April 2016 onwards, shipyards are under the harmonised list of infrastructure, but not many banks have actually funded it from the infra point of view, said Madhu Nair, chairman and managing director of Cochin Shipyard Ltd. He was talking in a panel discussion at THE WEEK Maritime Conclave 2024 in Chennai.
Nair said the problem is not coming from the infrastructure, but from the shipping part of it.
“One thing that many people don't fully appreciate is, in shipping, in shipbuilding, for a hundred million dollar shipbuilding turnover, the banking volumes are 2.5 to 2.8 times, which not many people are fully aware of as there is cash and the non-cash part of it.
“You can actually go wrong on the non-cash side. A shipyard goes bad on the inability to pay on the non-cash side because there are refund guarantees involved. And the refund guarantees sit with the bank. And if the bank didn't have that kind of deep expertise in financing, the whole thing goes down,” he said.
Expertise in shipping finance
Nair said today there is only one bank in the country, the State Bank of India, which has the expertise in shipping finance.
“I build a shipyard, what is the kind of money a banker will come and support? Or you can raise from the markets? Somebody needs to really understand the value, and the value is not a normal valuation game; you are trying to value a shipyard. The deep-rooted expertise in the debt markets that this country long ago had—we had the Shipping Credit Investment Corporation of India, we had an ICICI—we let go of these institutions,” he said.