy Code (IBC), expanding CSL’s capabilities in smaller and medium-sized vessels.
• UCSL recorded a total revenue of ₹ 186 crores in FY 2023-24, demonstrating turnaround.

Management’s Track Record in Execution #

• CSL achieved an all-time high turnover in FY 2023-24.
• CSL’s ship repair turnover breached the ₹ 1,000 crore mark.
• The Company attained a net worth of ₹ 5,000 crores.
• CSL secured significant orders from European clients for Hybrid Service Operation Vessels (SOVs).
• The Company delivered India’s first indigenously-built Hydrogen Fuel Cell Vessel.
• UCSL turned profitable within 3-4 years of its insolvency resolution process.
• The order book value of UCSL has grown significantly to around ₹ 1900 Crores, aided by repeat orders.

Capital Allocation Strategy #

• The highest-ever investment in CSL’s history (approximately ₹ 2,769 crores) was made in the ISRF and New Dry Dock projects.
• CSL has allocated funds for CSR activities, exceeding mandatory spending for FY 2023-24.
• HCSL is setting up a new ship repair facility in Pandu, Assam.

Organizational Changes and Their Impact #

• CSL was upgraded to ‘Schedule A’ from ‘Schedule B’ CPSE, reflecting improved financial performance and operational scale.
• The formation of the C-SAS division allows CSL to explore strategic and knowledge-driven technologies, diversifying revenue streams.

ESG Analysis of Cochin Shipyard Limited #

Environmental Metrics and Targets #

• CSL aims for 100% green energy reliance, with a planned 17 MW wind-solar hybrid power plant and expansion of rooftop solar capacity to 4 MWp, projected to generate 40 million units annually, exceeding the company average consumption of 33.5 million units.
• CSL’s total solar power capacity stands at 1672 kWp, generating 21.47 lakh units of energy in FY2023-24.
• The Company is procuring a portion of renewable energy from the Indian Energy Exchange Limited (IEX), having purchased 8.04 lakh units in FY23-24.
• CSL achieved an annual energy savings of approximately 4.44 lakh units through energy conservation measures.
• Cochin Shipyard Limited, was upgraded to ‘GreenCo Gold’ ratings from ‘GreenCo Silver’ by CII.
• CSL made capital investment towards energy conservation equipement of H 78 Lakhs.

Social Responsibility Programs #

• CSL’s CSR expenditure for FY2023-24 was ₹14.44 crores, exceeding the target of ₹13.69 crores, with 109 projects undertaken.
• CSR themes included health, education, women empowerment, environment, and rural development.
• The Company, under it’s Start-up Support, Awarded a total of H 170 lakhs to five start ups.
• CSL won KMA CSR Award 2024 for Social Inclusion.

Governance Structure and Effectiveness #

• CSL’s Board, as of March 31, 2024, comprised 12 directors: a Chairman & Managing Director, 3 Whole Time Directors, 2 Part-time official (Nominee) Directors, and 6 Non-official (Independent) Directors.
• Five Board meetings were held during FY2023-24, meeting statutory requirements for meeting frequency.
• Separate Audit, Nomination & Remuneration, Corporate Social Responsibility and Sustainable Development, Stakeholders Relationship, and Risk Management Committees exist.
• The Company was upgraded from ‘Schedule B’ to ‘Schedule A’ CPSE by the Government of India.
• Independent Directors’ performance and fulfillment of independence criteria were evaluated as satisfactory.

Sustainability Investments and ROI #

• Investment in energy conservation equipment during FY2023-24 totaled ₹78 lakhs, resulting in an estimated annual energy savings of 4.44 lakh units.
• CSL’s C-SAS division is focused on strategic and knowledge-driven future technologies, including autonomous underwater vehicles and hydrogen fuel cell technology, which will provide long term sustainability.

ESG Ratings and Peer Comparison #

• CSL was upgraded to ‘GreenCo Gold’ from ‘GreenCo Silver’ by the Confederation of Indian Industry (CII).
• India Ratings and Research (Ind-Ra) and Care Ratings reaffirmed CSL instruments’ ratings of IND AAA/Stable and CARE AAA/Stable, respectively.

