Mazagon Dock: aptly called “Ship Builder to the Nation”

About Company
Mazagon Dock Shipbuilders Ltd is primarily engaged in building & repairing of ships, submarines and various types of vessels and related engineering products for various
domestic and international clients
• It was incorporated as a Pvt. company in 1934 and was taken over by the Government of India in 1960.
• The company is a leading player in shipbuilding Industry of India.
• Since 1960, It primarily manufactures for the defence sector and has built 795 vessels including 25 warships ranging from advanced destroyers to missile boats and 3 submarines.
• It has also delivered cargo ships, passenger ships, supply vessels, water tankers, tugs, dredgers, fishing trawlers, barges & border for various customers in India and abroad
• It is the only shipyard to have build destroyers and conventional submarines for the Indian Navy and also one of the initial shipyards to manufacture Corvettes in India.
• Huge growth opportunities going ahead as only 6% of homes in India are currently connected through wireline broadband.
• The company’s dockyard is located in Mumbai which is also headquarters for Western Naval Command of Indian Navy.
• The company is considering an opportunity of developing a greenfield shipyard at Nhava, Navi Mumbai with a ship lift, wet basin, workshops, stores and buildings along with a ship repair facility spread over an area of 40 acres.

Industry Review
The global shipbuilding industry deals primarily with production & modification of larger vessels & rigs that are used for transportation & defence purposes. A characteristic feature of ship-building is that unlike other manufacturing industries, which predominantly follow make-to-stock inventory model, shipbuilding is an order driven industry where each vessel is custom built on receipt of the ship-building order.Thus, building an order book is essential for growth and sustenance of the shipbuilding industry. Order book growth for commercial ships is largely driven by growth
in world trade & commerce, which spurs demand for new ships. Some broad categories of ships include passenger carriers, offshore vessels, dry bulk carriers, tankers, container ships and defence vessels such as destroyers, frigates & corvettes. Average time period required to build a ship depends upon the type & complexity of the vessel. For example, on average it takes 15-18 months to build a conventional vessel, i.e. a bulk carrier or a tanker ship, while it requires 28-32 months to construct an offshore rig or an LNG vessel. Building defence vessels takes even longer as it takes five to seven years on an average to build a destroyer, frigate or a submarine. In the early twentieth century, the shipbuilding industry was largely dominated by Europe. However, later in the century Japan & South Korea overtook the position from Europe by offering lower wages.Thus, the shipbuilding industry in the past few decades has shifted from Europe to Asia due to favourable factors such as cheap labour,competitive manufacturing and steelmaking sectors, as well as state support.

Indian shipbuilding industry
India being an emerging economy is still in the evolving phase of
shipbuilding.The Indian shipbuilding industry based on the types of ships built can be broadly classified as follows:

  1. Large ocean-going vessels catering to overseas & coastal trade
  2. Mid-sized specialised vessels, such as port crafts, those for fishing, trawlers, offshore vessels, etc
  3. Defence/naval craft and coastguard vessels
    India’s geostrategic & geopolitical concerns underline the need for a strong & capable Navy and coast guard. Hence, there is need for sustained growth and self-sufficiency of its shipbuilding industry. Traditionally, even as naval ancillary components have been acquired from outside India, actual shipbuilding activity has been carried out indigenously. However, over the years, the government has focused on greater indigenisation of even defence equipment. The domestic shipbuilding industry primarily caters to the Indian Navy, coast guard. Currently, its fleet consists of aircraft carriers, transport dock,landing ship tanks, destroyers, frigates, nuclear-powered submarine,conventionally powered attack submarines, corvettes,mine countermeasure vessels (MCMVs), large offshore patrol vessels, fleet tankers and various auxiliary vessels and small patrol boats. The Indian Coast Guard’s fleet comprises patrol vessels, patrol boats, patrol craft and a hovercraft.In the public sector, shipyards such as GRSE, MDL, CSL & Goa Shipyard have been increasing their focus towards defence.However, MDL is the only Indian shipyard that has built destroyer and conventional submarines for the Indian Navy and is one of the initial shipyards in India to manufacture Corvettes.

MDL has over 200 years of experience in the shipbuilding industry, while traversing from a small single unit ship repair service to multi units, multi products Company.

