Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AAA/Stable/CRISIL A1+’ ratings on the bank loan facilities of Cochin Shipyard Limited (CSL; part of the Cochin Shipyard group).

 

The ratings reflect the strategic importance of the company to the Government of India as it is majorly owned by the Ports, Shipping and Waterways and is the only ship building company under the Ministry. The company also benefits from the long-standing presence in the ship building industry with healthy execution track record, strong market position driven by healthy association with Indian navy and sizeable order book. The scale of operations of the group has been increasing steadily for the past few fiscals and has achieved Rs. 4852 crore in fiscal 2025 and is further expected to steadily grow over the medium term. In the current fiscal, CSL has already achieved revenues of Rs. 3538 crore with a PAT of Rs. 440 crore in the first nine months of fiscal 2026. The group’s healthy order book of around Rs. 21100 crore as on August 31, 2025 is also substantial, being more than 4 times the fiscal 2025 revenues which provides strong revenue visibility. Some of the key orders to be executed over the next few months include ASW SCW Corvette and NGMV for Indian Navy, as well as few commercial orders. The group has also benefitted from the execution of the construction and deployment of INS Vikrant (first indigenously developed aircraft carrier) over the past 2 decades through fiscals 2022, and is currently executing the Phase III of IAC, leading to it becoming the only shipyard in the country to have done so.

 

The ratings also incorporate a strong financial risk profile supported by comfortable capital structure, robust debt protection measures and ample liquidity. The reliance on debt has been increasing to support the working capital requirement marked by debt outstanding of Rs 596 crore as on Dec 31st 2025 while the net worth remained comfortable at Rs.5697crore, leading to a comfortable gearing of around 0.1 time. With continued capex spend, the debt levels are expected to increase over the medium term, though capital structure should remain comfortable as majority of the capex will be executed in a phased manner over the next 3 to 4 years. The debt protection metrics were also comfortable marked by interest coverage and net cash accruals to debt ratios for H1 fiscal 2026 at around 12 times and 0.9 times, respectively. The liquidity of the group also remains comfortable with low bank limit utilization on the fund-based bank limits for the past 12 months ending December 2025, while having healthy unencumbered cash and bank balances.

 

These strengths are partially offset by the vulnerability of operating margins to fluctuations in raw material prices and foreign exchange (forex) rates. Volatility in the prices of key raw materials such as steel, engines, and pipes, which account for 45-50% of the total operating revenue can impact the operating margins. This is compounded by the absence of escalation clauses in contracts with customers.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of CSL along with its wholly owned subsidiaries, Hooghly Cochin Shipyard Ltd (HCSL) and Udupi Cochin Shipyard Ltd (UCSL), together referred to as the Cochin Shipyard group. For arriving at the ratings of CSL, CRISIL Ratings has also applied its criteria for notching up standalone ratings of entities based on government support as CSL is majority owned by the Government of India and operates under the Ministry of Ports, Shipping and Waterways.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths 

Strategic importance to the Government of India: CSL is a government-owned shipyard (which holds 68% stake in the company) under the administration of the Ministry of Ports, Shipping and Waterways. Along with its subsidiaries, the company builds and repairs ships, such as indigenous aircraft carrier, bulk carriers, next generation missile vessels, anti-submarine warfare shallow watercrafts, and platform supply vessels used by the Indian Navy. The company is strategically important to the government for strengthening the naval and coast guard defence of India.  CSL built the first indigenous aircraft carrier (IAC-1), INS Vikrant, and successfully delivered the same in fiscal 2022, and is currently executing the Phase III for the project thereby becoming the only shipyard in India with such a distinction. CRISIL Ratings believes that CSL will continue to benefit from being a government held PSU with continued focus on Indian defense projects which currently account for more than 65% of its current orderbook.

 

Longstanding presence and strong market position: Incorporated in 1972, CSL has an industry presence of over five decades which has enabled the company to develop strong technical capabilities and market position. Till fiscal 2025, CSL has built 194 ships, including large, small, and medium-sized vessels; offshore support vessels; and defense vessels. Also, geographical presence is diversified, with all the dockyards located strategically (Kerela, Maharashtra, West Bengal, Andaman and Nicobar, Karnataka). Revenues have been increasing for the past few fiscals (except fiscal 2023) and the group has achieved the highest revenues since its incorporation in fiscal 2025 of Rs. 4852 crore driven by strong demand and healthy execution of projects as the company caters to commercial (domestic and export) as well as defense segment. The company achieved sales of Rs 3538 crore for the first nine months of fiscal 2026 and are estimated to reach around Rs 5000 crores for the full year. The scale of operations is expected to sustain over the medium term on the back of capacity expansion, healthy order book and timely execution track record.

