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After decades, HSL to net operating profit this fiscal

Amit Mitra
Rear Admiral L V Sarat Babu, Chairman and Managing Director of Hindustan Shipyard Ltd, is all set to change the course of the yard’s decades-long burdensome legacy of operational loss-making.
Indeed, for the last few decades now, India’s oldest shipyard, which was once one of the flag-bearers of the country’s fledgling industrial revolution, has not been able to notch up any operating profit. But this will change in the current fiscal— HSL will come out with a tidy operating profit, besides earning a net profit for the second consecutive year, sending out clear signals that the stables have been cleared for the yard to take on global competition.
It was last financial year that HSL, under the stewardship of Rear Admiral Babu, provided a glimpse of the fascinating turnaround story by netting a net profit of Rs 19 crore.
“This year our net profit will be more than last year. And more significantly, we will be coming out with operating profit, for the first time in decades,” he told VIS News Service in an exclusive interview.
Level playing field sought
All that Rear Admiral Babu wants now is that the Ministry should look at HSL differently, as things have changed right from the bottom level.
Indeed, here HSL is not seeking more than it deserves. For, other government-owned shipyards under the Defence Ministry, such as Garden Reach Shipbuilding and Mazagaon Dock, continue to get orders on nomination basis.
“All that we are asking now is that HSL, now under the same Ministry, should be given the same treatment, especially now that we have shown our true capabilities. We want nothing more than whatever they (other shipyards under Defence Ministry) are getting,” he pointed out.
Orders in pipeline:
Now that the momentum has been built up, HSL has adequate orders in the pipeline to keep it going. It has received orders for six tugs, one FSV and a Coast Guard vessel, apart from two special operations vessels (mini-sub) for Rs 600 crore each and a normal refit of INS Sindhu Vir submarine for Rs 600 crore.
It has received LoI for two landing platform docks worth Rs 1200 crore each and eight inshore platform vessels estimated at Rs 90 crore each—these are for 2018 and beyond.
Rear-Adm Babu was appreciative of the efforts being made by Vizag MP Dr K Haribabu to shore up HSL’s order book. “Thanks to these efforts, we will get two submarine orders,” he said.

Hyundai tie-up, the next big break:
The next big break for the yard will come after the on-going negotiations between India and South Korea for a strategic partnership between HSL and Hyundai materialises. “The inter-governmental agreement is expected to be finalised within the next three to four weeks. And after that, we (HSL) will be engaged in direct discussions with Hyundai for the partnership,” Rear Admiral Babu said.
The tie-up will be for construction of five Fleet Support Vessels (FSVs) worth a total of about Rs 9,000 crore. However this will be just the entry point for the tie-up, which will be later extended to transfer of technology that will make HSL ready to take on global competition on its own.
The contract is expected to be signed within a year with HSL open to a 50:50 partnership and then about three to three-and-half years for the first of the FSV to roll out. HSL is looking at building four of the five vessels in the yard, with a staggered transfer of technology.

Clearing the stables:
How did the HSL chief, who took over last year, achieve this turn-around? To put it simply, it was clearing-the-stables strategy—in other words, clearing the decades-old cobwebs of frail discipline and work culture among the employees, avoidable expenditure and non-accountability that led to agonising delays in finishing the ship building orders.
“As soon as I took over, I realised that the yard should undergo a transformation from the bottom most rung right to the top. I saw that employees had to be motivated—they would always ask ‘what am I getting from HSL’ and not ‘what am I giving to HSL. This formed my starting point for change,” Rear-admiral Babu said. He was, indeed, aghast that how could an yard like HSL remain in such dire conditions, despite the sound infrastructure it had.
In the next few months, he initiated small measures that today are yielding big, positive results. Measures like designing a new HSL flag, logo, a clear motto and a new anthem, composed and produced in-house—this is lipped every morning by the employees. Next came tackling the trade unions. “I saw to it that trade unions did not come to me with demands for welfare measures, because I implemented them even before they would come to me,” he said, adding that the whole purpose is to instil the feeling of ownership amongst the employees.
Was there some heartburn among employees and trade unions? “Yes, many did not like the new measures that I initiated. But today, I must say, that all employees and trade unions are totally with me and are giving their best to hold aloft the HSL flag,” he pointed out.

Wrapping up pending orders
The next big challenge was clearing the pending orders. When he took over, Rear-Admiral Babu saw that ship building and repair orders received from 2006 to 2009 were still pending. “I saw to it that we completed six of these pending orders last year and this fiscal we will wrap up the remaining eight. With this, we will have a clean slate,” he pointed out.

Cutting expenses:
Another measure was to cut down on unnecessary expenses. “I started with myself. I took away all perks from my (salary) package, except for the official house and car. For example, I saw that the overtime bill would touch Rs 50 lakh, when there was hardly any orders. Today it is less than Rs 10 lakh,” he said.

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