India’s Mazagon Dock Shipbuilders to acquire Colombo Dockyard in landmark deal

India’s state-owned Mazagon Dock Shipbuilders Limited (MDL) is set to acquire a controlling stake in Sri Lanka’s largest maritime facility, the Colombo Dockyard PLC (CDPLC), marking the first-ever international acquisition by an Indian shipbuilding firm.

Valued at US$52.96 million, the deal involves purchasing a 51 percent equity stake previously held by Japan’s Onomichi Dockyard, which had announced its decision to divest in December due to its own financial pressures. MDL confirmed in a stock exchange filing that it has entered into an agreement with Onomichi and is now awaiting final regulatory and statutory approval.

If completed, the acquisition would turn Colombo Dockyard into a subsidiary of India’s top naval and commercial shipbuilder, potentially granting New Delhi a new strategic location in the Indian Ocean.

Colombo Dockyard’s financial struggles

Founded in 1974 and located within Colombo Harbour, Colombo Dockyard has long served as Sri Lanka’s premier shipbuilding and repair facility. The yard has built vessels for clients from Japan, Norway, France, the UAE, and across Africa. Its integrated service model, ranging from in-house design to advanced repair, made it one of the region’s most versatile shipyards.

Japan’s Onomichi Dockyard had been its principal stakeholder since 1993. However, the firm has faced mounting financial troubles in recent years. In 2023, CDPLC posted a record loss of US$38.3 million, in part due to contracts agreed prior to the COVID-19 pandemic at unsustainable prices. With the Sri Lankan government holding a 49 percent stake, the loss proved to be a crisis not just for the yard, but for the state itself.

An asset for India

For MDL, the acquisition is a major milestone in its efforts to expand beyond India and into the global shipbuilding market. With a current order book of US$3.7 billion, MDL aims to reach US$10 billion by 2026.

The firm, which is overseen by India’s Ministry of Defence, has built 30 warships and 8 submarines for the Indian Navy since 1960. MDL also services US Navy vessels under the Master Ship Repair Agreements (MSRAs), which authorise Indian shipyards to maintain and repair US military supply ships.

MDL stated that the acquisition gives the company “a strategic foothold in the Indian Ocean Region - a key maritime corridor.”

“With this, MDL begins its transformation from a domestic shipbuilder to a regional maritime player with global ambitions," MDL wrote on X. “Aligned with Maritime Amrit Kaal Vision 2047, this move strengthens India’s regional maritime influence and expands MDL’s global reach.”

Speaking to Moneycontrol, MDL’s managing director Captain Jagmohan called the acquisition “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 is set to leverage Colombo Dockyard’s regional base and client network, while promising to revitalise the shipyard through access to Indian technology, supply chains, and markets. As one MDL spokesperson put it, the move will “enhance its competitiveness in the global shipbuilding and marine engineering arena.”

“This is a great opportunity to resurrect the joint shipbuilding and repair options,” said Commodore R.S. Vasan (retd), director general of the Chennai Centre of China Studies. “That MDL and the Indian government are thinking globally and acting regionally is encouraging.”
“For India to claim it is a maritime nation and to reclaim its past glory, it has to expand the scope of such outreach.”

Growing India–Sri Lanka ties

The acquisition comes amid a broader deepening of Indo–Sri Lankan ties under Anura Kumara Dissanayake. During a visit to New Delhi in December, Dissanayake signed a “Joint Vision Agreement” with Indian Prime Minister Narendra Modi to foster investment-led growth.

This was followed by Modi’s visit to Colombo in April, during which the two countries signed several bilateral agreements worth US$1.2 billion. The most notable was a five-year defence pact, which has stirred backlash amongst Sinhala nationalist circles.

Yet, an Indian Express article quoted Indian officials as saying, “The Sri Lankan government requested the Indian government to encourage Indian investors to look at Colombo Dockyard.” 

The article added that officials from both governments “worked overtime to conclude this strategic deal on Sri Lanka’s largest shipyard.”
A senior official connected with the Colombo dockyard said the Sri Lankan government had actually requested the Indian government to encourage investments in the dockyard.

“Our Colombo dockyard has been suffering huge losses for years now. MDL was shortlisted based on its financial strength and its track record in shipbuilding,” the official told THE WEEK on condition of anonymity. “It will generate revenue continuously. We believe MDL can route new construction contracts to Colombo. The revenue generation will happen through repair, refit and these construction contracts.”

Southern backlash 

^{An FSP protest in Colombo earlier this year.}

Despite the optimistic framing by both governments, the deal has not been without controversy in Colombo.

The Frontline Socialist Party (FLSP) has raised alarms about the implications for national sovereignty and economic transparency. “This would strip the government of majority control over a strategically vital maritime institution,” said FLSP spokesperson Pubudu Jagoda.
The party also expressed concern over Indian control of critical national infrastructure, echoing long-standing anxieties over Indian influence.

In response, government officials have insisted that the deal protects both national and economic interests. Deputy Minister of Youth Affairs Eranga Gunasekara said the investment would generate long-term benefits, including job retention and economic stability. 
“The deal will address Sri Lanka’s long-term benefits, especially for workers and local industries connected to the port,” he said.