The company’s facilities currently comprise three dry docks, two wet basins, three slipways, production shops, assembly shops, module shop with painting chamber for integrated construction,sheet metal shop, pipe shop, machine and fitting shop, ship dry dock and dredging, electrical repair shop and instrumentation shop for our shipbuilding division.The marine division infrastructure includes shops for fabrication of frame, sub-section assembly and section formation, cradle assembly shop for structural and equipment outfitting and final assembly, one dry dock and submarine assembly shop.

Strong order book to provide long term topline visibility.

In MDL’s order book comprises of three major shipbuilding projects and two submarine projects.
MDL expects to have a decent order pipeline in the next one to three years with several projects lined up from Indian Navy and Indian Coast Guard worth ~between 20k to 30k crore.
MDL believes it has the competitive advantage for mega projects like six P-75i conventional submarine project (~45000 crore) and six new generation
destroyers (50000 crore) to be finalised over the next three to four years.
MDL is the only player to have earlier built these types of ships and submarines in India.
Any mega order win over the next few years would further propel long term growth.
The strong order book provides long term revenue visibility.

Only shipyard to have built destroyers, conventional submarine
MDL is India’s only shipbuilder to have built destroyers and conventional submarines for Indian Navy.
In the past, it has constructed two SSK submarines and modernised and refitted four SSK submarines.
Since its inception, MDL has built and delivered 795 vessels including 25 warships, from advance destroyers to missile boats and three submarines.
It has also delivered cargo ships, passenger ships, supply vessels, multi-purpose support vessels, water tankers, and tugs, dredgers, fishing trawlers, barges and border outposts for various customers in
MDL is a defence public sector undertaking (DPSU) mainly operating in two business divisions i) shipbuilding and ii) submarine and heavy engineering with maximum shipbuilding and marine capacity 40000 DWT.
The shipbuilding division includes the building and repair of naval ships engaged in construction and repair of naval ships. It is currently building four P-15 B destroyers and four P-17A stealth frigates and repair & refit of a ship for ministry of Defence (MoD).
Submarine & heavy engineering division includes building, repair and refits of diesel electric submarines.
MDL currently building/ in process of delivering four Scorpene class submarines under transfer of technology agreement with Naval group, France and one medium refit submarine for MoD. It has successfully delivered two submarines, INS Kalvari and INS Khanderi.


Key Risks

Predominantly dependent on MoD for defence orders
Invocation of bank guarantees by customers may impact results
Any decline/delay in defence budget to impact growth, profits
Any delay in procurement, nomination or any other decision by its customer and collaborators may result in time and cost overrun in completion of its shipbuilding and submarine projects.
MDL currently operates from Mumbai, which limits its future expansion programme.
Most of the MDL’s revenues and cash flows are driven from MoD contracts and substantial contracts are on a nomination
Going forward, orders are likely to be awarded on competitive basis.
Hence there is no assurance that future defence orders will come to MDL only.

Disc: Invested


What are the scope differences between Cochin Shipyard and Mazagon?


if you check the investor presentation between both, we see Mazagon is concentrated towards construction of warships and submarines, in fact only co to build submarines and I believe as the allocation and thought process of nation is rewarding more towards defense, and furthermore it is confirmed with the running order book of the co and the co. is rewarding with sustainable margins with a healthy dividend and increase in reserves for every quarters.

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Appreciate the great writeup. Just a couple of Qs.

  1. I didn’t get reference to wireline broadband opportunity wrt to Mazagaon Docks
  2. How does it compare to Garden Reach Ship builders?

Thank you.


  • Garden Reach Shipbuilders and Engineers (GRSE) is a shipbuilding
    company primarily adhering to the shipbuilding requirements of
    the Indian Navy and the Indian Coast Guard

  • Shipbuilding: construction of vessels for clients engaged in the
    defence sector. GRSE has built and supplied more than 750
    vessels for maritime security.

  • Engineering: develops & manufactures portable steel bridges,
    suspension type pre-fabricated steel bridges, marine pumps,
    railless helicopter traversing systems, boat davits, anchors, mooring
    and dock capstans, anchor windlass and winches

  • Engine Production: undertakes assembly, testing, servicing and
    repair of various models of diesel engines used for marine
    propulsion and power generation through collaboration with the
    MTU of Germany

Built India’s first indigenous warship–the INS Ajay, in
the year 1961
✓FirstIndian shipyard to build and deliver:
oFleet tankerto the Indian Navy
oHovercraftto the Indian Coast Guard
oLanding shipto the Indian Navy
✓First Indian shipyard to export a warship to the
Government of Mauritius
✓First Indian shipyard to integrate carbon composite
superstructurewith steel hull for the ASW Corvette
✓Pioneered manufacture of portable steel bridgesin
✓Developed first Indian Marine Sewage Treatment
✓Kamorta Class Frigates built with 90% indigenous

