Mumbai: The department of investment and public asset management (DIPAM) has appointed investment banks for the initial public offering (IPO) of state-owned Mazagon Dock Shipbuilders Ltd (MDL), two people aware of the development said.
MDL caters to the nation’s strategic requirements, making ships for the navy and other buyers. It was established in 1934. In 1960, the government of India took over the company.
The proposed IPO is likely to be a pure offer for sale and could see the government divest a minimum 10% of its stake, said one of the persons cited above on condition of anonymity as he is not authorized to speak to the media.
“The planned IPO will likely see the government sell anywhere between 10-15%. Presentations for hiring bankers were held a couple of week ago and the government has appointed four banks, Yes Securities, Edelweiss, Axis Capital and JM Financial to manage the share sale,” this person added.
According to a second person, who also spoke on the condition of anonymity, the IPO could fetch the government Rs1,000-1,500 crore.
“Very few defence stocks are available in the market; such as Bharat Electronics Ltd and BEML Ltd. Given this shortage, one can expect a strong investor appetite for Mazagon Dock’s IPO,” he added.
A spokesperson for DIPAM declined comment on the development. An email sent on Tuesday to Mazagon Dock was not answered. “As a matter of policy, YES Securities does not comment on company specific information,” a spokesperson for the firm said in an email. Emails sent to Axis Capital, JM Financial and Edelweiss did not elicit a response.
Mazagon Dock has made ships for other customers in India and abroad and also supplied rigs and other offshore drilling related equipment to state-owned oil and gas company Oil and Natural Gas Corp. Ltd (ONGC).
MDL is currently working on three major warship building projects and one submarine project.
In 2015-16, the shipyard reported a revenue of Rs4,121.65 crore, as against a revenue of Rs3,592.6 crore the previous year. In 2015-16, it reported a profit of Rs637.82 crore, as compared to Rs491.59 crore the previous financial year. The company had a net worth of Rs2,846 crore as of 31 March 2016.
Apart from Mazagon Dock, the government has also lined up the initial share of another shipyard, Cochin Shipyard Ltd. Cochin Shipyard filed its draft IPO papers with the stock market regulator in March.
The government also intends to list another state-owned defence equipment maker, aerospace company Hindustan Aeronautics Ltd.
The government plans to raise around Rs72,500 crore this fiscal through divestments.