l Hindustan Shipyard Limited, A Govt. of India Undertaking-Ministry of Defence
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RAdm L V Sarat Babu, NM, IN (Retd)
Chairman & Managing Director

 

It gives me immense pleasure to welcome you to the 64th Annual General Meeting of the Company and update you on its performance during the year 2015-16.   This is my first opportunity to address all the shareholders after taking over the reins of HSL as Chairman & Managing Director and I am delighted to state that HSL has posted profit this year after passing through many challenging years. Substantial improvement in our productivity during the last quarter of the financial year under consideration has contributed towards our turnaround.

The Company’s Accounts for the year ended 31 Mar 2016 along with Board's Report, Auditor’s Report and Nil Comments of C&AG have already been circulated to all concerned.  Before I enumerate various aspects of company’s performance, progress, modernization, future scope and other issues related to employee welfare, let me briefly highlight the global ship building industry scenario which has significant effect on our company.

Shipbuilding Scenario

Ship building industry is mostly dominated by Asian players such as South Korea, China and Japan. These traditional large ship builders in the region are enhancing their offshore capabilities and are providing cost effective and flexible turnkey solutions to various global customers. As per analysis by one of the leading firms in ship building market, “increasing sea borne trade, strong commercial vessel market and increasing GDP of world economists among others are now acting as growth drivers for the ship building industry”. Ship building industry functions in an extremely competitive environment with productivity, modernisation, skills and competence as key drivers. Apart from depending on Defence orders, Indian shipyards need to find alternative avenues and competitive strategies for business connected with shipbuilding. Shipbuilding Industry in India has recently got a boost with the Govt. of India according Infrastructure status to it. This will further boost the ‘’Make in India’’ programme. This welcome move by the present Government will help the Indian Shipyards to become globally competitive. I now move on to the performance and other aspects of our Company during the period under review.

Company Performance

It is indeed my privilege to report that our Company has done comparatively very well during the last fiscal year. During the year 2015-16 our Company achieved a total income of Rs 648.56 Cr and a Value of Production of Rs 593.29 Cr. The total income has been the second best and the Value of Production has been the third best since the inception of the company. The company has achieved Profit After Tax (PAT) of Rs 19 Cr after many challenging years and without any financial grant from the Government. Further the Value of Production during the last quarter of the financial year 2015-16 has more than doubled compared to previous quarters due to concerted efforts at achieving productivity and productivity linked targets. The operational indices i.e. Value of Production, Man Hour per CGT, VoP per employee, employee cost as a percentage of VoP during the year under review have also improved significantly. The accumulated losses and negative net worth of the company has also been reduced to Rs 1306.37 Cr and Rs. 1004 Cr respectively. Therefore, it is a great moment for me to share with you that our company has started making profits and positively looks forward for a turnaround from the negative net worth status in the coming years.

Execution of shipbuilding & Ship Repair Projects

It is with great satisfaction that I highlight some of the major productivity linked achievements during the financial year 2015-16:

(a) During the year, our company has delivered three ships i.e. One Inshore Patrol Vessels for Indian Coast Guard and Two 25 Ton Bollard Pull Tugs for Indian Navy. These two Tugs have been built over a period of 11 Months from the date of keel laying which is an appreciable time frame.

(b) The keel for the last 25 Ton BP Tug for Indian Navy was laid on 11 Apr 2015 and the vessel has been floated out on 23 Apr 2016 along with the two 50 Ton Bollard Pull Tugs for Kandla Port Trust.

(c) The vessel VC 11184 was floated out on 25 Apr 2016 at an impressive ceremony. This was the first time, when the yard successfully undertook multiple float out of four vessels at the same time in Building dock which is a major milestone achieved by the yard.

(d) The Medium Repair-cum-Modernization of Sindhughosh (EKM) Class Submarine, INS Sindhukirti was successfully completed and handed over to Navy on 26 Jun 2015. This has received accolades from Indian Navy both at Eastern Naval Command and the Naval Headquarters.

(e) Nine vessels of various kinds have been repaired during the year 2015-16. Major Refit projects of INS Magar and INS Kesari are under progress.

