Accumulate Dredging Corporation stock for long term gains

The dredging industry is growing on account of increasing maritime sector requirement where over 120 million cubic metres of annual dredging is being carried out at major ports and dockyards in the country. The Dredging Guidelines issued last year envisages that dredging activity should reach a target of 3 billion cubic metres over the next 10 years. This demand would largely come from capacity augmentation plans at existing as well as upcoming greenfield ports. In the next few years, most of the key ports are expected to deepen and widen their navigational channels to attract deep draft vessels. Recently, the Ministry of Ports, Shipping and Waterways has announced plans to take up a dredging project worth Rs 3 billion to increase Cochin port’s draft depth to 18 metres to help the port dock larger ships. Besides, the increasing requirement for land reclamation and the government’s plans to develop inland waterways as an alternative mode of transport will offer considerable dredging opportunities. The Dredging Corporation of India is a MiniRatna public sector unit providing dredging services for seaports exclusively in the country. It is a pioneer organization in the field of dredging and maritime development and is fully equipped to offer the complete range of dredging and allied services. The company helps to ensure continuous availability of the desired depths in the shipping channels of the major and minor ports, Indian Navy, Fishing harbours and other maritime organisations. It also helps in the deepening of existing harbours and provide dredging maintenance for the upkeep of the required depths at various ports along the 7,500 km coastline of the country. The main seaports which the company does business with are Visakhapatnam port, Haldia, Kandla, Cochin and Ennore port. Every port or harbour is designed with certain designed navigable depth for the safe entry and exit of ships.
But this depth generally decreases due to deposition of sediments and other material during a course of time and to restore its depth and remove the accumulated material is inevitable for all the ports and harbours. This process of removing the accumulated material is called “Maintenance Dredging” and Dredging Corporation is fully equipped to cater to this requirement in all the major ports of India. The process of raising the land level to create a artificial land either just below or adjacent to water bodies is called “Reclamation”. The fill material is generally used from the adjacent water bodies so as to improve the depth in the water bodies as well as to use for the creation of land.
The coastal line in the beach is subject to deposition and erosion of sediments due to various reasons. However if the rate of erosion is more than rate of deposition, it is necessity to replace the quantity of erosion to maintain the coastal line intact. Dredging Corporation does all the process of land reclamation. The company reported Q3FY23 standalone financial numbers with Net Sales at Rs 371.32 crore in December 2022, up 54.69% from Rs 240.04 crore as against quarter for December 2021. The EBITDA climbed to Rs 62.07 crore in December 2022, up 37.48% from Rs 45.15 crore in December 2021.Going forward, the outlook remains positive for the dredging industry with the upcoming 22 greenfield ports and brownfield expansion works at the existing non-major ports to offer huge opportunities for the industry. The Dredging Corporation stock currently quoting at Rs 357 can be accumulated for long term investment gains..
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.