GARDEN REACH SHIPBUILDERS & ENGINEERS LIMITED
Know the Company
Garden Reach Shipbuilders & Engineers Ltd (GRSE) is one of the major shipbuilding companies in India, under the administrative control of the Ministry of Defence. The Company specializes in meeting the shipbuilding needs of both the Indian Navy and the Indian Coast Guard. Since its establishment in 1884, the Kolkata-based GRSE boasts a pivotal role in enhancing the nation’s shipbuilding capabilities and it holds the distinction of being the first shipyard in the country to export warships. In addition to ships building, GRSE is involved in marine engine production as well as it provides engineering services. However, shipbuilding stands out as a significant revenue contributor, accounting for almost 90% of the Company’s revenue. The sale of engines and engineering products generates approximately 6% of revenue, with the remaining revenue derived from the Services segment, which includes ship repair services, followed by Bailey Bridge and Diesel Engine services.
OPEN AN ACCOUNT
Invest in stocks curated and picked by our research team.
Product Portfolio
GRSE boasts an extensive array of impressive offerings of ships and barges within both the Defence and civil segments, which include:
- Frigates: These warships, are the guardians of the sea, a formidable part of the naval fleet with advanced weaponry and surveillance systems.
- Anti-Submarine warfare Corvette: Tailored to detect and counteract submarine threats, these vessels are vital for maritime security.
- Missile Corvette: Compact yet lethal, these vessels are armed with missiles and play a crucial role in naval defence strategies.
- Landing Ship tank & Landing craft utility: These vessels facilitate the transportation of troops, equipment, and vehicles during amphibious operations.
- Survey vessel: Essential for maritime exploration, these vessels chart the oceans and provide critical navigational data.
- Fleet replenishment tanker: Playing a supportive role, they ensure that the fleet remains operational by supplying fuel and provisions.
- Patrol Vessels: From Fast Patrol to Offshore and Inshore Patrol Vessels, these ensure the territorial integrity of the nation’s waters.
- Hover craft and fast interceptor boat: Designed for rapid response, these vessels are essential for rapid engagement and coastal defense.
Strengths
As a Defence Public Sector Undertaking, GRSE is primarily dedicated to the construction of warships for the Indian Navy and the Indian Coast Guard. GRSE’s journey encompasses significant milestones, starting with the construction of India’s first warship for the Indian Navy in 1961. Over the past 63 years, GRSE has successfully delivered approximately 790 platforms, including 108 warships for the Indian Navy, the Indian Coast Guard, the Governments of Mauritius, and the Governments of Seychelles. This achievement stands as the highest number of warships built and delivered by any shipyard in the country, ranging from the construction of 5-ton boats to 24600-ton Fleet Tankers.
Over the years, GRSE has solidified its capabilities in in-house ship design and shipbuilding, making substantial contributions to the success of the indigenous warship construction program. The company has demonstrated its expertise by successfully designing and constructing a diverse range of complex warships, including (as explained above) Frigates, Anti-Submarine Warfare Corvettes, Missile Corvettes, Fleet Tankers, Landing Ship Tanks (Large), Landing Craft Utility, Offshore Patrol Vessels, Fast Patrol Vessels, Inshore Patrol Vessels, and Water Jet Fast Attack Crafts, among others. The Company has also expanded its capabilities to include the design and construction of zero-emission vessels.
Now the Company’s focus areas include Unmanned Surface Vessels, Autonomous Underwater Vehicles, and Ship-Based Drones, etc.
Over the years, the company has significantly enhanced its manufacturing and operational processes through modernization of its facilities and the integration of Information Technology. The shipyard’s Integrated Shipbuilding Facility, comprising designated hull shops, dry docks, and building berths, facilitates the construction of high-quality ships within reduced timeframes by using Modular Construction Technology aligned with global standards. GRSE currently has the capability to simultaneously construct 20 ships, comprising 8 large vessels and 12 medium/small vessels, leveraging state-of-the-art infrastructure.
GRSE holds a strategic advantage over global shipyards in securing contracts to build vessels for the Indian Navy and Indian Coast Guard due to its eligibility for the ‘Make in India’ initiative under the Defence Procurement Procedure. ‘Make in India’ initiative provides indigenous manufacturers with a competitive edge when supplying to the domestic market. The Ministry of Defence (MoD) has accorded the highest priority to indigenously designed, developed, and manufactured products for capital goods procurement. As repeat customers of the company, the Indian Navy and the Indian Coast Guard form a significant portion of the revenue contributors from the domestic market.
