Mazgaon Dock Shipbuilders Ltd (MDL) is a PSU dear to the government for far greater reasons than you can imagine. Being the oldest shipyard in India, Mazgoan Dock Shipbuilders has a long and illustrious profile as the principal shipbuilder for the Indian Navy. It is one of the few shipyards that understands the changing requirements of the armed forces, based on updated technological and geopolitical requirements. Unlike other government companies, which faded into oblivion due to inefficiency and resistance to change, Mazgaon Dock has stood out to become a vital cog in India’s maritime defence ecosystem, while also working on commercial projects as well.
A consistent track record
Mazagaon Dock has consistently delivered technologically advanced vessels and submarines on time, a critical requirement to meet the government’s growing defence procurement needs. This track record of reliability and efficiency instills a sense of confidence in its future projects and the security it provides to the nation.
As a Government-owned PSU working under the Ministry of Defence, Mazagaon Dock was earlier seen to be highly dependent on the Government for orders, but it has also successfully delivered commercial projects for the oil and gas industry.
Further Modernization and Expansion
Among the government’s six shipbuilding yards, Mazgaon Dock is the only one capable of constructing submarines and destroyers for the Navy, making it a highly important PSU for the government. Even as India lags behind China, South Korea, and Japan in the global shipbuilding market, MDL remains a promising company that could significantly enhance India’s performance in this sector, both for commercial and defence purposes. Mazgoan dock hasn’t allowed complacency to affect it, as its continued reliability and adaptability have shown.
To modernize its operations, it has partnered with Royal HaskoningDHV, a Dutch consultancy firm, to expand its yards and cater to larger orders. This ambitious Rs.5,000 crore expansion plan will integrate MDL’s existing yards with 2 new facilities, creating a mega yard that will be the largest in India, even capable of constructing aircraft carriers.
This new yard will be across the creek to its existing yard in Mumbai, and it is expected to create 1,500 jobs. Currently, Mazgoan Docks can handle 11 submarines and 10 warships. The expansion would almost double the capacity, also encouraging ancillary industries to set up shop in the area.
The company is also in talks to acquire a controlling stake in Sri Lanka’s Colombo Dockyard PLC (CDPLC). According to reports, this listed yard is facing severe financial challenges, with losses amounting to Rs. 2.48 billion last year. If this materialises, MDL will become the first Indian yard to operate overseas as well.
How MDL remains a PSU everyone loves
Even though it remains in government control, it is one of the few PSUs that doesn’t deal with commodities. It has filed more than 50 patents and is actively collaborating with international institutions to enhance its operations. Even though it primarily constructs vessels for the government, it also produces cargo ships, passenger ships, multipurpose support vessels and barges for customers in India and abroad. In total, the yard has built 801 vessels, with a total of 40,000 dead weight tonnage capacity.
The golden egg-laying hen for investors
Investors were delighted when Mazgaon Docks went public in October 2020. It raised Rs.443 crore from the markets and has remained a valued possession for every investor.
It has delivered multibagger returns, as the stock has surged 854 times since. Analysts have placed MDL as one of the top PSU stocks to invest in, alongside HAL and IRCTC. With a strong emphasis on indigenisation and a proven track record for on-time delivery, MDL’s strong fundamentals and a virtually debt-free balance sheet make it a stock worth its weight in gold.
Competition and Future Outlook
Though MDL doesn’t have an outright monopoly, it does compete with L&T and other shipyards for contracts. As MDL has developed a deep understanding of the Navy’s requirements, many international shipbuilders looking to invest in India have to partner with MDL to fulfill their requirements.
“The Ministry of Defence is in the process of approving the additional procurement of three more units of Scorpene-class submarines after the general elections of 2024,” Abhijit Apsingikar, a senior defence analyst at GlobalData, explains.
“Being the prime contractor for building the previous six units of Scorpene submarines, MDL’s role in submarine construction cannot be understated. The company is also likely to play a pivotal role in the upcoming P-75I-class submarine programme. While the international submarine designs vying for the project have narrowed down to ThyssenKrupp Marine Systems’s (TKMS) U-214 and Navantia’s S-80 Plus submarines, these international shipbuilders will have to partner with an Indian shipyard to build these submarines, and MDL is one of the two local shipyards shortlisted for this purpose. As such, MDL will keep playing a vital role in the Make in India programme over the next few decades.”
MDL is in no mood to rest on its laurels. It is actively investing in R&D to build capabilities for hydrogen-powered boats, lithium-ion batteries and AUV Swarm drones. Besides this, the Mazgaon Dock is also building an indigenous ‘midget’ submarine, which can seat 6 people, and its poised to be ready for testing sometime in 2025.
If SBI remains India’s most profitable PSU, MDL is proving to be India’s most promising PSU.
