Why has Mazagon Dock bought controlling stake in Sri Lanka's Colombo dockyard?

Mazagon Dock Shipbuilders Ltd has acquired a stake in a Sri Lankan dockyard.

The Indian government-run firm bought a controlling interest in Colombo Dockyard PLC (CDPLC).

But what do we know about the deal? And why has Mazagon Dock Shipbuilders bought a stake in the dockyard in Colombo?

Let’s take a closer look:

What we know

First, let’s take a brief look at Mazagon Dock Shipbuilders.

Mazagon Dock Shipbuilders is India’s biggest warship builder.

It was incorporated as a public firm in 1934.

Headquartered in Mumbai, it is chaired by ex-Indian Navy captain Jagmohan.

It has a market capitalisation of $15.12 billion (Rs 1,29,254 crore).

It has a turnover of around $1.13 billion ( Rs 9,660 crore).

Mazagon Dock Shipbuilders bought a 51 per cent stake in the CDPLC.

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CDPLC is Sri Lanka’s biggest dockyard and a publicly-listed firm.

Located within the port of Colombo, it has been in business for over five decades.

The deal was made in cash for $52.96 million (Rs 452 crore).

“The Board of Directors of Mazagon Dock Shipbuilders Limited inter alia considered and approved the acquisition of a controlling and substantial stake of Colombo Dockyard PLC by way of an investment not exceeding $52.96 million (approximately Rs 452 crore) considering prevailing exchange rate) in the securities of CDPLC through a combination of primary subscription and secondary acquisitions from the shareholders of CDPLC,” a statement from Mazagon Dock Shipbuilders read.

The CDPLC has been in poor financial health for a while.

The firm saw a loss of Rs 70 crore in 2024.

Onomichi Dockyard, which had controlling interest of CDPLC, approached both the Sri Lankan and Japanese governments for relief.

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Onimichi previously owned a 51 per cent stake in CDPLC.

Why has it made this deal?

Experts say the move is aimed at countering China’s growing footprint in Sri Lanka as well as the IOR.

China owns an 85 per cent stake in Hambantota International Port Group (HIPG).

It also has a 99-year lease on Sri Lanka’s Hambantota International Port (HIP).

Experts also say the deal gives MDL a foothold into the Indian Ocean Region (IOR).

Despite the CDPLC’s recent financial difficulties, the port’s strategic location and history could make it an invaluable asset for MDL.

After all, the CDPLC is the Sri Lankan government’s leading shipbuilder and ship repair firm.

It services over 200 ships every year – and can handle vessels up to 125,000 DWT.

It also has clients and government contracts across Asia, West Asia, and Africa.

It is known for building complex offshore support vessels, cable-laying ships, tankers, and patrol boats for clients across Japan, Norway, France, the UAE, India, and several African nations.

It is Sri Lanka’s only shipyard which offers an integrated portfolio of services-ranging from in-house design and construction to advanced repair and marine steel fabrication.

The move also helps out Sri Lanka.

This because the Sri Lanka Employees’ Provident Fund owns 16 per cent of the CDPLC, its insurance fund owns around 9 per cent and the ports authority owns five per cent.

The CDPLC going under would have also meant the loss of jobs for those employed at the dockyard.

It could also be the first step towards MDL becoming a global player in shipbuilding.

This is the first time an Indian shipbuilding firm, either state-owned or private, has bought a shipyard overseas.

“With this, MDL begins its transformation from a domestic shipbuilder to a regional maritime player with global ambitions," Mazagon Dock Shipbuilders Limited wrote on its social media account on X.

“Aligned with Maritime Amrit Kaal Vision 2047, this move strengthens India’s regional maritime influence and expands MDL’s global reach,” it added.

“This is not just an acquisition, it is a gateway. It marks our first international foray and reflects our ambition to transform into a global shipbuilding enterprise. With Colombo Dockyard’s strategic location, proven capabilities, and strong regional presence, this step will position MDL as a key player in South Asia and lay the foundation for our emergence as a global shipyard,” MDL chairman Captain Jagmohan said.

“With this acquisition, MDL positions itself not only to strengthen its presence in the region (IOR) but also to enhance its competitiveness in the global shipbuilding and marine engineering arena,” an MLD spokesperson added.

With inputs from agencies