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Warship maker Mazagon Dock targets nearly $400 mn valuation in IPO
Photo Credit: VCCircle

State-run warship maker Mazagon Dock Shipbuilders Ltd is seeking a valuation of as much as Rs 2,924.5 crore ($396 million) in an initial public offering next week, as the government looks to revive its disinvestment agenda.

The government is selling 30.6 million shares, or a 15.17% stake, in the Mumbai-based company through the IPO that begins September 29 and closes two days later. The company isn’t issuing any new shares.

The company has set a price band of Rs 135-145 per share for the IPO. At the upper end, the government will mop up Rs 444 crore.

Mazagon Dock, which is fully owned by the government of India, is the first state-run company to go public in the financial year that began in April. The government has sold part of its stake in two other listed companies this fiscal year so far—Hindustan Aeronautics Ltd and Bharat Dynamics Ltd—raising a total of almost Rs 5,696 crore.

The share sales are part of the government’s disinvestment programme. In February, the government had set an ambitious target to raise Rs 2.1 trillion ($28.4 billion) from asset sales in 2019-20. It has so far met less than 3% of the goal.

A successful IPO and listing will see Mazagon Dock join listed peers such as state-run Cochin Shipyard Ltd, which went public in August 2017, and Garden Reach Shipbuilders & Engineers Ltd.

Mazagon Dock had received regulatory nod for its IPO in December last year.

This was the second time Mazagon Dock had filed its IPO proposal. It had previously planned a share sale in 2018, when the government wanted to sell a 10% stake in the company.

Yes Securities (India) Ltd, Axis Capital Ltd, Edelweiss Financial Services Ltd, JM Financial Ltd and DAM Capital Advisors Ltd (earlier known as IDFC Securities Ltd) are the merchant bankers managing the IPO.

Mazagon Dock has a long history. It operated as a small dry dock in Mazagaon village in Mumbai to service the ships of the British East India Company in 1774. The dock was then developed into a ship repair yard and later a ship-building yard over the course of two centuries.

The company was incorporated as a private firm in 1934, and was acquired by the government in 1960 to expand its warship development programme. Since 1960, it has built 795 vessels.

Mazagon Dock constructs and repairs warships and submarines for use by the Indian Navy and other vessels for commercial clients. It is India’s only shipyard to have built destroyers and conventional submarines for the Indian Navy, besides being one of the initial shipyards to manufacture corvettes (or small warships).

The company operates under two verticals: One is shipbuilding, under which it builds and repairs naval ships, and the second is submarine and heavy engineering, which includes building and repairing diesel electric submarines.

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