Behind Mazagon Dock’s Lanka deal: Eye on China, Colombo bailout plea

CDPLC, listed on the Colombo Stock Exchange, is the flagship of Sri Lanka’s maritime industry and serves a wide spectrum of commercial and governmental clients across Asia, Middle East and Africa. Officials from both the Sri Lankan and Indian governments worked overtime to conclude this strategic deal on Sri Lanka’s largest shipyard, said sources.

According to officials, CDPLC has been in dire straits for some time. “Since it is 51% owned by Onomichi Dockyard Company Ltd, they initially sought relief from the Government of Japan, and thereafter from the Government of Sri Lanka. However, neither government could provide any financial relief to them,” an official said.

At the end of November 2024, Onomichi Dockyard exited from CDPLC. At this point, officials said, the Sri Lankan government requested the Indian government to encourage Indian investors to look at Colombo Dockyard.

“A default by CDPLC would be serious for the Sri Lankan government as, out of the remaining 49% stake, around 16% is owned by their Employees’ Provident Fund. Sri Lanka’s insurance fund owns around 9%, Sri Lanka Ports Authority 5% and so on. A default would also have brought great financial distress and uncertainty for the workers employed in Colombo Dockyard,” the official said.

“A few companies, with strong credentials, expressed an interest in CDPLC. As per the due process followed for a listed company, MDL was shortlisted in view of its prowess in shipbuilding as well as its financial strength. Both these aspects are key for the turnover of Colombo Dockyard,” the official said.

MDL’s net worth, represented by its market capitalisation, is approximately $15.12 billion as of June 25, 2025. The company is almost debt-free. It has reported a turnover of approximately $1.13 billion, according to officials.

MDL’s decision is expected to significantly change the shipbuilding and ship repair landscape in the region. With CDPLC its first international venture, it is seen as a major milestone in the company’s transformation from a purely domestic shipbuilder into a regional maritime player with global aspirations.

“It demonstrates the appetite by Indian industry, including PSUs, to acquire strategic assets overseas and to build investment-led partnerships,” the official said.

On the other hand, MDL’s controlling stake will serve as a force multiplier for CDPLC, said officials. MDL will bring an order pipeline for CDPLC from both domestic and international market for repairs, refits and new builds, they said.

The move is expected to boost the existing revenue stream from the Indian sub-continent’s ship repairs. A number of orders for which potential clients are approaching MDL can be diverted to CDPLC, the official said.

On sharing of expertise, the official said both the shipyards possess enormous expertise garnered over the past decades. “This strength can be leveraged for mutual benefit and can result in a win-win scenario,” the official said.

The resources available at both the yards can be shared for mutual benefit. “For instance, the detailed design capabilities possessed by both the yards can be leveraged for projects at MDL as well as at CDPLC,” the official said.

CDPLC, which is currently under financial distress, can benefit from MDL’s strong financial capabilities, thereby expediting the turnaround process. CDPLC will now be in a position to secure contracts which it missed earlier due to poor financial health, the official said.

In a regulatory filing, the Mumbai-headquartered shipbuilder said the proposed acquisition would enable the company to strengthen its position in the ship repair and shipbuilding industry by unlocking operational synergies, enhancing research development capacities and expanding market reach. “It supports the company’s long-term growth vision in the shipbuilding and ship repair industry,” it said.

The move comes amid concerns in New Delhi over Beijing’s persistent attempts to expand its strategic influence in the island nation.

China Merchants Port Holdings holds an 85% stake in Hambantota International Port Group (HIPG) and secured a 99-year lease on the Hambantota International Port (HIP) in Sri Lanka in 2017. In July 2024, CDPLC and HIPG signed an agreement to set up a full-fledged workshop at HIP.