The Central government has called off plans to sell shares in India’s biggest warship builder, Mazagon Dock Shipbuilders Ltd, through an initial public offering (IPO) in the wake of low demand for shipbuilding stock.

The IPO was slated to hit the market this month.

“The IPO is not going to be held in the near future,”, a government official briefed on the plan said. “All the five merchant bankers unanimously said there is no demand in the market for the shares when it was about to be launched in September. So, we had to defer it,” he added.

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The move to shelve the IPO comes in the backdrop of troubles facing shipbuilders in the country. Two of India’s listed shipyards – ABG Shipyard Ltd and Bharati Defence and Infrastructure Ltd – collapsed after being weighed down by debt and were liquidated by the National Company Law Tribunal (NCLT) under India’s bankruptcy law.

Reliance Naval and Engineering Ltd, also listed, is fighting financial and operational creditors, to save the firm from being admitted to NCLT under the Insolvency and Bankruptcy Code (IBC).

Cochin Shipyard Ltd and Garden Reach Shipbuilders and Engineers Ltd (GRSE) are the only state-run shipyards to be listed.

The IPO of shares in Mazagon Dock was slated to hit the market after the share sale in Garden Reach Shipbuilders and Engineers in September 2018.

Both Mazagon and GRSE are defence public sector undertakings operating under the administrative control of the Defence ministry. Cochin Shipyard comes under the administrative control of the shipping ministry.

The GRSE share sale was hit by a market slide, forcing the government to extend the sale period and reduce the price band. Eventually, the IPO was bailed out by some state-run banks who bought bulk of the shares on offer.

Mazagon Dock, India’s only shipyard to build destroyers and conventional submarines for the Navy, was expected to be a big draw among investors looking to benefit from the government-funded naval shipbuilding program estimated worth thousands of crores.

The yard delivered ‘INS Khanderi’, the second of the six Scorpene Class submarines it is building for the Indian Navy, on Saturday.The first submarine named ‘INS Kalvari’ was commissioned into the Indian Navy last September.

The third submarine named ‘INS Karanj’ is currently undergoing sea trials and the fourth is getting ready to be launched.

The balance two submarines are at various stages of outfitting. The last of the submarines will be delivered by 2022.

Mazagon Dock is building the submarines under a transfer of technology agreement with Naval Group of France.

Mazagon has also entered the submarine repair business in 2018 by clinching a Rs 1,100 crore refit deal from the Indian Navy to overhaul its Shishumar Class non-nuclear diesel electric submarine named INS Shishumar.

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