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B. K. Majumdar Institute of Business Administration Project Report on Industrial visit at ABG Shipyard Ltd Viral Bhogaita Roll No - 120

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Page 1: Viral Bhogaita

B. K. Majumdar Institute of Business Administration

Project Report on Industrial visit at

ABG Shipyard Ltd

Viral Bhogaita

Roll No - 120

Page 2: Viral Bhogaita

Preface

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i) Objective

ABG Shipyard Ltd was earlier known as Magdalla Shipyard Pvt Ltd. It started its production in 1991. Its main objective then was to produce high performing vessels and create a customers base in the global market of shipping. The company’s main objective include

Values Time efficiency Cost consciousness Employee security Customer satisfaction

Due to company’s high objectives it has been able to deliver 104 vessel in the last decade and they also include some of the specialized and sophisticated vessels like Interceptor boats, self loading and discharging bulk carriers, dynamic positioning ships, diving support vessels for leading companies in India and the world.

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ii) Scope

As compared to other sectors, shipping industry has a very distinct and unique feature i.e. they sell first and construct later. The future scope of Indian shipping industry is high because of the following reasons

India has got a high amount of skilled labors that are a necessity for the industry

Demand of shipping is high in the western countries and do not possess enough production capacity

Labour cost in India is low Number of shipyards in India is very less

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iii) Methodology

Challenging times for the Dry bulk segment

Freight rate is considered as a lead indicator to indicate a reversal in the shipbuilding cycle. The fall in freight rates led to the slowdown in new orders in 2009. Up to October 2009, only 21mn dwt of new orders were received, vis-à-vis 79mn dwt in 2008 and 135mn dwt in 2007. The situation was aggravated by the limited credit availability to the shipping and shipbuilding industries. However, in the last one year Baltic index has gone up by166% globally, the Dry Bulk segment is likely to witness a substantial execution of the order book in 2010 and 2011, with nearly 2,000 vessels due for delivery from the current order book of 2,450 vessels. It is estimated that ~30% of the global order book could be potentially cancelled, but this could also help rein in oversupply. The replacement demand is also likely to be subdued for the Dry Bulk segment, except in the case of Handy size vessels, where nearly 40% of the fleet is more than 25 years old. Handy size

Forms 24% of ABG's Dry bulk order book. It could also benefit from such demand, as it focuses on the sub-60,000 dwt category and global shipyards cater to larger vessels.

Subsidies: Timely payment and extension could act as a trigger

So far, ABG has booked Rs489cr as subsidy in FY10YTD, and has received around Rs40cr against it from the Government. The management has indicated that the subsidy component on the existing order book would be around Rs1, 800cr, and is likely to be collected over next five years, of which Rs140cr is expected to flow by FY2011E. Further, as per media reports, there is a high probability of the extension of the subsidy for a period of 10 years, with retrospective effect from August 2007. We believe that the timely payment and extension of subsidy could act as a trigger, thereby improving the company's working capital and leverage. However, we have excluded the subsidy amount from the net worth while arriving at the fair value of ABG, which could provide a further 25% upside to our fair value.

In order to make Indian shipbuilders globally competitive, the extension of subsidy, tax concessions or soft loans are quite likely in the upcoming budget. Globally, shipbuilders have been provided support by their respective governments. However, the subsidy factor could come down further for ABG, as the contribution of bulk orders minimizes and income from the rig segment increases, which is not eligible for subsidy.

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Ship repairing gaining momentum in India

The potential size of the ship repair industry in India is around Rs2,800cr, which includes repairing Indian and foreign vessels calling at Indian ports. China has been emerging as a dominant player in the ship-repair industry, with 176 dedicated ship-repair yards, while India has one dedicated ship repairing yard (Western India Shipyard) and 35 smaller ship-repair units (major ones being Cochin Shipyard, Hindustan Shipyard,

Mumbai Port Trust and Mazgaon Dock, having permanent approval as ship-repair units). About 56,000 people in China are involved in ship repair, while in India the number is 5,000. Ship-building is technology-driven, while ship repair is labor-intensive (calls for ancillary support and a quick turnaround time). For every Rs100

Spent on ship repair, approx Rs30 goes towards labour charges. With the growing fear of pollution, and stricter norms and regulations, the ship repair industry is a lucrative industry. Moreover, Indian shipyards have competitive advantages like a high growth region, low labor costs, the availability of a trained and skilled labor force, and proximity to international shipping routes, offering low mobilization and demobilization expenses, with 5,500km of a mainland coastline.

