Pipavav Defence looking to raise $150M through LSE listing by Oct

SKIL Group’s Pipavav Defence and Offshore Engineering Co Ltd has said it is looking to raise $150 million through a listing on the London Stock Exchange (LSE) by October this year to reduce debt and invest in its subsidiaries. Pipavav Defence, which recently got the government’s nod to build warships for the Indian Navy, has shortlisted investment bankers for the issue, of which two “global investment bankers will lead the initiatives.”

Pipavav Defence scrip was up 0.07 per cent to Rs 67.8 at noon on Wednesday on the Bombay Stock Exchange, giving it a market capitalisation of Rs 4,984.12 crore. Nikhil Gandhi’s SKIL Group also listed the unit SKIL Ports & Logistics Ltd on the Alternative Investment Market (AIM), the LSE’s junior market, in 2010.

According to Pipavav Defence, it has received provisional approval from FIPB to raise $200 million.

“The investment will capitalise the subsidiaries to build a wide spectrum of defence manufacturing facilities and infrastructure for the global demand,” said Pipavav Defence. “The investment will also reduce overall debt equity and strengthen the balance sheet significantly,” it added.

According to an ICICI Securities report, Pipavav Defence had debt of Rs 4,486 crore at the end of FY13, which is expected to go up to Rs 5,118 crore by end of FY14. The company’s current debt-equity ratio stands at 2.2x.

The move comes after the Ministry of Defence lifted the hold on the Mazagon Dock-Pipavav Defence joint venture to build warships for the Indian Navy earlier this month. Last month, Pipavav Defence also appointed former private equity executive Rajiv Shukla as CEO of the company.

Pipavav Defence added it is currently working with around 12 countries to build warships and offshore assets, and expects to become a global defence and offshore company over the next 4-5 years. The company has submitted bids worth $2 billion to various countries, along with respective local partners.

The company is also looking forward to joint marketing initiatives to tap the growing global demands of warships and submarines through its JV with Mazagon Dock Ltd.

Pipavav Defence counts strategic investors such as Swedish defence major Saab and Singapore’s shipyard SembCorp Marine, as well as ace investor Rakesh Jhunjhunwala and Valiant Capital as its shareholders.

“Although we believe the Mazagaon Dock-PDOECL JV would be a game-changer for the company in the longer term, near-term concerns like lower execution, bloating interest cost and uncertainty over commercial order book make us cautious about the financial performance of the company,” an ICICI Securities report stated last month.

(Edited by Sanghamitra Mandal)

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