Robust order visibility to help shipyard stocks sail faster

The Defence Acquisition Council (DAC) approved naval orders worth ₹8.45 trillion over FY22-25, which is over 3x the amount for the preceding three years.

- DEVANGSHU DATTA

There are orders worth ₹2.35 trillion lined up in FY26-27, approximately 3.1x the combined order book of the three listed PSU shipyards.

The combined order books of Mazagon Dock Shipbuilders (MDL), Garden Reach Shipbuilders & Engineers (GRSE), and Cochin Shipyard (CSL) have been stagnant since FY19 though their combined revenue has risen from ₹8,900 crore in FY19 to ₹12,400 crore in 9MFY25 (not annualised).

The warship project pipeline is lumpy and subject to long delays.

The earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin is also a function of the complexity of design.

There are many design changes and clarity with respect to costs and margins emerges only at later stages.

There is visibility on orders worth at least ₹2.12 trillion during FY26-27.

This includes six P75I submarines, three Kalvari-class submarines, next-generation Corvettes, and P-17B Frigates, plus smaller vessels.

There could also be a third aircraft carrier.

The DAC plans to order three Kalvari-class submarines with Mazagon Docks (MDL) on a nominated basis in FY26 at an order value of ₹36,000 crore.