CMP- Rs.405
M.cap- 1,139 cr
Dredging is the process of excavating or removing soil or rock from below water
using dredgers. The operation of dredging involves two main stages
(i)
the material
to be removed has to be disturbed and loosened and then lifted to the water
surface and
(ii)
Every cubic meter of material dredged should
be relocated or disposed of to a suitable disposal site as identified. The main
objective of dredging is the creation of deeper and/or wider waterways to
improve navigation of ships.
Dredging market is a composition of various types of activities such as
Capital dredging projects are primarily port creation and expansion projects,
which also involve the deepening and/or widening of channels to allow access by
larger and deeper draught ships and also the provision of land fill for
building additional port facilities, thereby enhancing port capability.
Maintenance dredging consists of the restoration of designed depths of
waterways and harbors by removing silt, sand and other accumulated sediments.
Due to natural sedimentation, active channels generally require periodic
maintenance dredging, thus creating a continuous source of dredging work that
typically must be carried out if the navigability of the channels is to be
maintained.
Inland dredging consists of dredging in rivers, canals, lakes and
other inland bodies of water. It is used to create or maintain depths in inland
waterways for inland transportation, for flood control, to increase capacity of
silted ponds and also to remove polluted sediments
Reclamation dredging involves capital dredging and is the raising of land
levels and creation of land. Beach nourishment dredging generally involves
moving sand from the seabed to shoreline locations when erosion has progressed
to a stage that threatens substantial shoreline assets or affects tourism
The scope for dredging in
India
The scope for
dredging in India is potentially vast, looking at the prospects of development
and maintenance of existing major ports, building new ports, offshore resources
exploration, demand from navy and more interestingly the projects envisaged for
national waterways. The capital dredging demand during 2012-2017 is about 639
million m3 and that of maintenance dredging during the same period is about 521
million m3. This requires the employment of substantial number of dredgers of
varying capacities. The minor sector dredging demand of about 100 million m3,
during the said period, offers additional opportunity for dredging. The modal
shift of cargo to inland and coastal waterways offers bright prospects for a
sustainable economic prosperity.
Demand Drivers
Indian
Dredging Market
The increased focus on
infrastructure and impetus by the government to make India a global
trans-shipment hub, coupled with some of the large dredging projects already announced
reflects the high potential of the Indian dredging market.
Market Size ~Rs. 20,000 Cr. by
2020
Demand
Drivers
(i)
Deeper Draft at Ports | Atleast 14 mtrs .
(ii)
Increase in EXIM Trade and throughput Capacity at Ports
(iii)
Land Reclamation
(iv)
Emerging Trends | Ultra Mega Size Vessels
(v)
Consistent maintenance and capital dredging at existing ports
(vi)
Inland
Transport & water linking projects
(vii)
Tourism
Development| Beach nourishment
.
Company Overview
·
Premier
dredging company in India in terms of hopper capacity & quantity dredged
·
Owns
and operates 12 Trailer Suction Hopper Dredgers, 3 Cutter Suction Dredgers and
1 Back hoe Dredger
·
Conferred
with “Mini Ratna Category I status” by the GOI in November 1999
·
Key
customers for Fiscal 2015 include Kolkata Port (Haldia), Kandla Port, Ennore
Port, Cochin Port, Visakhapatnam Port.
·
Estimated
market share of 75.6% in maintenance dredging and 64.9% in capital dredging
during Fiscal 2015
·
A premier and the only PSU dredging company in
India.
Preferred
dredging company for Major Ports and Indian Navy.
Has been in dredging business since 1976 catering to
the dredging requirements of the Major Ports & Indian Navy.
·
Operates a diverse dredging fleet
which is the largest in India in terms of capacity. The size, versatility and
technical capabilities of DCI’s fleet improves its competitiveness as it
generally permits it to select the appropriate equipment for a particular
maintenance dredging job.
