Mazagon Docks to acquire substantial stake in Colombo Dockyard

State-owned defence ship building company Mazagon Dock Shipbuilders is investing Rs452 crore ($52.96 million) to acquire a controlling stake in Sri Lanka’s Colombo Dockyard PLC and has entered into a tripartite agreement with Colombo Dockyard and Japan’s Onomichi Dockyard for acquiring a substantial stake in the Sri Lankan shipbuilder.

The transaction will be through a combination of primary and secondary acquisitions of securities from CDPLC’s existing shareholders, including Onomichi Dockyard Co Ltd, the current majority shareholder. 

In a stock exchange filing, Mazagon Docks said its board of directors has approved MDS’s proposal to invest Rs452 crore for acquiring a controlling stake in Colombo Dockyard PLC.

In fact, the three parties are reported to have already executed the terms and conditions of the agreement. However, the transaction is subject to regulatory approvals and customary closing conditions.

Mumbai-based Mazagon Dock Shipbuilders is a defence public sector shipbuilder specialising in the construction of warships and submarines, as also commercial vessels.

With a market capitalisation of bout $15.12 billion, the company is almost debt-free and has reported a turnover of about $1.13 billion in the last financial year. 

Colombo Dockyard, a financially stressed company, will benefit from the deal as MDL is financially sound and is capable of backing major business orders, which will help CDPLC look for a faster turnaround. 

Report say, the Sri Lankan government has been encouraging Indian investments in Colombo Dockyard, which has been passing through a difficult situation financially. MDS was selected considering its prowess in shipbuilding and financial strength.

The acquisition also marks another step in India’s entry in the global market for repairs, refits, and ship building.