State-owned warship maker Mazagon Dock Shipbuilders's initial public offering (IPO) opens today. The issue will close on October 1. The listing on BSE and NSE is expected to take place on October 12.
Here's a list of key things you should know before placing the bet:
The company has fixed its IPO price band at Rs 135-145.
Funds Raise: Mazagon Dock is expecting to raise about Rs 413 crore at the lower price band and Rs 444 crore at the upper price band.
Objective Post Listing: The main objective of the company would be to carry out the disinvestment of 3,05,99,017 equity shares by the government and achieve the benefits of listing the shares on the stock exchanges.
Public issue: The initial public offering (IPO) of 3,05,99,017 equity shares of the state-owned defence company is an offer for sale by the government. As many as 3,45,517 shares have been reserved for eligible employees. The total offer will constitute 15.17 percent of the post-issue paid-up equity.
One can bid for a minimum of 103 equity shares and in the multiples of 103 thereafter.
Lead Managers and Registrar: The lead managers of the IPO are Axis Capital, DAM Capital Advisors Ltd (Formerly IDFC Securities), Edelweiss Financial Services, JM Financial Consultants and Yes Securities. The registrar is Alankit Assignments.
Financials: For the financial year ended March 2020, Mazagon Dock Shipbuilders reported a revenue of Rs 5,566 crore while its profit stood Rs 415 crore.
Post issue, it's market capitalization will be Rs 2,915 crore, said Aditya Kondawar, Founder, JST Investments. He further added that the company has a lot of debt, with debt-to-equity (D/E) ratio at 5.8x. In fact, 78 percent of its balance sheet is current liabilities, which shows extensive working capital needs.
"Increasing inventories and trade receivables have lead to weak cashflows and consistent milking by hefty dividends have weakened the balance sheet," said Kondawar further.
Brokerage's View: We have a 'SUBSCRIBE' recommendation on the IPO for listing gains given the company's niche business. On a long-term basis, we advise to 'stay cautious', added Kondawar (JST Investments) while placing its view.
Angel Broking explained, "In terms of valuations, the pre-issue P/E works out to 6.1x FY20 earnings (at the upper end of the issue price band), which is lower vs. peers like Garden Reach Shipbuilders and Cochin Shipyard (trading at 12.2x and 6.6x of its FY20 earnings, respectively)."
Further, the company has a healthy ROE of ~16 percent coupled with highest dividend yield (7.4 percent) and higher cash on balance sheet among its peers. Hence, considering the above positive factors, we recommend 'SUBSCRIBE' to the issue with a long-term horizon, added the brokerage.
About the company: Incorporated in 1934, Mazagon Dock is a defence public sector undertaking shipyard under the Department of Defence Production, MoD. The company has maximum shipbuilding and submarine capacity of 40,000 DWT.
Mazagon Dock is primarily engaged in constructing and repairing warships and submarines for MoD and other types of vessels i.e. cargo ships, multipurpose support vessels, barges and border outposts, tugs, dredgers, water tankers, etc. for commercial clients.
The company is engaged in the construction and repair of warships and submarines for the MoD for use by the Indian Navy and other vessels for commercial clients.