Bharati Shipyard has strengthened its position as the top shipbuilder in the country by striking its second deal in less than a year and once again beating its close rival ABG Shipyard to the finish line. It is acquiring 51% stake in ICICI Ventures-backed loss-making Chennai-based Tebma Shipyards for Rs 75.75 crore, valuing the firm at Rs 150 crore ($33.5 million).
Bharati Shipyard will subscribe to fresh equity at a price of Rs 19.20 per share expanding the post-issue equity capital base of Tebma to Rs 77.36 crore from the existing Rs 7.78 crore. Post issue, ICICI Venture’s stake is expected to dilute to around 26%.
At present, ICICI Ventures holds 53%, original promoters K Balasubramanian owns 4.93% with the rest held by the public.
PC Kapoor, managing director, Bharati Shipyard said, “This significant acquisition of Tebma Shipyards is of strategic importance to us, as we get access to their ready-made and modern shipyards in Malpe in Karnataka, Cochin in Kerala and Chengalpet in Tamil Nadu. The combined Bharati-Tebma entity with a total nine shipyards will now be in a formidable position to offer cost-effective solutions to their global and domestic customers.”
The deal will enable Bharati to save costs for construction of such yard facilities. Tebma’s strategic alliance with Cochin Shipyard will also be beneficial, the press release said. Tebma has a current order book of approximately Rs 750 crore, which mainly consists of vessels required for the global exploration and production sector.
The deal rocketed Bharati Shipyard scrip that was trading at Rs 244.2 at mid day on Tuesday, up 6% over the previous day in a weak Mumbai market.
Tebma, that began operations in 1987, has built 115 vessels catering to the requirements of diverse domestic and international clientele including leading ports, shipping companies, Indian Navy, lake authorities and dredging service providers for the public as well as the private sector.
Bharati Shipyard last year successfully won a corporate takeover battle for Great Offshore from ABG Shipyard. ICICI Venture had been reportedly looking to exit Tebma and had approached ABG Shipyard Ltd to buy its 53% stake last year. Apparently this was after capital goods maker L&T did not interest in Tebma.
ICICI Ventures had acquired 33% stake in Tebma in February 2007 and subsequently bought 20% more in an open offer and is estimated to have put in a total of Rs 100 crore for this investment. Post equity dilution with entry of Bharati Shipyard its 26% odd stake will be valued at around Rs 40 crore.
From net profit of Rs 63 crore with revenues of Rs 439 crore in the year ended March’08, the firm ended up with loss of Rs 75 crore on revenues of Rs 311 crore for FY’09. While on the one hand demand shrunk with economic slowdown, interest cost more than doubled. For the half year ended September’09, revenues crumbled to just Rs 51 crore with net loss of Rs 54 crore.
The transaction not working out for ABG Shipyard is yet another missed opportunity for a company that has struck various deals over the last few years. Three years ago, it agreed to buy ship and oil drilling rig-repairer Western India Shipyard Ltd from a group of lenders led by ICICI Bank. It also acquired Vipul Shipyard Ltd that was housed closed to its own facilities at Surat, Gujarat.