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Contents Page

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Introduction

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i) Background of the Industry

The ship building industry enjoys strategic importance in view of its role in developing a country’s shipping fleet. Being a labour intensive industry, countries with low wage levels are ideally suited for ship building activities. The ship building sector is a global industry with China, South Korea and Japan controlling 78% of the total market share. India is a very small player with an insignificant market share.

The fortunes of the ship building industry generally fluctuate in tandem with global economic growth and international trade. The 3.9% global economy growth in 2003 and 5% in 2004 has been above the long term underlying trend of 3.6%. The tonnage demand for sea-borne traffic grew 10% in both 2003 and 2004 as compared with 4-5% growth per annum since the nineties.

Structural changes in the shipping market have resulted in longer distances and increased demand for all types of tonnage. A strong ship building market is expected to continue in the foreseeable future due to higher economic growth, low interest rates, its importance from defence perspective and a continuation of the global outsourcing trend.

Ship building also involves heavy engineering with a multi-disciplinary technical and industrial competence – requiring expertise in metallurgy, heavy sheet metal fabrication, high-tech welding, structural engineering, naval architecture, material sciences, hydrology and propulsion systems. The technological sophistication too has been increasing for building all sizes and types of ships.

Ship building is a global industry with China, South Korea and Japan controlling 78% of the world market though modern ship building, as defined in the contemporary world, evolved in Europe.

Ship building as conducted in the past in many parts of the world, including India was limited to very small ships and with limited design sophistication. The political dominance and resulting trade influence of Europe in the colonial era necessitated the building of large ships. This need spurred the development of ship building industry in Europe and later in North America during industrial revolution. In this period, ship building industry saw a continual influx of superior technology with major changes in ship design and materials used to build ships, as also in the size and number of ships built.

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The maritime scenario witnessed momentous changes after World War II. In the late sixties, the European ship building industry began to steadily witness competitive challenges from developing countries like Japan and South Korea – indicating a shift towards the Asian countries. High labour costs in Europe and the US also contributed to a gradual shift in ship building to Asian Countries. Japan emerged as the one of the largest ship building nations outside Europe while South Korea emerged as a strong player in the seventies. The growth of South Korean shipyards was significant as it demonstrated capability to build large ships at highly competitive costs. Till date, both Japan and South Korea retain their hold with a 64% market share.

[Source: Commission of the European Communities – Seventh report from the commission to the council on the situation in world ship building, Brussels, 6-5-2003 COM (2003) 232 final

Web address: http://europa.eu/rapid/pressReleasesAction.do?reference=IP/03/675&format=HTML&aged=0&language=EN&guiLanguage=en#file.tmp_Ref_1]

The increasing wage structures in Japan and South Korea are increasingly leading to the emergence of China and Taiwan as the other leading ship building nations. Japan, although no longer considered a low cost producer, is expected to continue to dominate the world market due to larger scale automation and robotisation in its shipyards.

India is also likely to compete for a share in the Asian ship building market space. With 100% FDI in Indian ship building sector and growing competitive pressures to expand capacities across geographies by harnessing local advantages, India has all the chances to bag its legitimate share of maritime action.

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(1) The Far East passed Western Europe in 1966 (the year I emigrated).

(2) Korea passed Japan in 2006.

(3) China passed Japan in 2009.

(4) The Far East now has over 90% of the market.

[Source: Lloyd's Register of Shipping's "World Fleet Statistics"

Web address: http://www.ihsfairplay.com/Maritime_data/World_Fleet_Statistics/World_Fleet_Statistics.html?product=Report,World%20Fleet%20Statistics&i=4]

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ii) History of the Company

The company was originally incorporated as ‘Magdala Shipyard Private Limited’ vide its certificate of incorporation bearing number 7730 dated March 15, 1985 with Registrar of Companies, Gujarat, Dadra & Nagar Haveli under the Companies Act, 1956 by Ram Swaroop Nakra and T. V. Ramchandani. The current promoters acquired the shares in the year 1989.

The name of the company was changed to ‘ABG Shipyard Private Limited’ on May 25, 1995. Subsequently, on the receipt of approval from the Central Government of India, our company became a public limited company and fresh certificate of incorporation was issued by the Registrar of Companies, Gujarat, Dadra & Nagar Haveli on June 14, 1995.

