GRSE - Garden Reach Shipbuilders & Engineers Limited Share Price

In the Q1 FY 2026 earnings call of Garden Reach Shipbuilders & Engineers Limited (GRSE), management provided a positive outlook. As of June 30, 2025, the order book stands at Rs.21,700 crores, comprising 10 projects and 40 marine platforms, with a significant focus on naval contracts, including P-17 Alpha, Anti-Submarine Shallow Water Crafts, and Next-Generation Offshore Patrol Vessels.

Key forward-looking points include:

1. Ongoing Projects:

   • GRSE delivered the first P-17 Alpha ship ahead of schedule on July 31, 2025.
   • The second P-17 Alpha ship is at 80% completion, expected to be delivered by April 2026, and the third by August 2026.
   • The contract negotiations for the high-value Next-Generation Corvette project, approximately Rs.25,000 crores, are progressing, with expectations to conclude negotiations within the financial year.

2. Expansion Plans:

   • GRSE aims to increase its shipbuilding capacity from 28 to 32 ships by 2026. Long-term plans target ramping up to 40 ships by 2029.
   • A new Greenfield shipbuilding facility is planned, with land acquisition discussions ongoing.
   • There are potential contracts for new multipurpose vessels and projects from the Navy and Coast Guard amounting to Rs.1,200 crores, with additional RFPs anticipated over the next 18 months.

3. Indigenization Targets:

   • Current indigenization levels for the P-17 Alpha project are between 80%-85%, with expectations to reach 85%-90% for upcoming projects, including P-17 Bravo.

4. Financial Guidance:

   • Management expects to maintain consistent revenue growth, building on a strong FY 25 performance where revenues surpassed Rs.5,000 crores and profits exceeded Rs.500 crores.

5. Future Opportunities:

   • The company is actively involved in developing autonomous maritime platforms and green vessels, positioning itself to capitalize on emerging technologies in defense and commercial shipbuilding.

Overall, GRSE is strategically positioned for growth with a robust order book and ambitious expansion and modernization plans aligned with governmental defense initiatives.

1. Question from Dipen Vakil: Could you elaborate on your revenue recognition process? Are there amounts pending from the government after deliveries?

   Answer: Yes, in our projects, particularly with the P-17 Alpha, we typically receive about 95% of the project cost upon delivery. Revenue recognition occurs at delivery, meaning we realized full revenue with the first P-17 Alpha. For the second ship, expected in April 2026, we anticipate accruing 90-92% revenue by March.

2. Question from Dipen Vakil: What is the progress on new product development such as autonomous underwater vehicles?

   Answer: We are focused on new technologies, having developed an Unmanned Underwater Platform that underwent successful prototype trials. We also executed an order for an unmanned surface vessel, indicating significant opportunities with both the Navy and Coast Guard. While development is still nascent, we anticipate growth in this market.

3. Question from Krishna Doshi: How will the completion of the P-17 Alpha project affect margins and revenue in FY '27 and FY '28?

   Answer: We expect strong momentum with the P-17 Alpha project, completing it by August 2026. Given its scale, we anticipate sustained growth in both top and bottom lines through FY '27, building on our strong FY '25 performance, where we exceeded Rs.5,000 crores in revenue.

4. Question from Krishna Doshi: What is the timeline for first ship delivery post the next-generation corvette contract signing?

   Answer: Contract negotiations are ongoing, and we expect to sign by December. Following that, preproduction activities will begin. The first ship delivery is projected for 2031, with final deliveries by 2034. Revenue recognition from this project is expected to start in FY '28.

5. Question from Amit Dixit: What are the current and future levels of indigenization for the P-17 Alpha and upcoming projects?

   Answer: The indigenization level for P-17 Alpha is around 80-85%. For the Next-Generation Corvettes and P-17 Bravo, we anticipate reaching 85-90% as more systems become indigenized progressively over time.

6. Question from Harshit Kapadia: Could you share the order book breakup and its contribution from various segments?

   Answer: Our order book stands at Rs.21,700 crores, with 10 projects mostly in shipbuilding. Around 86% comes from defense projects, while 14% includes non-defense orders, with specialized vessels contributing 9% and exports about 5%.

7. Question from Harshit Kapadia: What is the strategy regarding the provision write-backs mentioned previously?

   Answer: We haven't factored in provision write-backs in Q1. We plan to assess this in the first half of H2, estimating a 50-50 split of the Rs.330 crore provision between FY '26 and FY '27.

8. Question from Sanjeev Zarbade: What is the strategy regarding increased subcontracting costs?

   Answer: The increase to Rs.235 crore in subcontracting is expected, with around 15% of sales allocated to it. This is normal due to current production demands and we do not foresee significant changes in this strategy moving forward.

9. Question from Sanjeev Zarbade: Is GRSE in contention for autonomous vessel projects announced recently?

   Answer: Yes, we are part of the Navy's push for autonomous vessels, including underwater platforms. Our involvement aligns with broader market developments in autonomous technology, and we aim to capture substantial opportunities.

10. Question from Sunil Shah: What is the anticipated concurrent shipbuilding capacity in the next few years?

    Answer: We aim to raise our capacity to 40 ships by 2029, with new facilities expected to support around 40 concurrent constructions through acquired land and a greenfield shipyard. Pipavav collaboration could enhance this further.