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State-owned defence firm Bharat Dynamics files for IPO

23 January, 2018

State-owned manufacturer of ammunition and missile systems Bharat Dynamics Ltd has filed a draft prospectus with the Securities and Exchange Board of India to float an IPO.

The public issue entirely comprises a secondary market sale. The government, acting as the promoter, will sell a little over 22 million shares representing about 12.5-13% stake in the company on a post-issue basis.

BDL is 100% owned by the government, and the government will get three years from the date of listing to bring its stake down to 75% or below to meet SEBI’s norms on the minimum public float.

The total issue size is estimated at Rs 1,000 crore ($157 million), according to two persons aware of the development.

BDL will join other PSU defence and defence-related companies in opting for the capital markets route. Hindustan Aeronautics Ltd (HAL) filed its draft proposal with SEBI in October 2017 after moving back and forth on its plans for five years.

Last week, Mishra Dhatu Nigam Ltd (Midhani) also filed for a Rs 450 crore IPO. The company makes special steels and superalloys, besides being the only manufacturer of titanium alloys in India. Its products have special applications in sectors such as defence, aerospace, power generation, nuclear and other general engineering industries.

More than two dozen firms, either having valid SEBI approval or have filed applications to receive one, are looking to go for IPOs. These firms are looking to benefit from the boom in the secondary markets.

Benchmark equity indices advanced nearly 28% in 2017, and have extended gains so far this year, with indices touching record highs.

BDL, and other PSU offerings, are part of the government’s record Rs 72,500 crore disinvestment target for 2017-18 and the one for the next financial year which will be announced in the upcoming Union Busget on 1 February.

Last week, the government revised its disinvestment target to Rs 92,000 crore, following Oil and Natural Gas Corp (ONGC)’s acquisition of government’s 51.11% stake in state-owned oil marketing firm HPCL.

Here’s a snapshot of the proposed IPO by BDL

Issue
BDL’s issue size is estimated at Rs 1,000 crore ($157 million).

The public issue entirely comprises a secondary market sale. The government, acting as the promoter, will sell a little over 22 million shares representing about 12.5-13% stake in the company on a post-issue basis. BDL is 100% owned by the government

Use of Proceeds
The company will not receive any proceeds from the offer. The entire proceeds will go to the government which is the selling shareholder.

Bankers

SBI Capital Markets, IDBI Capital Markets & Securities and Yes Securities are merchant bankers managing the IPO.

Lawyers
DSK Legal, Advocates & Solicitors and Riker Danzig, Scherer, Hyland & Perretti LLP are Indian and international legal counsels representing the company and the government in the IPO.

Cyril Amarchand Mangaldas is the legal advisor to the merchant bankers.

Company
BDL, a leading defence PSU, was incorporated in 1970. It is engaged in making surface to air missiles (SAMs), anti-tank guided missiles (ATGMs), underwater weapons, launchers, countermeasures and test equipment.

It is the sole manufacturer for SAMs in India, torpedoes and ATGMs. The company is the sole supplier of SAMs and ATGMs to the Indian armed forces.

The firm is also engaged in the business of refurbishment and life extension of missiles manufactured.

BDL is co-develops next generation ATGMs and SAMs with Defence Research and Development Organisation (DRDO), the national agency in charge of military’s research and development.

The company operates via three manufacturing facilities located in Hyderabad, Bhanur and Visakhapatnam. It is setting up two more manufacturing facilities at Ibrahimpatnam (near Hyderabad) and Amravati in Maharashtra which shall be used to manufacture SAMs and very short range air defence missiles (VSHORADMs) respectively.

The company had an order book of Rs 11,164 crore as on 31 October 2017.

Financials
BDL posted a net profit of Rs 172.59 crore for the six months ended September 2017 on revenues (from operations) of Rs 1,805.68 crore during the same period, according to the draft prospectus.

Its net profit stood at Rs 490.31 crore in full year 2016-17 and Rs 562.06 crore in the previous year.

Its revenues were Rs 4,832.75 crore in financial year 2016-17 and Rs 4,078.75 crore in the previous year, showed the DRHP.

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State-owned defence firm Bharat Dynamics files for IPO

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