INDIAN SHIP BUILDING INDUSTRY

OUTLINE

Global shipbuilding demand and supply

Indian shipbuilding industry

Indian shipbuilding projections & targets

Comparisons

What Indian Shipbuilding Industry needs

INDIA OPPORTUNITY

• India has a pool of well educated, skilled, enterprising young work force. As per Goldman Sachs report on BRIC economies - India will be the third largest economy by 2025 .The adage that China is world’s factory floor and India its back office is looking outdated.

• World economic growth has been around 4% for last few years. India’s GDP growth at 9%.

• Global Mercantile Trade has been growing at double the rate at 8%. India’s trade is growing at >20%. Tonnage handled in ports is expected to grow from the present level of 500 million tons to 1000 million tons by 2009-10.

• Indian merchant fleet, numbering 811 with 9.05 m GT, average age 18.3 yrs, carries only 13% of trade. Has a huge potential of growth. India’s shipbuilding industry is growing at >30%.

• Unlike past, emerging dynamic developing countries like China, India, Brazil are driving world economy.

GLOBAL TRADE IN B TONS

BRIC ECONOMIES

INDIA’STRADE

1000

INTERNATIONAL SEABORNE TRADE(Millions of Tons)

In 2006, goods loaded at ports worldwide was 7.4 billion tons.

This is equivalent to annual growth rate of 4.3%

Source : Estimated by UNCTAD

STRONG DEMAND FOR SHIPPING

World Fleet Outlook - mGTReference Case

0

200

400

600

800

1,000

1,200

1,400

1,600

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Dry CargoChemicalGas CarriersContainer ShipsBulk CarriersOil Tankers

1,601

1,196

776

Source ABS

•The Global Shipping Fleet has been growing at 8.6%.

•World fleet Crossed the billion dwt mark in early 2007 and stands at 1.04 billion dwt.

NEW ORDERS, COMPLETION & ORDERBOOK

Source : UNTACD and Tradewinds 29 Feb 08

9 PUBLIC SECTOR

19 PRIVATE SECTOR

TOTAL 27

20 DRY DOCKS

40 SLIPWAYS

600,000 DWT

GUJARAT1. ABG 2. L&T3.ALCOCK ASHDOWN4.PIPAVAV

W BENGAL 1. CIWTC 2. GRSE3, HDPE 4. SHALIMAR5. AC ROY 6. CORPORATE

KERALACSL

ANDHRA1. HSL

GOA1. CHOWGULE 2. DEMPO3. GSL

MAHARASHTRA2. MDL3. BHARATI

TAMIL NADU TEBMA

ORDER BOOK

EXPORTS

IN 2002 THE EXPORT WAS NEGLIGIBLE

RUPEES CRORES

MARKET POTENTIAL

•To maintain current share (13%) an addition of 15 m GT needed (New and Replacement). Projected investment is $20 billion.

•India’s overseas trade is projected to grow to 1000 m tons by 2009-10. Additional tonnage required to meet this is 100 m DWT.

•26.2% of world Fleet constituting 273 m DWT is 20 yrs & older and will need replacement in next 10 yrs.

The global order book is 500 m dwt

With Indian trade requirement of 100 m dwt …………

SHOULD THIS HUGE OPPORTUNITY BE GIVEN TO FOREIGN YARDS OR USED FOR GROWTH OF INDIAN SHIPBUILDING?

SHIPBUILDING POTENTIAL

• Demand for new Demand for new building will remain building will remain strongstrong

• Every 4Every 4thth ship on order ship on order in the world will be for in the world will be for serving Indian trade.serving Indian trade.

ACHIEVABLE TARGETSORDER BOOK AND DELIVERIES

(DWT IN MILLION TONS)

THIS TRANSLATES TO 30% Y-O-Y GROWTH

PROJECTED GROWTH OF INDIAN SHIPBUILDING

EMPLOYMENT POTENTIAL

YEAR 2007 2012 2017

NUMBER 50,000 180,000 500,000

ECONOMIC VALUE ADDITIONVALUE ADDITION 2012

(Rs Crores)2017

(Rs Crores)

1. INCREASE OVERALL ECONOMIC OUTPUT

64,000 3,42,000

2. TOTAL EMPLOYMENT 4,80,000 24,50,000

3. INVESTMENT 37,000 2,22,000

4. ADDITIONAL INCOME TO THE GOVERNMENT THROUGH TAX REVENUES

4,500 26,000

SOURCE: KPMG REPORT ON ECONOMIC BENEFITS, DISADVANTAGES FACED ABD BENCHMARKING GOVERNMENT SUPPORT ACROSS COUNTRIES

SHIPBUILDING OUTPUT (Million CGT)

SOURCE : Community of European Shipyard Association (CESA)

If India has to achieve 7% of world share then someone

is going to lose its share …..Thus, the competition for

market share will be intense and fierce .

