As we all know, ABG Shipyard is currently bidding for the control of Great Offshore Limited. Though, the company says it is planning to raise around 150 million USD to fund its expansion, the money will most likely be used for the bidding as well. ABG had actually looked at raising more than 200 million USD. The company will be seeking approval from its shareholders on 7th of this month.ABG is currently expanding its Dahej port which is present in Gujarat. This is one of the two manufacturing bases that the company has. The company is hoping that it would attract more order from offshore oil and gas explorers due to the proposed expansion and a possible acquisition of Great offshore. Getting a control of Great Offshore will expand it's presence into rigs as a the company is mostly involved in building vessels.
The company currently has a strong order book and a possible acquisition of Great Offshore will auger well for the company, since it would get better in building rigs. ABG had entered the rig market in 2007 from a contract that it received from Essar Oils. Great Offshore is already good in manufacturing rigs and it also provides vessels and technical support to the oil companies for drilling and production.
The company derives most of its revenues from supplying offshore vessels and it accounts for almost half of the order backlog. The company also makes bulk carriers and vessels for Indian Coast guard.
ABG already has 2.5% of Great offshore and it offered to pay 375 rupees for an additional stake of 35%. Currently it is locked with Bharti Shipyard over the control of Great offshore. The revival in demand for the drilling ships is the motive behind the two's interest in Great offshore. Crude prices have risen almost 50% this year. Great Offshore has a very good presence in oil drilling and it had even signed a contract worth 65 million USD with ONGC to charter three vessels for three years.
To contact the equity analyst on this story: Arun Gopalan in Chennai at Arun@hbjcapital.com
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