By Ishara Gamage Courtesy Ceylon Today

In a move that could reshape Sri Lanka’s maritime industry, India’s State-owned Mazagon Dock Shipbuilders Ltd (MDL) is in advanced negotiations to acquire a controlling stake in financially troubled Colombo Dockyard PLC (CDPLC), multiple sources familiar with the matter confirmed to Finance Today.

The deal, which centres on Japan’s Onomichi Dockyard Co. Ltd selling its 51% stake in CDPLC, could see a binding Memorandum of Understanding (MoU) finalised by the end of April. If successful, the acquisition would mark a significant strategic shift for Colombo Dockyard—Sri Lanka’s flagship shipbuilder—and reinforce India’s growing influence in the region’s maritime sector.

Colombo Dockyard, a publicly listed entity on the Colombo Stock Exchange (CSE), has been grappling with severe financial distress. Its latest audited financials reveal a staggering loss of Rs 2.48 billion for 2024, with total liabilities ballooning to Rs 38.28 billion. The company’s precarious state forced the CSE to move its shares to the Watch List in June 2024 after auditors flagged concerns about its ability to continue as a going concern.

Despite these challenges, CDPLC remains a key player in ship repairs and harbours ambitions to expand into high-value shipbuilding and offshore engineering. Its strategic location in Colombo’s port and potential expansion into Trincomalee and Hambantota make it an attractive asset for foreign investors.

Mazagon Dock, a defence shipbuilder under India’s Ministry of Defence, has emerged as the frontrunner after earlier bids from a UAE-based shipyard and two local players fell through, sources said. The UAE proposal stalled due to unresolved policy conditions requiring Sri Lankan government endorsement, while the domestic bidders failed to demonstrate sufficient financial and technical capacity,” sources said.

MDL’s strong financial position – bolstered by recent profits and dividends – and its existing ties to CDPLC give it a competitive edge. Nearly 200 Indian subcontractors are already working at Colombo Dockyard, providing Mazagon with operational familiarity. Known as the Ship Builder to the Nation,” MDL specialises in warships and submarines, but this acquisition would mark its first major foray into commercial shipbuilding abroad.

The deal aligns with India’s broader regional strategy, particularly its efforts to counterbalance China’s growing presence in Sri Lanka’s infrastructure and ports. For Sri Lanka, the infusion of Indian capital and expertise could revitalise CDPLC, attract foreign direct investment, and create jobs in the maritime sector.

However, the move has sparked mixed reactions. Trade unions have raised concerns over job security and potential shifts in management, while maritime experts and senior engineers view the partnership as a necessary step to stabilise the  listed company.

Onomichi Dockyard, CDPLC’s majority shareholder, has been seeking an exit since terminating its management agreement and withdrawing its nominee directors earlier this year. The remaining board members engaged a financial adviser to evaluate potential buyers, with Mazagon now being the recommended choice.

Other key shareholders include Sri Lanka’s Employees’ Provident Fund (16.34%), Sri Lanka Insurance Corporation (9.92%), and the Sri Lanka Ports Authority (3.04%). While the final decision rests with Onomichi, sources indicate that negotiations are progressing swiftly, with an MoU expected by month’s end.

In a corporate disclosure dated 4 April, CDPLC’s board urged the public to disregard speculative media reports, emphasising that no final agreement has been reached. The ultimate decision on the selection of the party to whom Onomichi will sell its shares will be Onomichi’s prerogative,” the statement read.

Key Stats:

= CDPLC Market Cap (17th April 2025): Rs 5.25 billion

= Share Price Range: Rs. 70.70 – Rs 75.60

= Major Shareholders: Onomichi (51%), EPF (16.34%), SLIC (9.92%)