ABG Shipyard to enter oil rig business

ABG Shipyard plans to enter oil rig construction with an investment of rupees 6 bn to tap replacement opportunities in the offshore energy sector, an executive said. The company, which has an oil rig design collaboration with Friede & Goldman of the United States, expects its new oil rig unit at Dahej shipyard to go on stream by November 2008, Chief Financial Officer Dhananjay Datar told.
"It is a natural extension for a ship builder and there are lot of replacements happening," Datar told.

The company would raise the money in debt by the end of 2007, he said. The unit would have the capacity to build four rigs at a time.
Rising crude oil prices have spurred demand for replacement of old oil rigs as well as building of new ones to serve new wells. This has attracted several shipbuilders to the sector, including India's Bharati Shipyard and now ABG.

ABG Shipyard, which builds bulk carriers, deck barges, interceptor boats, anchor handling vessels and offshore support vessels, has ordersworth rupees 40.74 bn. The company expects a 30 % rise in sales in the current business year.
The company acquired Vipul Shipyard, a small shipbuilder in Gujarat, and now plans to spend rupees 700 mm out of its internal accruals to expand it. Vipul would serve as an extension of ABG's larger shipyard in Surat, Datar said.

ABG, India's largest private sector shipbuilder, has also bid for state-run shipyard Alcock Ashdown (Gujarat), in response to the state government's privatisation effort. Earlier, ABG Shipyard reported a 6.7 % rise in net profit in the quarter to March. The slow growth was due to additional payment of octroi of rupees 40 bn, Datar said.
The company reported a net profit of rupees 329.87 mm on net sales of rupees 1.93 bn in the fourth quarter.