Background
We have been assigned to valuate a pipe laying barge which has become an NPA. The said barge was about 15 years old and lying unused for a long time.
This barge is used to lay pipes in under the sea. Most of the machinery on the barge were deteriorated and hull repairing was also to be carried out.
Challenges for Valuation
- Renewal of all statutory licenses and certifications to operate.
- Slump in general economy, in particular oil & gas exploration sector.
Problem leading to impairment in value
- Any bidder who purchases this barge has to deal with expired statutory approvals.
- Deteriorated equipment
- Cost of refurbishment.
Approach
Considering that this barge would not find ready buyers in the open market, a valuation approach had to be adopted to arrive at valuation which could be practically used to fetch maximum value for the lenders.
Also Read, Valuation of Steel Plant
Solution Offered
- Valuation under the consideration that this barge can be sold “as is where is” basis.
Alternatively, - Valuation of the barge on “piece meal” basis i.e equipment installed in the barge and hull are disposed separately.
This approach facilitated the lenders to take a decision to dispose this barge in the best possible manner to recover debts.
FAQs
1. Why is the valuation of a pipe-laying barge important?
It is essential for financing, insurance coverage, compliance, and determining fair market value during transactions or restructuring.
2. Which methods are used to value a pipe-laying barge?
Common methods include the replacement cost approach, market comparable approach, and income approach based on projected charter revenues.
3. How often should a pipe-laying barge be valued?
At least once every 2–3 years, or immediately before financing, insurance renewal, M&A transactions, or impairment testing.
4. What factors influence the valuation of a pipe-laying barge?
Key factors include vessel age, build quality, operational efficiency, charter rates, regulatory compliance, and maintenance history.
About the author:
Sahil Narula
Sahil Narula is the Managing Partner at RNC Valuecon LLP and a Registered Valuer with IBBI. He brings over a decade of experience in Valuation Services, Corporate Finance, and Advisory, having led numerous complex assignments under the Insolvency & Bankruptcy Code, 2016, Mergers & Acquisitions, Insurance, and Financial Reporting.
He is a regular speaker at national forums (ASSOCHAM, CII, ICAI, IBBI, Legal Era) and currently serves as Co-Chairman of ASSOCHAM’s National Council on Insolvency & Valuations and a member of CII’s Task Force on Insolvency & Bankruptcy.
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