Indian Shipbuilders: Order Books Shrink Amidst Policy Push

The future of Indian shipbuilders hinges on their order books, not just current profits. Mazagon Dock Shipbuilders and Cochin Shipyard, both profitable since FY15, have seen their stock prices fall significantly from their peaks. This decline is occurring despite a recently cleared Rs 69,725 crore package for shipbuilding, including a Rs 25,000 crore Maritime Development Fund.

Mazagon Dock Shipbuilders, a government-owned entity since 1960, has a strong operational record with high returns on capital and equity. However, its order book has decreased by 11% in three months, leaving only about 1.4 years of work. The company is investing heavily in new greenfield clusters, signaling significant capital expenditure.

Cochin Shipyard, India's largest commercial yard, has an order book providing over five years of work, a more diversified mix than Mazagon Dock. Yet, its profit margins have been declining, and its debt has tripled in FY26. The company is also undertaking expansion projects funded by borrowed money.

Both shipyards are facing a market disconnect. Mazagon Dock trades at a lower PE ratio despite its specialized defense work, while Cochin Shipyard commands a higher multiple despite falling margins. The next four quarters are crucial for assessing whether Mazagon Dock secures key submarine orders and if Cochin Shipyard stabilizes its margins and secures new vessel awards.