China Was Once Buying Up Sri Lankan Ports. Now It’s India’s Turn.
Nearly 20 years after China stirred fears about “debt trap diplomacy” with its construction and takeover of the Hambantota Port in Sri Lanka, India is stepping into the fold, acquiring a majority stake in Sri Lanka’s largest commercial shipyard.
Last month, Mazagon Dock Shipbuilders Limited (MDL), India’s leading defense public-sector undertaking, responsible for the construction and repair of Indian warships, acquired a majority 51 percent stake in Colombo Dockyard PLC (CDPLC). CDPLC is Sri Lanka’s largest commercial shipyard, located inside Colombo Harbor on one of the world’s busiest east-west shipping lanes.
The transaction, valued at $26.8 million, marks the first international acquisition ever made by an Indian shipyard, public or private. It also suggests India’s strategic calculus in its own maritime neighborhood has structurally evolved.
CDPLC is not a greenfield project. It is a functioning, 52-year-old commercial yard with four graving drydocks, capacity to handle vessels up to 125,000 deadweight tons, and a client base spanning Asia, the Middle East, and Africa. In November 2025, before the acquisition closed, CDPLC secured the largest shipbuilding contract in its history (valued at $150 million) from France’s Orange Marine for two advanced cable-laying vessels. The yard services more than 200 vessels annually.
Its location matters, as over a third of global bulk cargo and two-thirds of the world’s oil shipments pass through the Indian Ocean. MDL now controls the shipyard infrastructure at that crossroads, with Indian nominees reconstituting the board, and the Dredging Corporation of India signing an MoU with CDPLC for drydocking and ship repair services.
The acquisition is especially interesting as it shows how India’s own strategic calculus has evolved over two decades. The context for this acquisition dates back to the mid-2000s, when the Rajapaksa government in Colombo sought financing from India and the United States to develop Hambantota’s deepwater port.
At the time, both nations declined, as the financial viability of the project was questioned. China stepped in, providing over $1 billion in construction loans, with over $300 million in Phase I and another $808 million in Phase II. The new Chinese-constructed Hambantota Port proved commercially unviable under Sri Lankan management.
In 2017, unable to service its foreign debt, Colombo signed a 99-year lease and concession agreement with China Merchants Port Holdings for $1.12 billion, giving away 70 percent stake in the 1.4 billion port along with operating rights.
By contrast, the CDPLC acquisition is structured more like a business acquisition. Japan’s Onomichi Dockyard, majority shareholder in CDPLC since 1993, exited in December 2024 amid its own financial pressures and after CDPLC had posted losses of $38.3 million in 2023. Facing the potential default on a shipyard in which the Sri Lankan government itself holds a 49 percent stake, Colombo formally requested that New Delhi encourage Indian investors to consider the asset. MDL was selected based on its shipbuilding record and financial strength. The acquisition was executed through a transparent, phased process under Sri Lanka’s Takeovers and Mergers Code, with the incumbent CEO retained and no sovereign debt involved.
One model built a dependency by financing at above-market rates for a commercially questionable project. The other entered through an equity acquisition at the host country’s invitation, at a functioning yard, via a publicly listed stock-exchange process.
The framing of great power competition in small states often obscures the agency of the concerned small state. In this transaction, it was Sri Lanka that notably invited India. The current Dissanayake government in Colombo came to power on the platform of non-alignment, and it’s telling that India was first choice for the shipyard.
Further, in April 2025, India and Sri Lanka signed their first-ever formal Defense Cooperation MoU, and Sri Lankan President Anura Kumara Dissanayake publicly assured that Sri Lanka “will not permit its territory to be used in any manner inimical to the security of India.”
MDL is hoping to increase 20 percent revenue and profit growth at CDPLC in the current financial year, despite recent losses and Sri Lanka’s still-fragile economic recovery. Whether MDL can turn around CDPLC remains to be seen, and whether this transaction reflects a genuine shift in India’s strategic thinking on acquiring assets abroad is a question only sustained follow-through will answer.
What it does establish is a proof of concept. A defense ministry-owned Indian company, deploying commercial capital through a transparent legal mechanism, has secured controlling interest in strategically located maritime infrastructure at the host country’s request.
China spent over $1 billion in construction loans to build a port on a secondary shipping lane that then required a 99-year lease to a Chinese state owned enterprise to stay solvent. India paid $26.8 million for a controlling stake in a functioning yard at the region’s primary transshipment hub. The return on strategic investment per dollar spent is not comparable. India has demonstrated it can compete for maritime infrastructure through means that leave the host country’s sovereignty intact and its government as a willing partner.
The Indian Ocean has no shortage of distressed strategic assets: financially stressed yards, ports, and logistics infrastructure in small states that cannot sustain them independently. China has historically been the lender willing to step in when others walked away. This transaction suggests India is developing both the will and the commercial tools to enter that space. Whether New Delhi treats Colombo Dockyard as a template or an exception is the more consequential question.