Regulatory Compliance and Future Preparations #

• CSL complied with all the applicable regulations of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, and also the Guidelines on Corporate Governance issued by the Department of Public Enterprises.
• CSL is ‘Schedule A’ CPSE
• CSL maintains its Integrated Management System (IMS) under the ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018 standards.
• The Company received the Kerala Industrial Safety Award 2023.
• CSL complies with the Presidential directives and guidelines on reservation for SC/ ST/ OBC/ EWS and Persons with Benchmark Disabilities (PwBD).
• CSL complies with the Sexual Harassment of Women at Work Place (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act).
• CSL is in compliance with the DPE guidelines on Corporate Governance for Central Public Sector Enterprise.

Audit and Compliance Analysis #

Auditor’s Opinion and Qualifications #

• The Statutory Auditors (M/s. Anand and Ponnappan) issued an unmodified opinion on the standalone and consolidated financial statements.
• The Comptroller and Auditor General of India (C&AG) supplementary audit highlighted non-reporting of the Shipbuilding Financial Assistance Scheme in Annexure ‘A’ of the Independent Auditors’ Report. The Auditors responded that this will be taken care of in the future, and disclosure was already present in Note 34.5.

Key Accounting Policies and Changes #

• Revenue Recognition: The Company uses the output method for recognizing revenue over time for shipbuilding and ship repair contracts. This method is based on the physical progress of completion, involving management estimations. Subsidiaries changed to Output Method from Input Method for revenue recognition.
• Inventory Valuation: The Group changed its accounting policy regarding the measurement of Raw Materials and Components, changing from weighted average cost method, or net realizable value whichever is lower, to at weighted average cost method, and project specific average cost method when intended for project use.
• Deferred Tax: The Company adopted amendments to Ind AS 12, recognizing separate deferred tax assets and liabilities for leases, impacting the presentation but not the overall deferred tax position.
• Depreciation: The Group depreciated assets on a straight line basis over the assets useful life.
• Impairment of Assets: The Group assesses, at each reporting date, whether there is an indication that an asset maybe impaired. Impairment loss is recognized when the carrying amount of an asset exceeds recoverable amount.
• Leases: The group assesses at the beginning of contract, whether the contract is, or contains, a lease.
• Employee benefits: Defined contributions plans and defined benefit plans have been accounted for.

Internal Control Effectiveness #

• The Statutory Auditors expressed an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.
• The Company has an Integrated Management System (IMS) in place, certified under ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018.
• SAP S/4HANA ERP system is implemented, enabling management control.

Regulatory Compliance Status #

• The Company complied with applicable regulations of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, and the Guidelines on Corporate Governance issued by the Department of Public Enterprises.
• The Company complied with Secretarial Standards issued by the Institute of Company Secretaries of India.
• A fine of H 11,800 (including GST) was imposed by the BSE on the company for 1-day delay in intimating the record date fixed in November 2021.

Legal Proceedings and Potential Impact #

• The Company discloses the impact of pending litigations in Note 48 of the standalone financial statements and states that all material litigations are disclosed. There is no assessment of financial impact, apart from noting the value of contingencies.

Related Party Transactions #

• All related party transactions during FY 2023-24 were in the ordinary course of business and on an arm’s length basis.
• Audit Committee approval was obtained for all related party transactions.
• There have been an increase in equity shares through Right issue by HCSL of H 44 Crores and UCSL of H18 Crores.
• There have been no transactions which attracted provisions of Section 188.

Subsequent Events #

• Shri Prithiviraj Harichandan ceased to be a Non-official (Independent) Director on May 02, 2024, due to his resignation to contest in the Odisha Legislative Assembly.
• The Board of directors recommended a final dividend of H 2.25/- per share for the year under review.

Accounting Quality and Regulatory Risk Assessment #

• The auditor’s opinion and remarks indicate high quality financial reporting with no issues with the financial statement.
• The change in accounting policy for inventory valuation and revenue recognition requires careful monitoring, to ensure that management’s judgment of progress to completion is reasonable, appropriate and not biased.
• Regulatory risk is present, evidenced by the minor fine from BSE Limited for delayed intimation and the upgrade to ‘Schedule A’ CPSE status indicating growing scale.