  1. Strong & Established Relationships
    with Indian Navy and Coast Guard
    • Five decades long relationship with Indian Navy
    beginning with delivery of INS Ajay in 1961.
    • Delivered over 96 ships to Indian Navy, Indian
    Coast Guard & Government of Maldives on
    aggregate basis
    • Historically delivered first of its kind vessels by an
    indigenous shipbuilder including fleet tanker and
    • Built 12 ships in FY13 –FY17 for the Indian Navy
    and Indian Coast Guard (6 ships each).
    • Built & delivered warships with completed weapon
    and sensors trials for the first time in 2017.
    • Built & delivered the INS Kiltan, an anti-submarine
    warfare stealth corvette and the first Indian
    warship with a superstructure made entirely of
    composite material.

  2. Pursuing new market
    opportunities through exports
    • It exported first ship in 2014 and seeks to grow
    sales from ship exports substantially.
    • It intends to market all vessel sizes for exportation
    in various geographic locations.
    • However, company is expected to ramp up its
    export of small and medium sized warship and
    patrol vessels to South-East Asia, West Asia,
    African countries and Latin America.
    • GRSE is poised to supply vessels of improved
    quality while incurring a lesser capital cost in
    building ships to compete in the global arena.

  3. Cash rich balance sheet: While private sector
    shipyards like Reliance Defence, ABG Shipyard and
    Bharti Shipyard are reeling under high debt, GRSE is
    cash surplus and has cash and cash equivalent balance
    of ~Rs. 2,000 Cr.

  4. Negative working capital : Healthy increase in
    order inflows resulted in proportionate increase in
    stage payments received for these orders, thus
    resulting in negative working capital cycle.

  5. Capex: GRSE plans to spend ~Rs250 Cr. in next 3 to
    4 years mainly on account of modernization of existing
    ship building facilities at RBD and other units to
    enhance the capabilities of ships constructions / block
    fabrication etc.

  6. Healthy dividend yield: Company has announced
    dividend of Rs6.95/share in FY19, implying a healthy
    dividend yield of 5.8%

I could see both the shipbuilders are niche players in their respective way, however I prefer Mazgaon over GRSB, as the financials are much stronger to Mazgaon and the revenues are in large scale, and EBIT margins helps to push the bottom line to much stronger levels.


breakout with strong volumes…

Can be a big gamechanger…has higher margins.

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Can you please elaborate more, how is this a game changer. Thanx

This is not entirely correct. Operating margins in ship building industry, especially warship building are in range of 7 to 8% only.
Mazgaon Dock reported 6% (FY21) and 7% (TTM) vs GRSE at &% and 9% . Need to monitor if the 13% reported in last quarter is due to industry tailwinds or due to operating efficiency and can be sustained going forward…

Mar-21 TTM Sep-21 Dec-21
MDL 6% 7% 5% 13%
GRSE 7% 9% 13% 11%

Cash conversion is a concern in MDL . Free cash flow is negative (considering last 3 years). In comparison, GRSE has superior cash conversion metrics.


MDL Public WriteUp

  • Mazagon Dock Shipbuilders Limited (MDL) was established over 200 years ago, in the year 1774, Taken over by the Government of India and established as Public Sector Undertaking under Ministry of Defence in 1960. MDL is the premier shipbuilding yard in the country, producing world class Weapons and Sensors intensive state-of-the-art, warships and submarines.

  • MDL has built 799 vessels, including 26 capital warships and 6 conventional submarines and exported 243 vessels. In addition, MDL is undertaking repairs of ships and submarines.

  • MDL is presently building 04 Advanced Stealth Frigates, 04 Guided Missile Destroyers and 06 submarines. Of these, one Destroyer and 04 submarines have already been delivered.

  • One more Destroyer and one Scorpene Submarine is planned for delivery this year.

  • MDL has embarked on a diversification drive by reviving the Ship Repairs & Maintenance, besides venturing into the business of shipping container manufacturing and has already bagged two orders from M/s Container Corporation of India Ltd (CONCOR) totalling to 2500 containers into allied sectors as well. In order to stay competitive in the changing times and have an upper edge, MDL has initiated many R&D projects including Design & Construction of Midget submarines, has developed Hydrogen Fuel Cell powered Vessel for inland waterways and developed various Artificial Intelligence (AI) enabled products like Remotely
    Operated Vehicle, AI-Radiography Testing and AI-Ultrasonic Testing.

