In addition to ABG Shipyard, Great Offshore is also needed by Ruia group and Bharati certainly cannot loose it to its largest local competitor ABG.
The two prominent reasons given for takeover of Great Offshore Limited by Bharati Shipyard and ABG Shipyard are that it"s a forward integration of their existing business which will help them to fetch enough newbuilding orders. Having Great Offshore in their group would provide an edge in entering lucrative Offshore Oil Field Services Industry. Analyzing series of events that has taken place throws a different story. It appears in addition to ABG Shipyard, Great Offshore is also needed by Ruia group and Bharati certainly cannot loose it to its largest local competitor ABG.
Getting orders in Shipbuilding is quite difficult for a new firm. It"s difficult to convince owners to place millions of dollars worth order on a shipyard with no track record. But ABG Shipyard had Mr. Ruia and his companies which gave newbuilding orders to it, this helped ABG build credential, reach to international markets and could gradually became largest private sector shipyard in India. Growth would not have come to ABG so fast otherwise. Bharati Shipyard, could convince, Great Offshore (earlier part of Great Eastern Shipping Company) to place its first Tug in 80"s, though it had no past record of building tugs. Liking the success of first order, Bharati Shipyard gradually became preferred shipyard of Great Offshore. It allowed Bharati Shipyard to take risks on new segments without facing major disappointments, except in case of Jackup rig presently being built. As, much of ABG Shipyard"s success is due to Mr. Ruia and his other group companies, Bharati"s success is due to Great Offshore.
ABG Shipyard already has half a dozen companies in the shipping and offshore oil & gas services sector, to name a few Essar Shipping Limited, Essar Oil Field Services, Tag Offshore, ABG Shipping, etc, promoted by powerful Mr. Ruia clan which places newbuilding orders to the shipyard on nomination basis. What will one more company named Great Offshore add to their group? Great Offshore has never placed orders to ABG Shipyard; they may not do so in future. ABG Shipyard needs Great Offshore to curb growth of their competitor Bharati but Mr. Ruia and his group companies need it for hand holding to make a mark in the booming Offshore Oil Field Services Sector. The other group companies of Mr. Ruia are struggling to make a mark in offshore oil field services sector. The Semi Submersible rig of Essar, Chartered to Gujarat State Petroleum Corporation has spent more time in downtime and repair than actual drilling wells. ABG Shipping was blacklisted for three years by ONGC for not able to supply offshore supply vessels in stipulated time. On the other hand, though ONGC canceled the Jackup rig charter contract of Great Offshore due to delay but did not restrict them for future bidding. India"s largest Exploration & Production company ONGC and largest Integrated Offshore Oil Field Services providers are to an extent dependent on each other. Having India"s largest integrated offshore oil filed services company on their side would certainly prove to be one solution to many problems.
Bharati has orders worth more than US$ 200 million placed on it by Great Offshore for building Offshore Jackup Rig and Multipurpose Supply Vessels (MSV). hey qualify all criteria to be canceled if Great Offshore intends. Bharati fears, ABG Shipyard could implement its cancellation terms after taking over the management control of Great Offshore. Moreover, it will also snatch a very good client and a mentor which helped its promoter to build India"s 2nd largest shipyard from a mere Rs 1 lakh loan from SBI. Keeping Great Offshore independent or in its control is essential for Bharati, as it can help Bharati reach newer heights by placing newbuilding orders in Drillships and Semi Submersible segment in future.
Chances of Bharati wining the battle are high, but the impact losing will be unbearable. ABG or Mr. Ruia group do not have anything to lose by losing Great Offshore, but winning it is certainly hitting a goldmine. It"s a battle of survival and supremacy.