Pipavav Defence & Offshore Engineering Company Ltd (PDOECL), formerly known as Pipavav Shipyard, is raising Rs 900 crore from an international strategic investor. Initially, the investor is expected to buy 5 per cent stake in SKIL Infrastructure-owned Pipavav and later, it will be increased to 10 per cent.
The transaction will involve an issue of nearly 82 million shares “in one or more tranches, at a price of not less than Rs 110 per share” or the SEBI ICDR norms, whichever is higher. The issue price of Rs 110 will amount to nearly 100 per cent premium to its closing price of Rs 56.25 per share on Monday.
The share price of Pipavav Defence shot up nearly 10 per cent after the deal was announced and was trading at Rs 60.95 on the BSE, up 7.78 per cent at 1:30 pm.
“The aforesaid investment will be a long-term strategic investment in the company. The investor will initially subscribe to 5 per cent of the paid-up capital of the company and within a specified time, will increase its holding in the company up to 10 per cent of the paid-up capital,” a filing by Pipavav stated.
Pipavav Defence did not disclose the identity of the investor but disclosed that it “is a leading and extremely reputed global conglomerate with strong interest in the defence sector. The investor will bring in critical technology, required for manufacturing complex and critical equipment and systems required by the Armed Forces, i.e., Navy, Army and Air force.”
The new investor will also be able to nominate a board member.
Pipavav Defence operates one of the largest shipyards in India and one of the fifth largest in the world in terms of size (400,000 DWT). It owns the only private shipyard in India that has licence to produce frontline warships and signed a contract with the Ministry of Defence for construction of 5 naval gunboats worth Rs 3000 crore earlier this year.
Pipavav roped in billionaire investor Rakesh Jhunjhunwala as a shareholder in September this year through a warrant issue. It has also raised PE funding from investors like New York Life Investment Management India Fund and Trinity Capital. Last year, the company raised $40 million (Rs 177.80 crore) from PE firm Valiant by issuing compulsorily and mandatorily unsecured convertible debentures.
Pipavav Defence reported 37 per cent increase in revenues to Rs 860 crore in FY11 with a net profit of Rs 43.7 crore against a loss of Rs 48.2 crore in the previous year. For Q2 FY12, the company reported 33 per cent rise in revenues to Rs 449.8 crore while EBITDA increased 52 per cent to Rs 101 crore. The company had debt of Rs 2,000 crore as of FY11.
Pipavav Defence promoter firm, SKIL Infrastructure, filed its DRHP with market regulator SEBI for Rs 1,125 crore of initial public offering (IPO) in June this year. It also raised $400 million from JP Morgan after filing for IPO.
“Global shipyards are facing a dearth of new orders and existing orders are being cancelled owing to the weak economic scenario while PDOECL’s presence in the Indian defence segment and joint venture with Mazgaon Dock would provide it a strong and reliable order book. We believe Pipavav certainly deserves a scarcity premium due to high revenue visibility…,” said a recent ICICI Securities report on the company with a price target of Rs 91.