 

Sizeable order pipeline and execution track record: CSL and its subsidiaries had outstanding orders of Rs 19,600 crore and around Rs 1500 crore for shipbuilding and ship repair, respectively, as of August 2025. This includes orders from the Indian Navy as well as commercial orders from both in the domestic and overseas markets. The company also has orders worth Rs 285,00 crore in the pipeline, with plans to add more over the medium term. Track record of timely execution will continue to aid business risk profile.

 

Strong financial risk profile: The group has a strong financial profile marked by a strong networth of Rs 5566 crore as on March 31, 2025 and increased further to Rs 5,697 crore as of September 2025. While the reliance on external debt to support the working capital requirement has been increasing and further the company is planning few capex which would be partially debt funded, the capital structure however would continue to remain strong marked by gearing and total outside liabilities to adjusted networth ratio expected to remain below 0.2 and 1.5 times respectively over the medium term (0.01 time and 1.4 times, respectively, as on March 31, 2025). This, along with high profitability, led to robust debt protection metrics, with interest coverage and net cash accrual to total debt ratios of around 12 times and 0.9 times for the first half of fiscal 2026 (19.9 times and 9.8 times, respectively, for fiscal 2025). The financial risk profile is expected to remain stable over the medium term, driven by steady accretion of reserves and strong profitability

Key Rating Drivers - Weaknesses 

Vulnerability of operating margin to fluctuations in raw material prices and forex rates: Operating margin remains exposed to volatility in the prices of key raw materials such as steel, engines, and pipes, which account for 45-50% of the total operating revenue. This is compounded by the absence of escalation clauses in contracts with customers. The operating margins witnessed a dip in the first nine of fiscal 2026 to around 14% from around 19.5% in fiscal 2025, the same is due to varied project mix and milestone based billing, however the same is expected to improve and would continue to remain healthy at around 17-18% over the medium term. Furthermore, CSL procures raw materials and components from the international market, which exposes margin to any sharp fluctuation in forex rates. However, this risk is mitigated by forward contracts.

Liquidity Superior

Utilisation of fund-based limits has been at an average of 33% for the past six months through December 2025. Cash accruals, expected at over Rs 500-550 crore per annum, will be sufficient against nil repayment debt obligations. This will further provide a cushion to the liquidity of the company over the medium term. The current ratio was healthy at 1.3 times and unencumbered cash and balance stood at around Rs 467 crore, as on March 31, 2025, thereby providing financial flexibility in case of exigencies. Strong gearing and networth support financial flexibility and provide cushion in case of any adverse condition or downturn in the businesses

Outlook Stable

Business and financial risk profiles will remain strong over the medium term, underpinned by the company’s strategic importance to the Ministry of Ports, Shipping and Waterways, and continued business support from the Indian Navy and the Indian Coast Guard.

Rating sensitivity factors

Downward factors:

• Lower-than-expected revenue or sustained decline in operating margin below 12% leading to lower cash accruals
• Any large debt funded capex, impacting the financial profile of the company
• Any change in government policy resulting in dilution of the strategic importance of CSL to the Indian Navy

About the Group

CSL was incorporated in March 1972 in Cochin, Kerala. The Government of India holds 67.9% stake in the company, which is listed on the Bombay Stock Exchange and the National Stock Exchange. The company was conferred with Schedule ‘A’, Category-I Miniratna status by Ministry of Port, Shippings and Waterways. The company is engaged in shipbuilding and ship repair for both the domestic and international markets. The operations are headed by Mr Mr Valiyaparambil Jacob Jose (Chairman & Managing Director), Dr Harikrishnan S (whole-time director), Mr. Rajesh Gopalakrishnan (whole-time director & CFO), along with other directors.

 

HCSL was set up as a joint venture between CSL and Hooghly Dock & Port Engineers Ltd (HDPEL) on October 23, 2017. Pursuant to the approval of the Union Cabinet, CSL acquired the shares held by HDPEL and, with effect November 01, 2019, made HCSL its wholly owned subsidiary. HCSL manufactures and repairs commercial ships, barges and tugs for domestic and international clients.

 

UCSL was incorporated as Tebma Engineering Pvt Ltd in July 1984. CSL acquired the company through a National Company Law Tribunal, Chennai, order in September 2020 and renamed it UCSL in April 2022. The company manufactures and repairs tugs and coastal vessels, auxiliary vessels for defence, and mid-sized commercial fishing vessels for the Middle East and European markets. Main facility is in Udupi, Karnataka.

Any other information: Not applicable