Delay in projects to impact profitability in FY21, says Cochin Shipyard

There will not be any additional impact due to liquidated damages for delay in running projects as it has already invoked Force Majeure clause available in all the contracts

Cochin Shipyard Ltd has said that the it does not foresee any liquidity challenges to meet its supplier obligations and the ongoing capex will not be impacted on account of liquidity in the backdrop of Covid-19. Delay in running projects owing to Covid-19 pandemic will have an adverse impact on financial performance and profitability of the company during FY20-21 but the assessment of the impact will be possible only after stabilisation of operations in the yard.

There will not be any additional impact due to liquidated damages for delay in running projects as it has already invoked Force Majeure clause available in all the contracts. The impact on the financials of FY20 will be minimal since only six days production was lost in the month of March, 2020.

With effect from May 6, 2020, the company started its operations at the main unit at Kochi with entire permanent workforce. The Kochi unit alone contributes more than 90 per cent of the turnover of the company in a year. The units in Mumbai and Kolkata are still closed due to the lockdown and will be opened only after the restrictions are over. To catch up with the lost production days, the second and fourth Saturdays which were closed holidays have now been declared as normal working days until further notice. Henceforth there would be six working days in a week, said the company.

There were no production activities from March 23, 2020, to May 5, 2020. There has been reduced scale of production in outsourced manpower to a certain extend due to reduced migrant labour availability and restricted work arrangements which has reduced the scale of production. Delays in capex projects in Kochi, Mumbai, Kolkata, Port Blair as well as its subsidiaries Hooghly Cochin Shipyard Ltd and Tebma Shipard Ltd which was acquired by bidding at NCLT in March 2020 and consequent loss of production.

As the Company has zero debt except for the tax-free bonds of Rs 123 crore, debt servicing does not pose any serious impact. While there is a delay in collection of receivables from the customers especially from the government, the company does not foresee any credit risks. It has already set up a crisis war room which proposes a zero based budgeting and other austerity measures, it added.