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Pipavav, Airbus to start MRO unit
The parent company of Airbus, will hold 26-49% equity in the joint venture while Pipavav will hold a 51% stake
Mumbai:Pipavav Defence and Offshore Engineering Co. Ltd and Airbus SAS? have agreed to jointly start an aircraft maintenance, repair and overhaul (MRO) unit in India.
EADS NV, the parent company of Airbus, will hold 26-49% equity in the joint venture, Pipavav said in a filing to stock exchanges on Wednesday. Pipavav will hold a 51% stake.
"The first-phase MRO facilities and associated infrastructure are likely to cost $100 million (Rs. 489 crore)," Pipavav said in its filing. "The MRO facilities and associated infrastructure will be used for civilian and military applications."
Mint could not immediately contact EADS for comment.
A person familiar with the matter said the MRO facility will also have spare parts and logistics units.
"The name, necessary approvals, agreements and equity structure would be finalized in the next three months. The company would also induct a technical partner to run the aircraft repair facility," this person said, adding the deal will help Pipavav, until recently known as Pipavav Shipyard, position itself in the aerospace sector.
Five places are shortlisted for the MRO unit—Cochin International Airport in Kerala, old Bangalore international airport, a small airport site in Maharashtra and two other sites near private airports, he added, requesting anonymity.
Pipavav shares rose 2.7% to end trading at Rs. 79.90 on BSE on Wednesday. The Sensex shed 0.47%.
As India's aviation sector grows, the MRO market is expected to more than double revenue to $1.06 billion by 2015 from $499 million in 2009, according to a 2009 report by business research firm Frost and Sullivan. MRO service requirements in the country are expected to grow annually at a compounded rate of 13.5% in the same period.
"Labour costs in India are around $30-35 per man hour, compared with $55-60 in South-East Asia and the Middle East and even higher in the US and Europe," Frost and Sullivan analysts Chethan Kambi and Arun Narayanan wrote in the report. "Therefore, India has potential to service not just Indian aircraft but also those from neighbouring regions."
India's MRO sector has been gathering pace in recent years.
In November, the aeronautical division of Europe's largest airline, Air France-KLM group, entered India's aircraft component repair market by acquiring a 26% stake in Mumbai-based MRO company Max AeroSpace and Aviation Ltd for an undisclosed amount.
Mumbai-based Air Works Engineering, which began repairing aircraft 59 years ago, started an MRO facility in Hosur, Tamil Nadu, and acquired European aircraft refurbishing and painting firm Air Livery for an undisclosed amount in 2010. Engineering firm Punj Lloyd Ltd and US-based private equity firm Global Technology Investment each hold a 33% stake in Air Works.
Airport developer GMR Group is in the process of starting an MRO facility with Malaysian Aerospace Engineering Sdn Bhd at the Hyderabad airport, and Air India is building an MRO with Boeing Co.
Panel for opening up submarine construction to private sector
MUMBAI: A committee set up by the Prime Minister Manmohan Singh to study India's much-delayed submarine programme has recommended opening up construction of submarines to the private sector. Each submarine costs close to Rs 8,000 crore to the government exchequer.
The committee, led by former Chairman of SAIL Dr. V. Krishnamurthy, has said that private sector investments should be invited as public-private partnership and as joint ventures with the government owned companies.
The committee has said that with private sector setting up capacity in the country there is no need to import submarines in future thus opening up the Rs 50,000 crore markets for Indian companies like L&T and Pipavav Shipyard. India at present has 14 submarines in its fleet.
L&T, which is constructing a shipyard in Ennore in Tamil Nadu, and Pipavav Shipyard , which has an existing shipyard in Gujarat, have been recommended by the panel to build submarines in partnership with government owned companies as joint venture projects. With this, Pipavav and L&T will join a select group of four companies that have the capability to submarines. "The report has been submitted to the government last week and an announcement is expected soon," said a source with direct knowledge of the panel's report.
"If this space is opened up, it will be a big opportunity for private players. And there is no doubt that Indian private players are fully equipped to manufacture submarines' Nikhil Gandhi. CMD of Pipavav told ET NOW.
It was in 1999, the defence ministry had prepared a 30-year plan to acquire 24 submarines. As per the plan, first six submarines were to be delivered in 2005 and to be completed by 2015. The rest of the 18 Submarines were to be delivered between 2015 and 2029.
The government gave the orders for the first six submarines to Mazgaon Docks in collaboration with French Ministry of Defence Yard. But due to lack infrastructure, the project has met with serious delay. In fact, all the submarines will now be delivered only by 2022 instead of 2015.
Indian private players have been continuosly exploring opportunities to enter various segments of the Indian defence & aerospace sector. Earlier this year Tata group formed a joint venture with Lockheed Martin to make aerostructures for Lockheed's C-130 aircraft in India. L&T also has a joint venture with Cassidian, a division of European Aerospace And Defence (EADS) Group, for defence electronics. It has also worked in close cooperation with the Defence Research and Development Organisation (DRDO) on several projects.The Mahindra group also has a joint venture with UK-based BAE Systems for production of manufacture mine-proof vehicles.
