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Cochin Shipyard IPO: Should You Invest?
Good revenue and profit figures reported over the years by the company plus its unique business model goes in favour of the investment option.
India's biggest public-run shipyard company is set to open its IPO issue on August 1, 2017. Here's a take on the investment option:
Company's business: As per the report of Crisil, the company is the largest state-run shipyard in the country with respect to dock capacity. In India, the company primarily caters to clientele in the defence sector whereas worldwide it caters to clients in the commercial sector. The company's primary area of business includes ship building, maintenance and repair. Also, Cochin Shipyard provides marine engineering training.
IPO objective: With an IPO issue, the company plans to raise Rs. 1,470 crore and fund its expansion plan worth Rs. 2800 crore which entails construction of larger and sophisticated ships. The company further aims to strengthen its business of ship repair.
Madhu S Nair, Chairman and Managing Director of Cochin Shipyard, said "Proceeds from the share-sale will be utilised by CSL to part-finance the setting up of an international ship repair facility at nearby Cochin Port Trust as well as a new dry dock, the firm's third, to facilitate the construction of larger ships and underwater repairs of rigs and semi-submersibles".
Details of the Issue: The issue will open on August 1 and close on August 3 and shall involve 33.984 million equity shares of Rs.10 each. The fresh issue will be of 2.2656 crore shares whereas the stake of Central government will total to 1.1328 crore shares. The price band of the issue shall be in the range of Rs. 424 and Rs. 432 per equity share. Minimum bid can be made for 30 shares and the stock shall be listed on both the exchanges.
For retail investors as well as employees of the company, a discount of Rs. 21 per share shall be given.
Company Financials: For the year ended March 2017, the company reported revenue of Rs. 2208.5 crores. Profit figure for the year stood at Rs.312.1 for the year ended March 2017. Basic EPS for the year ending March 2017 is Rs. 27.56 whereas last three years weighted EPS comes to be Rs. 23.38.
Reasons in favour of subscribing to Cochin Shipyard IPO:The company's revenue is reportedly increasing consistently. In the last 5 years, the company's revenue grew at a CAGR of 5%. Decent margins have been posted in the last 5 years of about 14-15%. Also unique business model also goes well for the investors to consider the IPO issue.
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