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The Centre will sell a 15.17 per cent stake, or 30.59 million shares, through an initial public offering (IPO) in India’s biggest warship builder Mazagon Dock Shipbuilders Ltd at a price band of ₹135-145 a share to raise as much as ₹444 crore.
The share sale will be held between September 29 and October 1, and the proceeds from the offer will go entirely to the government.
The IPO price has been set lower than the prevailing market price of two other state-owned listed shipyards — Cochin Shipyard Ltd and Garden Reach Shipbuilders & Engineers Ltd (GRSE), which are trading at ₹311 and ₹172 a share, respectively.
Mazagon Dock currently has an order book for constructing four ‘P-15B’ destroyers, four ‘P-17A’ stealth frigates, repair and refit of a ship, four Scorpene class submarines, and the medium refit and life certification of a submarine for the Indian Navy, worth ₹54,074 crore — all of which were secured on nomination basis (without a tender).
The order book is significantly higher than that of both Cochin Shipyard and GRSE, raising a question mark over the rationale in pricing the IPO price below these two shipbuilders.
Currently, Mazagon Dock is permitted by the government to keep a profit margin of 7.5 per cent on orders secured on nomination basis. This is likely to be raised to 8 per cent in the new Defence Procurement Procedure (DPP) being worked out by the Ministry of Defence, said Sanjeev Singhal, Director - Finance, Mazagon Dock.
‘Attractively priced’
Bankers managing the share sale said that the stock has been “attractively priced to draw investor interest across all categories.”
“While pricing, it has been kept in mind that we derive value both for the government as well as the investors. We would also like to have a good post-listing performance of the stock,” said Alok Pande, Joint Secretary, Department of Investment and Public Asset Management (DIPAM).
Mazagon Dock will be the third PSU to be listed after Cochin Shipyard and GRSE.
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