Mazagon Dock Shipbuilders IPO Opens On 29 Sept: Should You Subscribe?

About the company

Mazagon Dock Shipbuilders is a public sector undertaking (PSU) under the Ministry of Defence, with a shipbuilding and submarine capacity of 40000 DWT, according to a CRISIL report. It is in the business of construction and repair of warships and submarines for use of the Indian Navy and the other vessels of commercial clients.

It is wholly owned by the Government of India and was given the "Mini Ratna-I" status in 2006.

Some of the vessels built and delivered by Mazagon Dock Shipbuilders in the past include six Leander class frigates, three Godavari class frigates, three corvettes, four missile boards, six destroyers, four submarines and three Shivalik class frigates for the Defence Ministry for the use by the Indian Navy and constructed and delivered seven offshore patrol vessels to the Indian Coast Guard.

As of July 2020, the company has an order book of Rs 54,074 crore for its shipbuilding and submarines and heavy engineering, including three major shipbuilding projects and two submarine projects, all for the Ministry of Defence.

For the financial year 2019-20, the company posted a 7.9 percent growth in its revenue at 4,977.65 crore and has consistently reported profits for the last four financial years.

Mazagon Dock Shipbuilders IPO details

Dates: 29 September to 1 October 2020
Price band: Rs 135-145 per share
Lot size: 103 shares
Minimum lots to bid: 1
Maximum lots that can be bid on: 13
To be listed on: BSE, NSE
Expected listing date: 12 October

Shares on offer: Promoter of the company- the Government of India- is looking to sell 15.17% of its 100% stake in Mazagon Dock Shipbuilders through the IPO. 3,05,99,017 shares will be on offer, of which, 50% is reserved for QIBs (qualified institutional buyers), 15% for non-institutional investors and 35% for retail investors.

The company aims to raise Rs 413 crore at the lower price band and nearly Rs 444 crore at the upper price band.

Employee reservation: up to 3,45,517 shares.

Object of the issue: As part of the government's annual disinvestment target. The company will not receive any proceeds from the sale of stake as all the funds will go to the government, that is the selling shareholder.

Should you subscribe?

As per a review on the IPO by Dilip Davda, a contributing editor at Chittorgarh.com, Mazagon Dock Shipbuilders "has been a profit-making and dividend distributing PSU under MoD. It has orders worth Rs. 54000+ crore on hand which are to be completed in 6 to 7 years. Its financial track record so far has been indicating sustained top line with ups and down in PAT due to certain provisioning. Being a maiden IPO from a shipyard that builds destroyers and submarine is sure to catch fancy post listing."

He has given a "subscribe" rating to the IPO saying that "investors may consider investment for the medium to long term perspective in this reasonably priced issue."

Analysts at Geojit Financial Services also have a ‘subscribe' rating on the IPO, considering strong technological and execution capabilities, healthy order book and attractive dividend yield.