It delivered its first ship named “Nand Hazira”, a bulk carrier, in November 1990 to Essar Shipping Limited. During the period 1990 to 1994 the company delivered 18 ships mostly bulk carriers and cement carriers. In the year 1996 the company achieved its first major break through in the international markets and delivered three newsprint carriers to Lys Line AS, Oslo, Norway. The shipyard has the capacity to construct ships up to 20000 DWT and 155 meter length (as reported to SEBI on May 25, 1995). The shipyard has been certified by DNV for ISO 9001 for its manufacturing process.

1989 - Acquisition1992 - Unique ship-lifting facility1993 - First major domestic order1994 - Order for 3 cement carriers for Gujarat Ambuja Cement Ltd.1994 - First export Order1995 - Conversion into Public Limited Company1996 - Entered into European Market2000 - First Government Order for 2 India Coast Guard2001 - Entered the Gulf / Mid East Market2002 - Introduction of Subsidy Scheme for Private Shipyards2004 - Major proposed expansion; capability to produce ships upto 1,20,000 dwt.2005 - Private Placement for Funding Expansion2005 - IPO & Listing of shares on BSE2007 - Listing of shares on NSE

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Major events of the company since inception

Year Event1985

Incorporation of our Company as a private limited company

1989

Acquisition of shares by the current promoters

1990

Delivery of the first ship of our Company

1993

First major domestic order

1994

Set up the ship lift facility of our Company

1994

We received our first export order

1995

Conversion into Public Limited Company

1996

Entry into the European Markets

2000

First Government Order- Indian Coast Guard for 2 interceptor boats.

2001

Entry into Gulf/Mid East Markets

2002

All India Award for Highest Exporters from EEPC under the category ‘Highest Growth in Export- Non SSI

2003

All India Award for Highest Exporters from EEPC under the category ‘Highest Growth in Export- Non SSI

2004

Certification for ISO 9001:2000 received from DNV Netherlands

2005

Preferential allotment of Equity Shares

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iii) Introduction to founding members

ABG Shipyard Ltd is a subsidiary of ABG International Private Limited. ABG International Private Limited was incorporated in Maharashtra on September 3, 1993 as Magdala International Private Limited. On June 24, 1994, the name of the Company was changed to ABG Magdala International Private Limited. Later, on October 31, 1996, the name of the Company was changed to ABG International Private Limited. The Registration No. of the ABG International Private Limited is 73745/11. The main object of our Company is to conduct trading activities. ABG International Private Limited is promoted by Rishi Agarwal and Saket Agarwal. Other subsidiaries of ABG International includes Onaway Industries Limited; ABG Shipping Limited; ABG Cement Limited; Jarrow Finance & Trading Private Limited; Banal Investment & Trading Private Limited; B.F. Engineering Private Limited

At the time of conversion of the company from Private Ltd to Public Ltd the share holding of Rishi Agarwal and Saket Agarwal was 50% each. The board of director comprised of Rishi Agarwal, S. Muthuswamy and D. P Gupta.

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Rishi Agarwal serves as Non-Executive Non-Independent Chairman of the Board of ABG Shipyard Limited. He holds an MBA (Finance) from Purdue University of USA. He is a first generation technocrat and is the Managing Director of ABG Shipyard Ltd. After returning from USA he took over the management of ABG Shipyard Limited and under his able stewardship and guidance has reached to present level of one of the private sector Shipyard in India. Has over 24 years experience in Shipbuilding, Ship Repairing and Shipping. His other Directorships include ABG International Private Limited, ABG Cement Limited, ABG Engineering & Constructions Ltd, ABG Energy Ltd, ABG Energy Himachal Pradesh Ltd, ABG Energy (Gujarat) Ltd, ABG Shipyard (Singapore) Pte. Ltd, ABG Infralogistics Ltd, ABG Power Private Ltd, ABG Cranes Private Ltd, ABG Kolkata Container Terminals Private Ltd, ABG Kandla Container Terminals Ltd, ABG Projects & Services Limited (UK) and ABG Ports Private Ltd.

