Cases

Landscaping the Ship-Building Industry for an International Private Equity Investment Company

Challenge

The client, an international private equity investment company was considering private placement in a privately held domestic ship-building company. However, the client had to consider the following challenges before it committed itself to the venture:

  • The ship-building company was a leading private player with over 2 years of ordersdue for delivery and more than 50 percent international orders
  • The global ship-building industry had an all-time high of orders
  • The Indian government was supporting the industry with subsidies till 2007
  • The global ship building industry was increasingly dominated by Japan, South Korea and China
  • Ship builders in developed nations like EU and US were not competitive in the main-stream ship-building segments
  • EU dominated passenger ships and cruise ships, while the remaining US industry survived due to the regulatory protection and defense orders

Thus, the client requested UC to landscape the ship-building industry for the company.

Our Approach

To landscape the ship-building industry for the client, UC adopted the following approach:

  • Analysed historical and future ship-building deliveries
  • Identified demand trends across various vessel types -

    1) Cargo Vessels – Dry Bulk Carriers, Tankers, Container Carriers, etc

    2) Off-Shore Vessels – Tugs, Barges, OSV, Dredgers, etc

  • Analysed and assessed the following demand drivers -

    1) Oil Prices and Oil exploration

    2) Trade growth and Port development

    3) Fleet age and charter rates

    4) Current order book

    5) Regulation of the driving phase of single hull oil tankers

  • Established correlation between oil prices, oil exploration and off-shore vessel demand
  • Analysed correlation between global trade, fleet growth and utilisation
  • Analysed the supply scenario -

    1) Current order book across various countries and players

    2) Trends in market share

    3) Ability to compete in various segments

    4) Regulatory barriers

  • Recommended investment strategy and identified key risks.

Impact

The client received a detailed insight into the ship-building industry in the country.