Mazagon Dock Shipbuilders

IPO Size

`443.69 Cr

Price Band

`135-145 Per Share

Minimum Lot Size

103 Share

Face Value

`10 Per Share

Employee Discount

NA

Retail Allocation

35%

Issue Open Date

29 Sep 20

Issue Close Date

01 Oct 20

Listing Date

12 Oct 20

About the Company:

Mazagon Dock Shipbuilders Limited is a Defence Public Sector Undertaking under ministry of Defence. It is one of the India's leading shipyards with a capacity to meet requirements of the Indian Navy. Mazagaon dock was first constructed in 1774 as a small dry dock, which was incorporated as a public limited company in 1934, before being taken over by Govt. of India in 1960. The shipyard builds warships and conventional submarines at its facilities in Mumbai and Nhava. Major customers for the shipyard include Indian Navy and Coast Guard. The company claims to be the India's only shipyard that builds destroyers and conventional submarines for the Indian Navy. The company is one of the ship builders for P17-A project for building next generation guided missile stealth frigates through collaboration with Fincantieri, Italy. The company has dropped the repair work of ships since 2016.

Outstanding Litigation:

S.No. 1 - Company 2 - Directors 3 - Promoters
Entity Name By the Company Against the Company By the Director Against the Director By the Promoter Against the Promoter
Criminal cases 25.9 - - - - -
Material civil cases 1,108.80 - - - - -
Taxation matters - 14,458.55 - - - -
Regulatory Procedings - 6.81 - - - -
Amt. (In Million Rs.) 1,134.70 14,458.55 - - - -

Financial Statements:

Income Statement FY20 FY19 FY18
Gross Operating Income 55353.07 52046.74 50276.29
Cost of Employee & Inventory 44189.46 40498.04 40156.28
Other Expenses 2907.34 3033.53 3000.29
EBITDA 8256.27 8515.17 7119.72
Depreciation 686.77 643.26 524.84
Interest 92.64 90.76 90.81
Exceptional Items 123.17    
Profit Before Tax 7353.69 7781.15 6504.07
Tax 3516.79 3077.31 2568.34
Profit After Tax 3836.9 4703.84 3935.73

Recommendation

As per CA Ajay Chouhan, SEBI Registered Research Analyst, recommendation is to 'Subscribe' but with a caution. The Magazon dock shipbuilder is the only shipbuilder that can built destroyers and conventional submarines. The shipbuilding division of the business is currently building four P15 B destroyers, four P-17A stealth frigates while the submarine division is engaged in building four Scorpene class submarine under transfer of technology from Naval group, France and a medium refit & life certification submarine. The listed peers have never been a decent investment bet for the investors but major cause of subscription comes from its financials. The company enjoys the tag of debt-free, 15% Return on Equity, good dividend yield and has strong order book. Moreover, the issue price is demanding 6.1x the P/E multiple at FY20 earnings much lower in comparison with the listed peers (Garden Reach Shipbuilders and Cochin Shipyard are trading at 12.2x and 6.6x respectively).

Promoter of the Company

The promoter of the company is Government of India.

Peer Comparison

Indian shipbuilding business is not restricted in the hands of public sector only but many private players have been involved in building and repairing shipbuilding and submarine division. In the public sector space, the company will face competition from Garden Shipyard, Goa shipyard, Cochin shipyard and Hindustan shipyard out of which Garden shipyard and Cochin shipyard are listed while in the private sector, Reliance Defence and Engineering Limited, L&T Shipyard, Bharti Shipyard, ABG Shipyard and Tebma Shipyard are involved in the similar business.

Objectives of the Issue

Offer for Sale

The object of the Offer for Sale is to allow the shareholders to sell an aggregate of up to 30,599,017 Equity Shares held by them. The company will not receive any proceeds from the Offer for Sale. Offer for Sale Size is of 30,599,017 Equity Shares making it an amount of Rs. 443.69 crores at the upper price band. The sole purpose of the IPO is to achieve listing gains through disinvestment.