  • Also, in accordance with Mission Raksha Gyan Shakti (MRGS) an initiative of Ministry of Defence, MDL has received 05 Patent grants from Indian Patent Office (IPO) and further pursuing cases for grant of IPR under MRGS.

  • MDL has completed modernisation and upgradation to contemporary world class infrastructure
    and facilities with Virtual Reality Lab, Product Data management, Product Life Cycle

  • Modular Integrated construction which enables us this capability and capacity to
    construct/repair 10 warships and 11 submarines simultaneously.

  • Vision and Mission of MDL is that shall strive to be progressive and profitable shipyard
    building world class warships and submarines using state-of-the-art technology and to deliver
    quality ships in time within the budgeted costs and endeavour to become one of the world
    leaders in warship building.


"Cash conversion is a concern in MDL . Free cash flow is negative (considering last 3 years)."
It means that MDL is taking advance for the orders - akin to having free cash… we can see it as an advantage, rather than a concern

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What’s next for MDL?

  • MDL has bagged 2 Orders from CONCOR Ltd for manufacturing 2500 number Shipping Containers. MDL embarked recently on a diversified business for construction of Shipping Containers for Container Corporation of India Ltd (CONCOR) which has significant market potential.
  • MbPT order for Repair of Launch Boat. MDL has also revitalized its Repair and Maintenance Verticals for Commercial Ships besides Ships and Submarines of Indian Navy and Indian Coast Guard.
  • Initiated Design & Development of Indigenous Midget Submarine - Developed Hydrogen Fuel Cell Powered Electric Vessel in collaboration with TATA Advanced Systems.
    It is a 6 Passenger boat, fitted with a 6 KW Electric OBM, a 10.2 KWH Battery, Fuel Cell System and can run for 22 Hours with compressed Hydrogen filled in PESO approved Cylinders.

Slide #9: , MDL Press releases

Witnessed a great rally in the recent time and J curve increment in stock price is definitely icing the top.

Booked profits as global alarming on recession fears & anyhow this settles in watchlist now.


A good money making idea ! :slightly_smiling_face:. Booking profit in stocks is something -a personal decision which everyone does depending upon one’s goal and other market situations.
If the market turns bearish for long term , then most stocks and sectors may turn negative and defence stocks may not be an exception.

However defence stocks are supposed to be recession proof- no inflation should affect PSU defence business- Defence of the nation is the priority at any cost . There is a fixed order book from the Govt and the Govt is not likely to cancel defence orders ! In fact mores orders could flow in future as the defence budget / allocation forms a lion’s share in year’s overall budget !

Having said that defence stocks carry a very low p/e , just because of PSU tag and the downward risk may be limited unless the Govt reverses it’s decision of “atma nirbhar” and or cuts down its Defence budget.
Discl: I am holding defence stocks for long term and currently sitting on 30-40% return on my defence stocks and I am definitely biased.
Therefore please do your own assessment for investing or to remain invested or to exit.


Good to hear your conviction towards defense sector & undoubtedly it is the megatrend anytime and the current global factors further help to build conviction.

And having said that I too have basket allocation towards this theme and invested into MTAR, DATA PATTERNS, MAZDOCK etc…


Mazgaon Dock Board is meeting on 10 Nov to declare q2 result and also interim dividend- that is What in the public domain & perhaps the market is expecting a strong quarter. But there may be some more information/ update which we may not be aware which has led to such a massive rise of 15% in a single day.
And if there is no other news, and the results does not meet the streets expectation, it may also fall rapidly…so one needs to be cautious while dealing with such stocks.

Discl: All Defence shipping stocks form a part of my defence basket, which I picked up from lower level. Please do your own assessment before investing or whether to remain invested.


MAZDOCK Q2 FY23 Management Commentary:

  • Bagged many ship repair orders and initiated manufacturing of Indigenous Midget Submarine.
  • There was lower revenue booking and a little higher cost on a standalone basis.
  • Cash flow was better in H1FY23.
  • Current orderbook visibility is good which shows good visibility until FY25.
  • Consistent stream of orders inflows is required.
  • ISEC has initiated a sell as they feel the significant price increase was due to higher order visibility which has already been factored in. In the last 6 months, there is not much change in order visibility.