Saket Agarwal serves as Non-Independent Non-Executive Director of ABG Shipyard Limited. He is a Commerce Graduate from Mumbai University. He has experience in marine business, port services, port development and transportation. He is the managing director of ABG Heavy Industries Limited, a listed company with a market capitalization of Rs 1,856 million, which is in the business of heavy lifts and port related services. His other Directorships include ABG Infralogistics Limited, ABG Kolkata Container Terminal Private Limited, ABG Kandla Container Terminal Ltd, ABG Projects & Services Limited (UK), ABG Cranes Private Limited, ABG Power Private Limited, ABG Ports Private Ltd, ABG -LDA Bulk Handling Private Ltd, ABG Haldia Bulk Terminals Private Ltd, ABG Coastal Private Ltd, ABG Container Handling Private Ltd, ABG-LDA Marine Private Ltd and Onaway Industries Ltd.

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The key people at ABG Shipyard Ltd are as follows

Name Since Current PositionRishi Agarwal 2008 Non-Executive Non-Independent Chairman of the BoardRajashekhar Reddy

- Compliance Officer, Secretary, General Manager – Legal

Ram Nakra 2008 Managing Director, Non-Independent Executive DirectorArun Pathak 2008 Non-Independent Executive DirectorAshwani Kumar 2010 DirectorSaket Agarwal 2007 Non-Independent Non-Executive DirectorAshok Chitnis 2005 Independent Non-Executive DirectorShahzaad Dalal 2006 Independent Non-Executive Director - Representative of IL

& FS Investment Managers LimitedNainesh Jaisingh - Ind Non-Ex Director - Representative of Standard

Chartered Pvt Equity Advisory (India) Pvt Ltd

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iv) Vision & Mission of the Company

As reported on the official website of the company,

The vision of the company is “ABG Shipyard Limited shall be a world class Shipyard capable of building and repairing vessels with the highest standards of quality, safety and strict adherence to delivery schedules at very competitive prices.”

The mission of the company is “To be a Global Marine Shipbuilding Company, offering customized full-service solutions to our customers, enabling them to focus on their core competencies.”

There are 14 nominated berths available for hull Berth allocation for an average mix of vessels 45 to 120 meters length. There are 3 construction Bays presently available with 12 Skids in each Bay. Thus 36 skid available for construction of 10 X 10 Meters blocks. There are 23 vessels under different stages of production in the shipyard at a given time are possible. 2 available jetties can accommodate vessels for stage between launching and delivery.

Blasting and Painting of Blocks, Hull Assemblies, Pipe Fittings:

Carried out in open environment by Grit blasting, then priming and final painting. Painting equipment is based on airless spray as standard.

Storage areas:

Covered sheds with vertical and horizontal stacking for steel plates, profiles and pipes.

Covered bonded stores area for storing the bought out major equipments & any other item considered under customs supervision and marked for exports.

Suitable cranage capacity.

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Other facilities:

Bending and CNC cutting facilities. Submerged Arc Welding facilities. CO2 welding machines facilities.

Marketing Capabilities

First European export order - 101.00 M long 5th Generation Newsprint / Multipurpose Container Vessel from M/s. Lys Line, Norway.

Marketing Organization - International and Domestic Market Personnel assisted by Naval Architects, Engineers and Estimation team.

Focus on European and Persian Gulf Markets.

Planning Capabilities

Master Plan scheduling. Hull block fabrication schedule. Activity schedules prepared for each vessel. Review of plans every month.

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Organizational Design

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i) Organizational Structure

The organization design process is often defined in phases. Phase one is the definition of a business case, including a clear picture of strategy and design objectives. This step is typically followed by "strategic grouping" decisions, which will define the fundamental architecture of the organization - essentially deciding which major roles will report at the top of the organization. The classic options for strategic grouping are to organize by:

Behavior Function Product or category Customer or market Geography Matrix

The levels of hierarchy at ABG Shipyard Ltd is divided in to three parts

Top Level

Middle Level

Bottom Level

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As the diagram suggests the number of workers or employees at the Top Level management is the lowest as compared to Middle Level management and Bottom Level management.

The number of employees at the Middle Level management lies between that of Top Level management and Bottom Level management.

While the number of workers at the Bottom Level management is the highest.

ABG Shipyard Ltd has a total work force of 10,000 workers covering all of its three plants. These workers consist of 1,200 contractual labours. The total work-force is divided into 275 teams representing a unique bled of skill, expertise, and camaraderie. Its experienced and highly knowledgeable experts keep abreast of the latest developments. They rise to global challenges with well trained and well equipped sophisticated technological tools.

