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Mazagon Dock Shipbuilders, the only firm in India that makes destroyers and submarines for the Indian Navy, will hit the market on September 29 (till Oct 01).
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Here are 13 key things that you should know before you subscribe.
Incorporated in 1934, Mazagon Dock Shipbuilders Ltd is the India's leading defence public sector undertaking shipyard under the Ministry of Defence. Mazagon Dock is primarily engaged in constructing and repairing warships and submarines for the MoD and other types of vessels i.e. cargo ships, multipurpose support vessels, barges and border outposts, tugs, dredgers, water tankers, etc. for commercial clients.
2) Business segmentation:
Its shipbuilding division undertakes building and repairing naval ships, and submarine heavy engineering division includes building, repairing, and refitting of diesel electric submarines.The company has a maximum shipbuilding and submarine capacity of 40,000 dead weight tonnage, and uses the facilities in Mumbai and Nhava. It’s currently executing orders for five Scorpene submarines—jointly developed by DCN of France and Navantia Spain. Its major customers are Indian Navy and Coast Guard.
3) Issue details & Valuations:
IPO Date: Sep 29, 2020 - Oct 1, 2020
Issue Size: 30,599,017 Eq Shares of ₹10
Face Value: ₹10 per equity share
IPO Price: ₹135 to ₹145 per equity share
Market Lot: 103 Shares
Listing At: BSE, NSE
Bid/Offer Opens On: Sep 29, 2020
Bid/Offer Closes On: Oct 01, 2020
Finalisation of Basis of Allotment: Oct 7, 2020
Initiation of Refunds: Oct 8, 2020
Credit of Shares to Demat Acct: Oct 8, 2020
IPO Shares Listing Date: Oct 12, 2020
4) Grey market premium
The unlisted stock is commanding a grey market premium of Rs 125-130, translating into an almost 90% premium.
5) Financials & Valuation:
Mazagon Dock’s revenue grew at an annualised rate of 9% through fiscals 2017-2020, while its operating and net profit fell 17% and 6%, respectively, during the period.
At the upper price band of Rs 145, Mazagon Dock issue is available at a P/E of 6.1x which is at a significant discount to its peers.
6) Peer comparison:
The company’s listed peers include Cochin Shipyard Ltd. and Garden Reach Shipbuilders Ltd.
7) Shareholding Pattern:
After the share sale, total promoter holding will fall to 84.83% from 100%, while the rest will be owned by the public.
The government has been paring its stake in defence enterprises—15% each in Hindustan Aeronautics Ltd. and Bharat Dynamics Ltd.—even as it aims to ramp up local manufacturing of such equipment. The central government, according to budget documents, aims to garner Rs 2.1 lakh crore through divestments in 2020-21.
8) Order Book:
Mazagon Dock’s current order book stands at Rs 54,074 crore—entirely from the Ministry of Defence and provides a revenue visibility for the next six-seven years. The company also expects the Indian government’s ‘Atmanirbhar Bharat’ plan to positively impact private and public shipyards as domestic manufacturing picks up.
As of now, Mazagon Dock has built 795 vessels, including 25 warships, 4 missile boats, 3 submarines, 6 Leander class frigates, 3 Godavari class frigates, 3 Shivalik class frigates, 3 corvettes, and 6 destroyers.
The company has zero debt.
10) Dividend Yeild:
The company has highest dividend yield of 7.4% among its peers Garden Reach Shipbuilders & Engineers Ltd (3.89 %) & Cochin Shipyard Ltd (5%).
Mazagon Dock has been paying dividend since last 15 years.
The net proceed from the IPO will be used towards following objectives;
• To carry out the disinvestment plan of 30,599,017 equity shares by selling shareholders constitutes 15.17% of pre-offer equity share capital.
• To achieve the benefits of share listing on the stock exchanges.
• India's leading public sector defence shipyard company.
• World class infrastructure facilities.
• Strategic location at Mumbai on the west coast of India.
• Strong order book and financial position.
• It is the only shipyard to build destroyers and conventional submarines to be used by the Indian Navy.
13) Key Risks:
- Non-compliance in certain SEBI guidelines owing to the nature of the business.
- Fully regulated under the supervision of the Ministry of Defence.
- The company or its technical collaborators may engage in certain transaction in or with countries or person that are subject to the U.S. and other sanctions.
- Unforeseen environmental costs.
- Delay of projects and costs/time overrun
Suggestion: Apply for only 'one lot' and Subscribe this issue for big listing gains as well as for long term investment.
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