Financial Status

The financial position of the company continues to be challenging. On the positive note the yard has been nominated for FSS, SOV and LPD. Post accord of AoN, the yard has received PSRs for FSS & SOV projects. Besides this, the yard is also being considered for Normal Refit of INS Sindhuvir. All these orders are at initial stage and the respective contracts are yet to be concluded.

Order Book Position

As on today, the balance order book value for ship construction is about  Rs 1186.65 Cr while the actual balance order value to be executed is Rs.569.76 Cr. Major thrust is being accorded to complete all pending ship building orders by mid 2017. Further, a Business Development Department has been constituted with a view to provide adequate impetus to develop aggressive business initiatives.

MoU Grading

The Performance of the company for the year, based on self-appraisal is “Fair” in terms of the MoU signed with the Ministry of Defence. The MoU grading has fallen from “GOOD” in 2014-15 to “FAIR” in 2015-16. The main reason for drop in grading despite  substantial improvement in the company’s performance indices was due to very ambitious MoU parameters set without a matching order book position. Not withstanding  this, as mentioned earlier the Company posted profit after many challenging years in 2015-16 and also achieved second highest income since its inception.

Corporate Governance

Our Company constantly endeavors to adopt and maintain highest standards of ethics in all spheres of its business activities. The company firmly believes that its business role is based on adherence to fundamental principles of Corporate Governance like honesty, integrity, accountability, adequate disclosures, legal & statutory compliances, and to protect, promote and safeguard interests of all stakeholders. It also strives to carry out its business obligations with good corporate values duly discharging its duties for maximum level of transparency in decision making to avoid conflicts of interests. The Company continues to comply with the guidelines on Corporate Governance for CPSEs 2010 issued by Department of Public Enterprises, Government of India The Company is expected to achieve “Excellent” grading for Corporate Governance for the financial year 201516 in terms of the said guidelines.

Yard Modernization

As per the plans envisaged during the last year, the first phase of the modernisation i.e. the Refurbishment and Replacement of Machineries & Infrastructure (RRMI) is under progress with financial support from Govt. of India against LPD Project. As on 31 Mar 2016, orders worth Rs 111.22 Cr have been placed. Out of which work for Rs 90.41Cr has been completed. Tenders valued at Rs159.84 Cr are under progress. Post cyclone Hudhud, HSL sought funds for restoration works of damaged facilities in the yard and in residential colony. Towards this, a team constituted by MoD visited the yard on 18 & 19 May 2015 to carry out damage assessment. The team recommended for sanction of Rs 214.48 Cr as grant-inaid to HSL. Pending sanction of funds from MoD, the yard undertook essential repairs and restoration works by temporary allocation of funds from RRMI.

Future Business Prospects

India has a long coast line extending over 7500 KM on three sides. India’s geopolitical position in the Indian Ocean consistently places increased demands on the Naval Fleet. Accordingly, both the Indian Navy and Coast Guard may need to embark on expansion of their fleets. HSL is geared up to seize this opportunity by taking up orders for construction of vessels for the Navy & the Coast Guard. It is pertinent to mention that our yard has already been nominated for 05 Fleet Support Ships, 02 Special Operation Vessels and 02 Landing Platform Docks. These orders are at their initial stage and Preliminary Staff Requirement (PSRs) for FSS & SOV orders have  been received. Contracts for these orders are yet to be concluded. Besides this, the yard has also been nominated for the Normal refit of INS Sindhuvir. These orders will elevate the present order book to the tune of Rs 20,000 Crores in the years ahead.

Skill Development

The yard’s initiatives in the field of skill development include training of Trade, diploma & degree apprentices as well as vocational trainees. 47 ITI apprentice trainees, 68 engineering graduates and 16 Diploma Trainees were trained in their respective streams during the year 201516. On the job training and project work was also extended to 1080 students of various engineering colleges, management institutions and marine institutes.