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ii) Top Management

We have established a tradition of best practices in corporate governance. We have complied with the requirements of the applicable regulations, including the listing agreement to be executed with Stock Exchanges and the SEBI Guidelines, in respect of corporate governance, including constitution of the Board and Committees thereof. Our corporate governance framework is based on an effective independent Board, separation of the Board’s supervisory role from the executive management and constitution of Board Committees, majority of them comprising of independent directors and chaired by an independent director to oversee critical areas.

We have a broad based Board of Directors constituted in compliance with the Companies Act and listing agreement to be executed with Stock Exchanges and in accordance with best practices in corporate governance. The Board of Directors functions either as a full Board or through various committees constituted to oversee specific operational areas. Our management provides the Board of Directors detailed reports on its performance on a quarterly basis.

The Board of Directors has nine (9) Directors of whom two (2) are whole time Directors, two (2) are promoter Directors, two (2) are investor Directors and three (3) are independent Directors. The Chairman of the Board of Directors is a nonexecutive director.

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The Top Level Management of ABG Shipyard Ltd include

Managing Director - Rishi Agarwal

Non Executive Chairman - Kamlesh Kumar Agarwal

Promoter Director - Saket Agarwal

Executive Director (Technical) - Ram Swaroop Nakra

Independent Director - Mehernosh Rustom Pardiwala

Nominee Director - M. J. Subbaiah

Independent Director (Additional) - Ashok Chitnis

Nominee Director - Nainesh Jaisingh

Nominee Director - Shahzaad Dalal

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Operations

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i) Plant location

The shipyard is located at Magdala, near Surat on the banks of the river Tapi which is along the western coast of Gujarat, India. The shipyard is spread across 35 acres of the area. Our shipyard has state of the art, manufacturing facilities including a “Shiplift Facility” which is one of its kinds in this region, having a capacity of 4500 tons, side transfer facilities, CNC plasma cutting and steel processing machinery. The shipyard has multiple building berths; two Dry Docks, two jetties and covered fabrication shops equipped with modern CNC based fabrication machinery. The “Shiplift Facility” gives the yard an operational flexibility and enables the yard to simultaneously build on modular basis and repair up to twenty three (23) ships. The manufacturing process is in line with world-class standards and the yard is certified by DNV for ISO 9001.

Currently, the yard can construct ships of a maximum length of 155 meters and up to a maximum weight of 20,000 DWT.

IT also has indoor facilities to build aluminium ships of to eighty (80) meters. We believe that our indoor work environment is a competitive advantage in building certain types of ships and in attracting and retaining customers. We are in the process of setting up a modern ship building facility at Dahej (150 kms from the existing yard). The proposed expansion would help us strengthen our presence in the global ship building industry and enable us to build larger and more complex ships.

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ii) Product Portfolio

The Product Range of ABG Shipyard Ltd includes:

102M Side Loader / Newsprint / Container Ship 83.5M DP2 Diesel Electric Propulsion Diving Support Vessel 26 Metre High Speed Aluminium Interceptor Vessel 47M 80 ton Bollard Pull MPV 60.8M DP1 (Dynamic Positioning) Diving Support Vessel 56 M Well Test / DP2 Supply Vessel 50 M Well Test / Supply Vessel 50 T Azimuthing Stern Drive Bollard Pull Tug 60.8 M. Anchor Handling Tug / Supply Vessel 49.5M Multi-utility Vessel 77.9M 2250 DWT Mini Bulk Carrier 80M 2500 DWT Self Loading / Unloading Bulk Cement Carrier 4000 DWT Self Loading / Unloading Bulk Cement Carrier

Since 1991, ABG Shipyard has constructed and delivered 95 Vessels globally, including Specialized and Sophisticated vessels and has successfully delivered three highly sophisticated 5th generation specialized Newsprint Carriers to Lysline, Norway among others. These ships are designed for worldwide service with unattended engine room and one-man bridge operation.

The company also holds the distinction of having delivered two numbers Interceptor Boats (45 knots) to Indian Coast Guard.

