Garden Reach Shipbuilders & Engineers Limited (GRSE)
Q1 FY26
Call date · August 19, 2025
1 · Management Commentary
Key Positives
- Delivered third Survey Vessel (Large), first Anti-Submarine Shallow Water Craft, and first P-17 Alpha ship to the Indian Navy (ahead of schedule).
- Completed two naval ship refits and pre-acceptance trials of the first indigenous 30-mm naval surface gun.
- Order book at ₹21,700 crores as of June 30, 2025, spanning 10 projects and 40 marine platforms.
- Expansion of shipbuilding capacity from 20 to 28 platforms, targeting 32 by 2026 and 40 by 2029.
- Progress on new product development: unmanned underwater/surface vehicles, green vessels, and proprietary Bailey Bridges.
Key Negatives
- Subcontracting costs increased significantly (from ₹131 crore to ₹235 crore in Q1).
- Revenue recognition for large projects like P-17 Alpha is lumpy, with major accruals at delivery milestones.
- High dependence on defense orders, though non-defense and export share is rising.
Forward Guidance
- Capex plans: Ongoing modernization, acquisition of a new dry dock in Kolkata, and setting up a greenfield shipbuilding facility (30+ acres in West Bengal); exploring a greenfield shipyard on the West/East Coast.
- New products/segments: Continued focus on autonomous platforms (surface and underwater), green vessels, and advanced bridges.
- Expected client wins/losses: Anticipates conclusion of ₹25,000 crore Next-Generation Corvette contract in FY26; bidding for additional Navy and Coast Guard projects (e.g., 5 Next-Gen Survey Vessels, 18 Fast Patrol Vessels, 31 Water Jet FACs, 6 Offshore Patrol Vessels, 22 Interceptor Crafts, 120 Fast Interceptor Crafts, and P-17 Bravo project worth ~₹70,000 crore).
- Revenue/margin outlook: Management expects to maintain momentum in both topline and bottomline through FY26 and FY27, with revenue visibility up to 2034 from large defense orders.
- Other strategic initiatives: Collaboration with Pipavav Shipyard for larger platforms; targeting export growth (notably with German client).
2 · Q&A Highlights
Q 1 (Composite): How does GRSE recognize revenue and receive payments for major defense projects?
A (Management):
• Revenue recognition is milestone-based, with 95% of project cost received by delivery; for P-17 Alpha, full revenue is recognized at delivery, with ~90–92% accrued by March 2026 for the next ship.
Q 2 (Composite): What is the progress and opportunity in new product development, especially autonomous and green vessels?
A (Management):
• Developed unmanned underwater and surface platforms, with prototypes undergoing trials; expects significant opportunities in 2–3 years as the segment matures; also building green vessels and advanced bridges.
Q 3 (Composite): What is the outlook for margins and revenue post-completion of the P-17 Alpha project?
A (Management):
• Expects topline and bottomline to maintain current momentum through FY26 and FY27, with continued growth from large projects.
Q 4 (Composite): Timeline and revenue impact of the Next-Generation Corvette and P-17 Bravo projects?
A (Management):
• Next-Gen Corvette contract likely by FY26-end; first ship delivery by 2031, last by 2034; revenue recognition from FY28 onwards; P-17 Bravo RFP expected by end of calendar 2025.
Q 5 (Composite): What is the current and future level of indigenization in major projects?
A (Management):
• P-17 Alpha: 80–85% indigenization; Next-Gen Corvette and P-17 Bravo expected at 85–90%, with propulsion systems likely to be indigenous by P-17 Bravo.
Q 6 (Composite): Details on order book composition and diversification?
A (Management):
• ₹21,700 crore order book: 98% shipbuilding (86% defense, 14% non-defense/export), 1% ship repair, 0.5% bridges/diesel engines.
Q 7 (Composite): Strategy and outlook for shipbuilding capacity expansion and collaborations (e.g., Pipavav)?
A (Management):
• Targeting 40-ship concurrent capacity by 2029; greenfield facilities and collaborations (e.g., Pipavav) to enable construction of larger platforms.
Q 8 (Composite): Subcontracting cost trends and provisioning/accounting practices?
A (Management):
• Subcontracting at ~15% of sales will continue due to project maturity; provisioning follows standard accounting, with ~₹330 crore provision write-back split 50:50 over FY26–27.
3 · Other Key Numbers
- Order book as on June 30, 2025: ₹21,700 crores
- Shipbuilding capacity: 28 platforms (targeting 32 by 2026, 40 by 2029)
- Subcontracting costs Q1: ₹235 crore (up from ₹131 crore)
- FY25 topline: Crossed ₹5,000 crore
- FY25 PAT: Crossed ₹500 crore
- Indigenization in P-17 Alpha: 80–85%
- Next-Gen Corvette expected order value: ~₹25,000 crore
- P-17 Bravo expected order value: ~₹70,000 crore
- Provision write-back pending: ~₹330 crore (to be split ~50:50 in FY26 and FY27)
- Export order (German client): 8 Multipurpose Vessels under execution; contract for 4 more expected by mid-September
- Ship repair order book: ~1% of total
- Non-defense shipbuilding: 14% of order book (Research vessels: 9%, Export: 5%)
- Ongoing projects: 10 projects, 40 platforms (including 14 naval ships, 4 research vessels, 13 hybrid ferries, 8 multipurpose vessels, 1 dredger)
- Delivery timelines: Next P-17 Alpha by April 2026, last by August 2026; Next-Gen Corvette first ship by 2031, last by 2034
All figures and statements are as disclosed in the call transcript.