The Indian defence sector would need investments of $200 bn to $300 bn in military & aerospace according to the defence ministry.The defence ministry is looking at signing offset contracts of more than Rs 10,000 crores in the 11th plan ending this year. Twelve offset contracts valuing Rs 9,943 crores have been signed with Indian private industries and defence PSU so far.
Pipavav Shipyard wins Rs 2500 cr order from Indian navy; stock rises
MUMBAI: Pipavav Shipyard has won a Rs 2500 crore order from the Indian navy to manufacture gun boats. The order was cleared by the Cabinet committee of security. Nikhil Gandhi, the CMD of Pipavav Shipyard confirmed the news to ET NOW .
"I havn't received any formal communication yet, but yes we have won the order as we were the lowest bidder," Gandhi told ET NOW.`
At 10:36 am shares of Pipavav Shipyard were trading 2.26 per cent up at Rs 86.00 on the Bombay Stock Exchange .
Pipavav gets defence production licence
Mumbai: The Pipavav Shipyard on Thursday said that it has received permission from the foreign investment Promotion Board (FIPB) for foreign direct equity investment and license to build warships for the Indian Navy.
“The company has obtained all statutory clearances required for warship building for defence sector. The clearance will help Pipavav to bid for all future warship projects like frigates, destroyers, aircraft carriers, LPDs, submarine, corvettes of the Indian Navy,” it said in a notice to the exchanges.The company’s shares on the Bombay Stock Exchange (BSE) closed at R79.20, up 1.02% on Thursday.
“For building warships you need to have three things — world class facility, defence production licence and FIPB approval. So now we have all three of them in place and will be bidding for any opportunity in this field. There is a lot of potential in this field and we are proud to have Northrop as our partners which gives us an edge above the rest to build complex warships," said Nikhil Gandhi, non executive director & chairman, Pipavav Shipyard. Last month, the company had signed a memorandum of understanding (MoU) with Northrop Grumman Overseas Service Corporation, Delaware, USA. Northrop is one of the largest defence companies in the segment with an expertise in defence systems, airspace management systems, navigation systems, precision weapons and marine systems.
The MoU will allow Pipavav Shipyard to focus on huge opportunities present in the defence sector in India with the help of technology and expertise possessed by Northrop. Pipavav Shipyard endeavors to indigenously produce military hardware for India and other friendly nations with such partnerships.
Its corporate website boasts of the company having necessary infrastructure and facility to build all kinds of naval vessels. Recently, Ovira Logistics had bought 51.1 million shares or about 7.67% in Pipavav Shipyard at R80.83 a share. Infrastructure Leasing and Financial Services, IL&FS Financial Services and IL&FS Employee Welfare Trust sold the shares.
The IL&FS group has completely exited its investments made in the Shipyard starting around three years before the public issue of the infrastructure company . Last October, London-listed private equity firm Trinity Capital also completed its exit from Pipavav.
- Golden boss full of praise for Pipavav
Its newbuildings at an Indian yard may have been hugely delayed but one bulker player has not ruled out returning for more.
Golden Ocean boss Herman Billung says the company expects to finally start taking delivery of its massively delayed panamax bulkers from India’s Pipavav Shipyard in the first half of 2011.
Although this marks another slippage for the four-ship series of 75,000-dwt newbuildings, Billung says the fledgling Indian yard is getting its act together after a catalogue of problems including building the site infrastructure.
The Golden Ocean managing director praises the quality of the first vessels and says he would not rule out returning to the facility for further tonnage.
The first two ships have been fixed simultaneously at a healthy $17,000 per day for five years but Billung declines to identify the charterer. He describes it as a “good industrial counterpart” who will take them back-to-back on delivery.
The first of the panamaxes was originally due around April 2009. Initially, Golden Ocean ordered six vessels but this was renegotiated to four, plus two options, and at a lower price of $31m per ship.
Exercising the options depends on delivery of the second pair, although Billung concedes that it is unclear when they will be ready. More recently it was hoped to be by the third quarter of 2011.
However, Billung describes Golden Ocean’s site manager as “much more relaxed” about the situation at the yard, which has yet to complete a single ship after getting off to a flying start by garnering almost $1bn-worth of panamax-bulker contracts from Norwegian, Greek and French owners.
Billung describes the construction of the yard on the Gujarat coast as ambitious. Problems included commissioning of Pipavav’s Goliath cranes and logistical difficulties stemming from the location of the block-fabrication plant.
But, says Billung, all machinery for Golden Ocean’s newbuildings is now on site and state-of-the-art equipment installed at Pipavav is reflected in the production quality. He describes it as equal to anything else the company has ordered.
Pipavav chief operating officer Debashis Bir tells TradeWinds that the first of Golden Ocean’s panamaxes will be launched in March and under the renegotiated contract it expects to deliver by the end of May.
Greek owner AVGI Maritime, the panamax arm of Alba Maritime, originally ordered 12 panamax bulkers and, claims Bir, it should receive the first four by March 2012.
The yard is now using the first of its Goliath cranes, with the second expected to be installed at the beginning of February.
However, despite Golden Ocean’s upbeat comments about Pipavav, other industry sources are less impressed, claiming the yard is unlikely to deliver its first newbuilding until the end of 2011.
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