Mazagon Dock Shipbuilders IPO – Share Price, Analysis and Review
There are a flood of IPOs now and investors are looking to make quick money too. Mazagon Dock IPO would open for subscription on September 29, 2020. Mazagon Dock Shipbuilders Limited is leading defence public sector undertaking shipyard under the Ministry of Defence in India. Its issue price is Rs 135 to Rs 145 per share. Should you invest in Mazagon Dock Shipbuilders IPO? What are the risk factors of investing in this IPO?
About Mazagon Dock Shipbuilders Limited
They are a defence public sector undertaking shipyard under the Department of Defence Production, MoD with a maximum shipbuilding and a submarine capacity of 40,000 DWT, 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. They are a wholly owned GoI company, conferred with the ‘Mini-ratna-I’ status in 2006, by the DPE. They are India’s only shipyard to have built destroyers and conventional submarines for the Indian Navy. They are also one of the initial shipyards to manufacture Corvettes (Veer and Khukri Class) in India.
Mazagon Dock Shipbuilders IPO Details
Here are the IPO issue details.
|IPO Date||Sep 29, 2020 to Oct 1, 2020|
|Face Value||Rs 10 per equity share|
|IPO Price band||Rs 135 to Rs 145 per share|
|Issue Size||Total of Rs 443.69 Crores|
|Offer for Sale||Rs 443.69 Crores|
|IPO Lot Size||103 shares|
|Lead Managers||Yes Securities, Axis Capital, Edelweiss Financial Services, IDFC Securities and JM Financials|
|Listing at||BSE and NSE|
Objects of issue – Mazagon Dock Shipbuilders IPO
Here are the objects of the IPO issue.
(i) To carry out the disinvestment of 30.59Mn equity shares by the selling shareholder constituting 15.17% of the company’s pre-offer paid up Equity share capital.
(ii) To achieve the benefits of listing the equity shares on the stock exchanges. Company will not receive any proceeds from the offer and all such proceeds will go to the selling shareholder.
Who are the company promoters?
Govt of India is the promoter of the company. President of India is acting through the Ministry of Defence.
Here is the summary of the financial information of the company.
|Total Revenues (Rs in Crores)||Profits after tax
(Rs in Crores)
Its EPS for FY2020 is Rs 21.36 and last 3 years average EPS is Rs 22.03.
What are the key strengths of Mazagon Dock Shipbuilders Limited?
Every investor should understand the company’s key strengths so that one can compare with its competitors to know how unique is such company in their business. Their investment decision would change based on these facts. Here are the key strengths of the company.
1) Only public sector defense shipyard constructing conventional submarines.
2) World class infrastructure capable of serving the requirements of the Ministry of Defence.
3) The location of its facilities promotes a closer association with its vendors and customers.
4) Increase in indigenisation of our vessels and implementation of the “Make in India” campaign.
5) Established track record with a strong financial position and strong Order Book.
6) Experienced board and senior management team and skillfully trained workforce.
What are the various strategies of Mazagon Dock Shipbuilders Ltd?
Company strategies would help investors to know what company is intending to do in the future and whether these strategies would help in revenue or margin growth. Such information would help investors to decide whether to invest for short term, medium term or for the long term. Here are the company strategies.
1) Export of its products to the international markets.
2) Focus on ship repair.
3) Augmentation of infrastructure and enhancing its manufacturing capacity
Reasons to invest in this IPO
Here are a few reasons to invest.
1) Mazagon Dock Shipbuilders Limited is leading defence public sector undertaking shipyard under the Ministry of Defence in India.
2) Company has posted steady revenue growth in the last 4 years. Its revenues grew from Rs 4,274 Crores in FY2017 to Rs 5,535 Crores in FY2020.
Risk Factors of investing in this IPO
These risk factors can impact company revenue and margins which would affect its share price. Investors should go through these points and understand them before investing.
1) Its margins are on declining mode. Its margins declined from Rs 598 Crores in FY2017 to Rs 477 Crores in FY2020.
2) They are in non-compliance with the provisions of Section 149 of the Companies Act in relation to the appointment of a woman director. They cannot assure whether the RoC or any other government authority will impose penalties on them on account of such non-compliance.
3) The continuing effect of the COVID-19 pandemic on its business and operations is highly uncertain and cannot be predicted.
4) Company is currently not in compliance with certain provisions of the SEBI Listing Regulations and / or Companies Act, as may be applicable in relation to the composition of the Board and its committees, the terms of reference of the Audit Committee and the Nomination and Remuneration Committee. Further, ongoing disclosure of information in relation to the company after the listing of the equity shares on the Stock Exchanges may be limited to the extent of information which are classified as confidential/sensitive by the MoD and may not be in compliance with the SEBI Listing Regulations and other applicable laws.
5) They predominantly depend on the MoD for defence orders and have mostly been awarded such orders on a nomination basis by the MoD for use by the Indian Navy. There is no assurance that future defence orders will be awarded to us by the MoD. Further, recent changes in the policy framework governing defence procurement and manufacturing in India may result in company no longer being given such orders which may have an adverse effect on its business growth, financial condition and results of operations.
6) Imposition of liquidated damages and invocation of performance bank guarantees / indemnity bonds by its customers could impact its results of operations and they may face potential liabilities from lawsuits and claims by customers in the future.
7) For complete internal and external risk factors, you can refer the RHP of the company.
How to apply for Mazagon Dock Shipbuilders IPO?
You can follow these steps to apply for this IPO
1) Login to your demat account
2) Visit IPO section
3) Check for Mazagon Dock Shipbuilders IPO link and click to bid
4) Select the IPO price and select bid Qty and submit
Mazagon Dock Shipbuilders IPO Promoter Holding
Pre-issue share holding – 100%
Post issue share holding – 85%
Mazagon Dock Shipbuilders IPO Tentative Dates / Timetable
|Finalization of Basis of Allotment||07-Oct-20|
|Unblocking of ABSA and Initiation of Refunds||08-Oct-20|
|Credit of shares to Demat Accounts||09-Oct-20|
|IPO Shares Listing Date||12-Oct-20|
Mazagon Dock Shipbuilders IPO share price valuations
1) On the upper price band of Rs 145 and EPS of Rs 21.36 for FY20, the P/E ratio works out to be 6.8x.
2) For last 3 years EPS of Rs 22.03, the PE ratio is 6.58x.
3) Means, the company is asking the issue price of Rs 145 of the upper price band in the P/E range of 6.5x to 6.8x.
4) There are listed peers like Garden Reach Shipbuilders whose shares are trading at P/E of 14.9x (Highest) and Cochin Shipyard at P/E of 7.6x (Lowest) and the industry average is 11.25x. Hence if you check above analysis, the company share price of Rs 145 at P/E of 6.5x to 6.8x is under priced and available at attractive valuations.
Mazagon Dock Shipbuilders IPO – Should you invest?
Mazagon Dock Shipbuilders is a leading defence public sector undertaking shipyard under the Ministry of Defence in India. It has posted steady revenue growth in the last 4 years. However, its margins are on declining mode. Its issue price is also under priced. Investors should consider these points before investing in this IPO.
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