Anil Ambani’s Pipavav Defence bags order from Russian Government for making frigates for Indian Navy.

In what is the biggest deal in the history of Indian warship building project clinched by any private company in India, the Russian government has chosen Pipavav Shipyard to deliver frigates for the Indian Navy. The deal size is expected to exceed $3 billion. This also marks the first deal for Pipavav Defence after it was taken over by Anil Ambani’s Reliance Group recently.

The Indian navy was battling to increase the fleet strength while the public shipyards being tied up in executing current orders, the GOI (Government of India) has been in advanced talks for the past several months with Russia. India placed its demand for three to four upgraded Talwar class frigates, classified as Project 11356 vessels.  The GOI gave firm instructions to Russian government that the order would only be placed through the Make in India route. Initially, Russia was keen to execute the order from its shipyard. Indian government however gave flexibility to Russia on choosing the partner in India for the project.

Russia has formally informed the defense ministry that Pipavav has been chosen as its Indian partner for the project. Larsen & Toubro and several other Indian Shipyards showed interest in partnering this project. Officials said a formal letter was sent by the Federal Service for Military Technical Cooperation (FSMTC) director Alexander Fomin last week confirming the partnership. The contract for the new frigates is likely to be in the form of a government to government order with Russia and could be signed this financial year with delivery expected over the next six to eight years.

The Russian team led by its trade minister  has been evaluating Indian Shipyards for the project over the past few months. Amongst the yards visited were Mazgaon Dockyard Ltd, Cochin Shipyard Ltd and the L&T unit, with the final selection being based on the availability of infrastructure and capacity. Pipavav has India’s largest shipbuilding facility and is currently executing a naval offshore patrol vessel order.

Pipavav defence has given good returns on YTD basis. On a one year basis the stock has been an underperformer by delivering 8 percent returns. Pipavav defence has been struggling with profitability and growth for the past 3 to 5 years.