India’s largest shipbuilding firm ABG Shipyard Ltd is forming a joint venture to set up a large shipbuilding yard in Nigeria. ABG Shipyard, which lost out to Bharati Shipyard in a domestic takeover battle for control of Great Offshore about a year ago, is expected to own 40 per cent stake in a JV with a group of Nigerian investors including Nkrah Investment Ltd (a provider of marine operations and logistics services) and BGL Private Equity Ltd (a wholly owned subsidiary of BGL Plc., a Nigerian investment bank).
The local government of Cross River State will own the balance 10 per cent stake for providing land and other procedural and infrastructure support to the Calabar Shipbuilding Yard, according to Nigerian Tribune newspaper that quoted one of the investors in the project. The consortium of local investors will own 50 per cent in the project that is pegged to involve $800 million to $1 billion in investment.
Besides building ships, it will also construct oil drilling rigs, support & offloading vessels, LNG carrier vessels, container carriers, patrol vessels and military equipment for the Navy.
The local government has reportedly earmarked 250 hectares of land for the project, which is said to have a geographical advantage as it can benefit from the Nigerian gas pipeline project.
Besides boosting growth in the region, the upcoming venture will also catalyse shipyard business in Nigeria, one of the largest economies in the African continent. According to the Nigerian Tribune report, the few existing shipyards such as Nigerdock Plc., Continental Shipyard, Naval Dockyard and Wilmot Point are severely constrained as they don’t have new shipbuilding capacities and primarily focus on ship repairs and fabrication work.
The initiative will also provide new growth opportunity for ABG Shipyard in a region which is now being tipped as the next big thing among emerging economies.
The move will help boost the company’s global business as well, since it faces strong competition at home and is pitted against contenders like Pipavav Shipyard and Bharati Shipyard. As of now, Bharati Shipyard is the second largest player in the business, as it has not consolidated its earnings with Great Offshore. But considering its overall spread of operations and the combined revenues of Great Offshore and Tebma, it is already bigger than ABG Shipyard.
Late last year, Bharati Shipyard had beaten ABG Shipyard to another deal by acquiring 51 per cent stake in ICICI Ventures-backed loss-making Chennai-based Tebma Shipyards for Rs 75.75 crore, valuing the firm at Rs 150 crore ($33.5 million).
But ABG Shipyard, the country’s biggest shipbuilding firm by market capitalisation, has been eyeing new growth opportunities. It had recently sought an industrial licence for defence production and was asked by the Foreign Investment Promotion Board, the nodal body monitoring foreign investment in the country, to maintain 21.91 per cent as the maximum foreign equity holding in the company.