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83.5M DP2, Diesel Electric Propulsion Diving Support Vessel – CCC Pioneer

Consolidated Contractors International S.A.L. (Abu Dhabi –UAE)

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26 Metre High Speed Aluminium Interceptor Vessel - Indian Coast Guards

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47Metre 80 ton Bollard Pull MPV – Lamnalco Colibri

Lamnalco Group Sharjah (UAE)

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60.8M DP1 (Dynamic Positioning) Diving Support Vessel – Al Huwaila

Halul Offshore Co. (Doha – Qatar)

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56 M Well Test / DP2 Supply Vessel - Al Shaheen

Al Mansoori Sharjah (UAE)

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50 M Well Test /Supply Vessel – Al Saqar

Al Mansoori Production Services, Sharjah (UAE)

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50 T Azimuthing Stern Drive Bollard Pull Tug – Burondi

Wijsmuller (An A.P. Moller Group) Holland

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49.5M Multiutility Vessel - Zamil

Zamil Offshore and Maintenance Co. - Saudi Arabia

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77.9M 2250 DWT Mini Bulk Carrier -Nand Magdalla

Essar Shipping Mumbai, India

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4000 DWT Self Loading / Unloading Bulk Cement Carrier – (Gujarat Ambuja Cement Ltd.)

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iii) Production Process

ABG is involved in the business of ship building for a variety of marine vessels. It has a shipyard in Surat wherein it undertakes building various offshore vessels and has a yard in Dahej where it has commenced building bulk carriers. ABG will start making jack-up rigs in its rig yard at the same location in Dahej.

Typically it takes 15-18 months to build a conventional vessel such as a bulk carrier, tanker or containership, and 28-32 months to construct an LNG vessel. Ship building companies recognize revenue based on the proportion of input of raw materials. Typically there are five cut off stages in the ship building process: contracting, steel-cutting, keel-laying, launch and delivery. From a typical vessel construction period of 15 to 18 months, it takes 6-9 months from contracting to steel cutting (design period), 3 months from steel-cutting to keel-laying, 3 months from keel laying to launch and 3 months from launch to delivery. Since most of the raw materials are used between steel-cutting and launch, most of the revenue recognition for conventional ships is concentrated during the last 12 months before delivery.

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iv) Competition

The Indian ship building industry is small by global standards. Ninety per cent of all India-owned ships are foreign built, and shipyards in India use mostly imported equipment. Overall, there are 28 large, medium and small shipyards, many of them combining ship repair services. Major shipyards are in the public sector domain. India’s share in international ship building is quite low and there are very few private sector shipyards. The Indian ship building industry structure can be divided into three distinct segments:

Public sector shipyards: The public sector shipyards build merchant class ships. These include Hindustan Shipyard Ltd, Cochin Shipyard Ltd, Hoogly Dock & Port Engineers Limited and Central Inland Water Transportation Ltd.

Defence shipyards: There are three naval shipyards under the purview of the Ministry of Defence (MoD) which include Mazgaon Dock Limited, Goa Shipyard Limited, and Garden Reach Shipbuilders & Engineers.

Private shipyards: India has two mid-sized private shipyards namely ABG Shipyard Limited, and Bharati Shipyard.

Besides, a number of smaller shipyards and repair yards make smaller barges, tugs, patrol ships, fishing ships. As far as international markets are concerned the ship building has moved from Europe to Asia. We face competition from countries like China, Korea and Japan. There has been a significant increase in capacity both through the construction of new facilities and the up gradation of existing shipyards. China is now emerging as a major player in our market segment and is the price leader. Japanese and South Korean shipbuilders presently dominate major segments of the ship construction industry, including tankers and bulk carriers. This dominance in ship construction is likely to continue, since tankers and bulk carriers are expected to constitute the major growth areas in world ship building.

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Human Resource

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Strategy of ABG shipyard

Their strategy is to leverage their reputation as a sufficient reliable, customer driven shipyard operator providing a diversified range of shipyard services they propose to utilize their proven strengths to enhance their position as one of the leading Indian manufacturer of ships and to respond to anticipated new ship and rig building construction with the objective of increasing revenues.

The key elements of their business strategy are as follows:1) Become a leading provider of integrated marine services,2) Capitalize on the expected growth in offshore business , including oil and gas

exploration and production 3) Leverage economies of scale 4) Continue to provide a wide variety of high quality products for diversified

markets, and maintain a high quality, dedicated workforce and continue to utilize modern organizational techniques.

All employees are classified as either regular or temporary. Regular employees are employees hired without a specific termination date. Temporary employees are employees whose position at the time of hire is for a short-term period. Terms of employment will depend on agency needs, and in no case will a temporary position be construed as being a contract for a definite time.