INDIA 0.32 0.8% 0.89 2% 3.1 7%

BUILD CAPACITY COMPARISON Japan Korea China India

Total Building Tonnage in shipyards in million DWT

12.1 11.5 12.2 0.5

Building berths for ships > 150,000 DWT

17 24 21 Nil

Building berths for ships > 250000 DWT

10 17 8 Nil

1. India presently has small ship building capacity

2. To achieve 4 m dwt deliveries by 2011 it will have to increase its capacity 4 times its present capacity in next 5 yrs

3. To achieve 16 m dwt deliveries by 2016 it will have to create a capacity of 8 million dwt

SUMMARY OF COST DIFFERENTIALSector Domestic Export

.China Korea China KoreaCD, ED, VAT & Octroi 8.30% 8.30% 2.91% 2.91%Service Tax 1.48% 1.48% 1.48% 1.48%Corporate Tax 1.40% - 1.40% -Charges towards Bank Guarantees 0.86% 0.86% 0.86% 0.86%Interest on Working Capital 2.60% 1.60% 2.60% 1.60%Interest on Capital Expenditure 0.74% 0.74% 0.74% 0.74%Insurance Charges 0.40% 0.40% 0.40% 0.40%Sea Freight differentials 3.90% 4.50% 3.90% 4.50%Clearing & Forwarding 0.30% 0.90% 0.30% 0.90%Bulk purchase discounts on purchase of inputs

3.25% 6.50% 3.25% 6.50%

Forex Rate Disadvantages 23.33% - 23.33% -Total Cost disadvantage 46.56% 26.68% 41.17% 21.29%Price Disadvantage due to Discount 5-10% 15-20% 5-10% 15-20%

Total Disadvantage 51.56%-56.56%

41.68% - 46.68%

46.17% - 51.17%

34.29% - 41.29%

Source KPMG

SHIP REPAIR INDUSTRY

• SIZE - 35 SRUs limited private participation mainly Concentrated in 3-4 yards.

• EVER GREEN INDUSTRY - Constant source of revenue even in lean period

• GOOD MARKET POTENTIAL – World cargo fleet >1 billion dwt. Booming offshore and energy sector

• LABOUR INTENSIVE - Promotes local employment and ancillary industry

• VALUE ADDED - Surge in conversions of SH Tankers

• STATUARY REQUIREMENTS – Special Surveys, ship maintenance requirements

NEW SHIPYARDS

MODERNISATION AND UPGRADATION OF EXISTING FACILITIES

HIGH PRODUCTIVITY

LOW CAPITAL COST

GROWTH OF ANCILLARY INDUSTRY

WHAT INDIAN SHIPBUILDING NEEDS

CONTINUATION OF INCENTIVE

LONG TERM SHIPBUILDING POLICY

RATIONALISATION OF TAXES, DUTIES, STATE CONTROL

SUPPORT OF INDIAN SHIPPING INDUSTRY

GUJARAT1. ABG 2. L&T3. ALCOCK ASHDOWN

W BENGAL 1. CIWTC 2. GRSE3, HDPE 4. SHALIMAR5. AC ROY 6. CORPORATE

KERALACSL

ANDHRA1.HSL2.NSTL3.NSDRC

GOA1. CHOWGULE 2. DEMPO3. GSL

MAHARASHTRA2. MDL3. BHARATI

TAMIL NADU TEBMA

THIS IS THE RIGHT TIME TO INVEST IN THE

INDIAN SHIPBUILDING

ANDREPAIR

INDUSTRY

THE END

ONE THOUS AND AND ONE DAYS OF HIS TORYA turkey before and after thanksgiving

VAR

IABLE

DAYS

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140

120

100

60

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20

160

SURPRISE

REQUIREMENT OF STEEL PLATES