Corporate Social Responsibility

As per DPE guidelines and Companies Act 2013, considering average net profit for the immediately preceding three financial years, our shipyard is exempted from earmarking dedicated funds for CSR even if the company has earned profit in the current year. Notwithstanding our current financial position, our company has identified some of the need-based CSR initiatives for the betterment of the local people with limited financial commitment.  During the Year 2015-16, an amount of Rs.3.02 lakhs was spent towards various CSR Related activities ie., International Coastal Clean-up Day, Swatch Bharat day on 02 Oct 15, Free Medical Camp on 20 Dec 2015, Blood Donation Camp on 05 Mar 2016. Apart from these, free electricity & water provided to six educational institutions operated in HSL colony for the benefit of the students of surrounding areas.

Swatch Bharat Campaign

Pursuant to the launch of Swatch Bharat Mission by Hon’ble Prime Minister, our yard has taken several initiatives for cleanliness and improvement of sanitation in the yard and colony. These initiatives have resulted in sensitising the employees and communities around the yard. Cleanliness drive in the yard was undertaken on 19 Sep 2016, 02 Oct 2016 and 23 Jan 2016. During these drives, employees of the yard did “shramadan”. With these initiatives, our yard looks clean, green and serene.

Indigenisation & Make-in-India Campaign

After launch of Make-in-India policy by Govt. of India, Indigenisation has got its much needed impetus. Towards this, HSL has taken various initiatives to facilitate indigenisation to the extent possible in Shipbuilding & Ship repairs. A Make-in-India cell has been constituted to promote Indian Vendors.

Industrial Relations

The Company maintains harmonious industrial relations with the work force. The recognised and the supporting trade unions of the shipyard are constructive in their contribution towards improvement of the company. Periodical interaction of C&MD with all the employees is being held for enabling them to be aware of the ongoing company affairs and to avoid communication gaps.

Morale, Motivation & Welfare Measures

(a) To improve employee spirit of belonging, an anthem was adopted by the shipyard in Jan 2016.This anthem was written and  composed by HSL employees.

(b) HSL Motto “Minimise Cost and Maximise Output” was adopted and inscribed in bold letters on the obverse of main entrance arch to enable a focused approach towards productivity.

(c) On the eve of 75th anniversary of the Shipyard, a Builders’ monument was inaugurated to bring in pride amongst the employees and also pay tribute to the ship builders of the past.

(d) A tri color HSL flag was adopted on 21 Jun 2016 to bring in a sense of identity and patriotic outlook towards the shipyard amongst the employees.

(e) A renovated family park was commissioned inside the HSL residential colony for enabling the colony residents and their families to enjoy the green environs.

(f) Post extensive repairs and refurbishments, “Lalita Kalamandir” an open auditorium was reopened in HSL residential colony in Apr 2016 to encourage performing arts amongst the employees and colony residents and also provide a venue for periodic entertainment.

(g) As a pilot project seven quarters have been renovated in HSL colony. Renovation of remaining quarters is under progress in a phased manner.

(h) In order to provide safe drinking water to colony residents, a 3 Ton Reverse Osmosis Plant has been commissioned in Aug 2016 inside the colony.

(i) A walker’s park for senior citizens of the colony along with a mini open gymnasium and sports courts have been commissioned in HSL Colony.

(j) The existing shopping complex has been renovated and inaugurated in Aug 2016 for the benefit of colony residents.

Acknowledgements

I would like to place on record our thanks and appreciation for the assistance, co-operation and guidance received by the Company from various Ministries of the Government of India, especially the Ministry of Defence, Department of Defence Production, the Integrated Headquarters (Navy)/MoD, the Indian Coast Guard, Comptroller & Auditor General of India, Controller of Defence Accounts (Navy), Government of Andhra Pradeh, Flag Officer, Eastern Naval Command and look forward to their continued support in the future. I acknowledge with gratitude the continued patronage and support received from the Company’s clients, OEMs and Vendors. I also thank the Classification authorities, Company’s Bankers and Auditors for their help and cooperation. I thank all my colleagues on the Board for their harmonious support and immense encouragement. My special appreciation to the collective efforts of the entire HSL Team working tirelessly to make the company profitable.

Thank You,