Employees also are classified as either exempt or non-exempt according to provisions of the Fair Labor Standards Act.

Regular Full-time Employees are those employees who work 40 hours per week and are eligible for all fringe benefits.

Regular Part-time Employees are those employees working at least 20 hours but less than 40 hours per week. Part-time salaried employees are eligible for all fringe benefits and earn sick leave and vacation at a rate proportionate to the hours they work. Regular part-time employees that work less than 20 hours per week are not eligible for fringe benefits.

Temporary Employees are those employees who are paid hourly under Letter of Agreement for a specified period of time. Temporary employees are not eligible for benefits.

Labour Turnover Ratio: 0.02

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At Dahej, workers are divided into three different departments:

•Blue Dress: Production workers

•White: Managers

•Orange: Safety department.

Also, the training given there is on the job to the new professionals.

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Finance

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i) Capital structure

Share Capital as on the date of filing of this Draft Red Herring Prospectus with SEBI is set forth below:

(Rs. In millions)

Particulars Face Value

Aggregate

A. Authorized Capital100,000,000 Equity Shares of Rs. 10 each 1000

B. Issued Subscribed And Paid-Up Capital before the Issue42,421,801 Equity Shares of Rs. 10 each fully paid-up 424

C. Present Issue to the public in terms of this Draft Red Herring Prospectus8,500,000 Fresh Issue Equity Shares of Rs. 10 each fully paid-up 85

D. Employee Reservation Portion200,000 Equity Shares of Rs. 10 each fully paid-up 2

E. Net Issue to the Public8,300,000 Equity Shares of Rs. 10 each fully paid-up 83

F. Issued, Subscribed and Paid-up Equity Capital after the Issue50,921,801 Equity Shares of Rs. 10 each fully paid-up 509

G. Share Premium AccountBefore the Issue 1,016

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ii) Basic Ratios

Details of the Capitalization of Reserves by our Company in the

(Rs. In millions)

Date of Allotment of Bonus Shares

Date of Approval of the Bonus Issue

Ratio of Bonus Issue

Number ofEquity Shares of

Rs. 10 eachIssued as Bonus

Amount ofReserves

Capitalized

Sept 3, 1994 Sept 3, 1994 9:1 7,200,000 72Feb 12, 1996 Feb 12, 1996 1:2 4,000,000 40Mar 15, 2005 Mar 10, 2005 3:2 19,500,000 195

The shareholding of the ABG International

Private Limited is as mentioned.

Name No. Of Shares %age share holdingRishi Agarwal 5001 50%Saket Agarwal 5001 50%

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Social Responsibility

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As a responsible corporate citizen, we at ABG are committed to the concerns of society as a whole. Towards fulfilling social responsibilities, ABG supports several causes, some of which are mentioned below.

Sports: ABG is involved in fostering a competitive spirit through active involvement in sports such as F1 Boat Race and Squash. ABG has organized and supported several of such events.

Community Education: Education is the very foundation of a progressive society and ABG supports this good cause.

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Awards and achievements

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ABG Shipyard Ltd. has in the last 2 years won the prestigious award from EEPC (Engineering Export Promotion Council) under the category ‘Highest Growth in Export – Non SSI’. This award known as ‘All India Award for Highest Exporters’ was won for the following years:

EEPC for the year 1999-2000 EEPC for the year 2000-2001 EEPC for the year 2002-2003 EEPC for the year 2003-2004 EEPC for the year 2005-2006 EEPC for the year 2006-2007 EEPC for the year 2007-2008

Certificate of Recognition Two Star Export House Certification: ISO 9001 / DNV – Bureau Veritas / RVA management System C024

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Conclusion

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Sources of information

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http://www.moneycontrol.com/financials/abgshipyard/capital-structure/ABG01

http://smartinvestor.in/BSCMS/PDF/abgshipyardinitiatingcoverage.pdf

http://www.abgindia.com/product-main.htm

http://www.moneycontrol.com/company-management/abgshipyard/board-of-directors/ABG01

httrp://www.theofficialboard.com/org-chart/abg-shipyard-

http://www.reuters.com/finance/stocks/companyOfficers?symbol=ABGS.BO

http://investing.businessweek.com/businessweek/research/stocks/people/people.asp?ticker=13377452