In addition to fulfilling orders from the Indian Navy and Coast Guard, GRSE, leveraging its in-house design capability, vast expertise, and state-of-the-art manufacturing and servicing capacities, has undertaken shipbuilding and repair projects for countries such as Sri Lanka, Mauritius, and Seychelles. GRSE’s Engine Division, featuring a state-of-the-art plant in Ranchi and a longstanding partnership with MTU, Germany, is spearheading the advancement of diesel engines. Through the fusion of top-tier technology with indigenous manufacturing capabilities, the division is not just manufacturing engines, it’s driving a vision of self-reliance and maritime excellence for India.
Strong Order Book
GRSE’s order book as of December 31, 2023 stands at over Rs 24,600 crore and most of this comes from the shipbuilding sector. This order book comprises of four projects for the Indian navy including of 19 warships and two other projects — one for the government of Bangladesh and one for the government of West Bengal.
Opportunities
The acquisition plans of the Indian Navy and Indian Coast Guard are geared towards a significant expansion of their fleet sizes. This expansion not only caters to domestic requirements but also presents substantial export potential, particularly for small and medium-sized warships and patrol vessels. The target export markets include South East Asia, West Asia, African countries, and Latin America.
The Company’s upcoming project is the Next Generation Survey Vessels, where the government has already granted Approval of Necessity. With its current capability for construction of large Survey Vessels, GRSE is poised for large success in Next Generation Survey Vessels also. The estimated order value for this project is approximately Rs 3,000 crore. The Request for Proposal (RFP) is anticipated to be released during the second quarter of the next financial year. Additionally, another RFP expected is for two multi-purpose vessels, again for the Indian Navy. The order value for this vessel is projected to be around 1,200 crore.
Another significant project in consideration is the Landing Platform Dock (LPD). Discussions regarding this project have been ongoing for nearly a decade. GRSE remain optimistic that it will come to fruition, shortly. The order value for this project is substantial. Even if the Navy opts for two LPDs, the order value could amount to approximately 40,000 crore.
Financials
For the quarter ending December 31, 2023, and the nine-month period ending on the same date, GRSE recorded its best-ever results in the history of the company. Its revenue from operations for the nine-month period stood at Rs 2,576 crore, representing an almost 31% increase over the corresponding period of the previous fiscal year. EBITDA for the period stood at Rs 367 crore, marking a 41% increase, while the net profit rose by 42% to Rs 245 crore. For the Q3FY24, revenue stood at Rs 923 crore and net profit booked at Rs 88 crore, compared to Rs 699 crore and Rs 55 crore, respectively, reported in the same quarter of the previous financial year.
Outlook
India’s shipbuilding industry is poised for significant growth, driven by ambitious plans from the Indian Navy and Coast Guard. Both forces have set their sights on expanding their fleets to comprise 200 ships each. With their combined shipbuilding program spanning over the next 14-15 years, orders for over 150 warships are expected in the coming years. This strategic initiative signifies a substantial boost to the industry’s order book and underscores the nation’s commitment to enhancing maritime capabilities in the foreseeable future.
A robust order book comprising the design and construction of 19 warships concurrently for the Indian Navy signifies exciting times ahead for GRSE. With the various policy initiatives undertaken by the Government of India to promote and support self-reliance (Atmanirbharata), the overall outlook for warship building appears highly promising in the years to come.
GRSE also intends to venture into the highly competitive commercial shipbuilding segment to cater to both domestic and global demands for ships. Consequently, the company has identified various non-defense products such as Ocean-going Ferries (Cargo + Passenger), Tugs, Dredgers, Barges, and E-Ferries to promote in the Export Market of Friendly Foreign Countries. This presents a significant opportunity for the company to integrate into the global value chain and fulfil its vision of becoming a global player in Shipbuilding.
Risk
GRSE operates within a fiercely competitive environment as private shipbuilding players pose formidable competition for orders from the defense sector. Technological advancements and innovations may render existing vessels and technologies are no longer in use or outdated, compelling companies to consistently invest in research and development to stay competitive, which is one of the causes of concern for the Company. Despite facing competition from both international and Indian shipyards in the public and private sectors, GRSE continues to strive for excellence.
Sector: Industrials
Market Price: Rs. 922.00 as on today
FV: Rs 10/-
Stock Name: Garden Reach Shipbuilders & Engineers Ltd
BSE Code: 542011, NSE Code: GRSE
Market Cap.: Rs 10288 Cr
Book Value: Rs. 136
Segment: Aerospace & Defense
Incorporation: 1884
Headquarters: Kolkata, India.