·
To maintain the value and
effectiveness of fleet, DCI emphasizes on preventive maintenance so as to
reduce the downtime, increase profitability, enhance the vessel life
·
Leader in maintenance dredging in
India through combination of usage of advanced equipment and experience. Sized
as the largest dredging company in India and extensive experience significantly
enhances the ability to bid profitably bid and complete the contracts awarded.
·
The senior management team as well
as the floating personnel who manage the dredgers have vast experience in the
dredging and maritime industries which provides a significant edge over the
competitors.
Indian Government is planning Inland waterways projects, which will make it
possible for us to fully reap the benefits of large rivers like Ganga. India
has just 14500 KM of inland waterways even these are not used for
transportation of goods which can be very cheap as compared to road and rail.
And our Non-religious Neighbor China has waterways of 100000 km and it
transports around 47% of its cargo via water, we are at 3-4%. Even Europe
is at 44%, Bangladesh at 35% !!
Number of inland vessels in india are just 1000, in china there
are 200000 and 11000 of Europe.
But now india is waking up and just recently they planned a
waterway from Varanasi to Haldia of 1620 KM. Dredging is constantly required to
keep these waterways navigable.
So we will see huge demand for dredging. DCI is the biggest
indian Dredging service provider but garners just around 700 cr of turnover.
But it has acquired 3-4 new vessels in last 2-3 years and plans are for better
planning of its finance
Other Competitors in dredging industry
Indian
· Adani Ports and SEZ Ltd.
|
· Dharti Dredging and
Infrastructure Ltd., Hyderabad
|
· Mercator Limited, Mumbai
· Chellaram Shipping Pvt.
Ltd., Mumbai
|
Indian
arms of foreign companies
· Boskalis Dredging India
Pvt. Ltd.
|
· International Seaports
Dredging Pvt. Ltd., Chennai
|
·
|
The government
encouragement for “Make in India" has brought in a lot of economic
interest in all industries.
Falling fuel prices will reduce the expenses significantly in the future.
Diversification Plan of DCI
Coastal
Shipping
The forecasted
economic growth for India is expected to transcend to the shipping industry
which in turn is expected to post high growth. This would result in increase in
the number of dredging (shipping) vessels servicing the Indian shores, which
would require operational management. However due to DCI’s lack of existing
capability coupled with no related synergies, DCI can at best only expect to be
a small player in the Coastal Shipping Segment.
Dredge
Repair Yard
The past couple
of years has seen a large number of international players enter the Indian
dredging market. This coupled with the rise of few domestic players has
increased the total dredging fleet within the Indian market.
Presently India
and its neighboring countries do not possess a dredge repair yard of
international repute to service and maintain these technically complex vessels.
Thus this option can be considered by DCI in partnership with a shipyard to
service captive requirements and for other customers in the region
Soil
Trading
This area is
very nascent and not particularly well developed in India currently, although
international majors have diversified into this area. The growth potential and
entry barriers would largely depend on the market dynamics in future
Civil
Construction
A growing trend
evidenced in large port contracts is that these are being awarded on a turnkey
basis to a consortium displaying both civil and dredging capabilities. To be
able to cash in on this opportunity DCI needs to enter into a consortium to
offer turnkey solutions to client as developing this skill set in-house may be
difficult and capital intensive.
Training
At present there
is no Institute offering formal education and training in the dredging field in
India. DCI can enter into a tie up with some of the management institutes in
India to impart formal education in this space and can also leverage this
course to carry out research and development to further its technological
know-how
Final word-
Dredging Corporation of India Limited is all set to
become a major player in its field and has huge growth potential for creating
wealth for its investors.
Disclaimer: I have vested interest in this company and
hence my views are biased.
Registration Status with SEBI:
I am not registered with SEBI under SEBI (Research Analysts) Regulations, 2014.
As per the clarifications provided by SEBI: “Any person who makes
recommendation or offers an opinion concerning securities or public offers only
through public media is not required to obtain registration as research analyst
under RA Regulations”.
