Sunday, May 22, 2022

Dalal St makes its biggest bet of FY21 on Mazagon Dock IPO with 157x oversubscription

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  • Earlier, the Happiest Minds Technologies IPO had shot through the roof to close with a whopping 150.98 times oversubscription

  • The public issue received bids for 481.6 crore equity shares against the offer size of 3.06 crore equity shares and raised Rs 444 crore

New Delhi: The initial public offer (IPO) of Mazagon Dock Shipbuilders’ Limited, which has witnessed a strong demand since opening on September 29, has been subscribed 157.41 times on the last day, which is the highest subscription for this fiscal year. Earlier, the Happiest Minds Technologies IPO had shot through the roof to close with a whopping 150.98 times oversubscription on the last day. But now, the crown rests with Mazagon Dock Shipbuilders’ Limited. The public issue received bids for 481.6 crore equity shares against the offer size of 3.06 crore equity shares and raised Rs 444 crore. 

The news comes as a relief for the government after the tepid response received from investors during the Bharat Dynamics Ltd (BDL) offer for sale (OFS).

Quantum jump in subscription from NII investors 

On the last day of the offer, there was significant increase in bids from non-institutional investors (NII) as their portion of the IPO was subscribed 679 times. The category of retail investors, who had displayed a steady interest from day 1, saw a subscription of 35.6 times. The reserved portion of qualified institutional buyers witnessed 89.7 times subscription and that of employees 3.88 times.

Most of the bids received seem to be at the higher end of the price band of Rs 135-145 per share.

‘Investors seem to have allied with ‘Make in India’ push’

“We believe Mazagon Dock IPO offer gives investors an opportunity to play on Indian growing defense story allied with Make in India push. We read out that it is the only company in the country to manufacture warships and submarines for the Indian Navy and also constructs cargo ships, multipurpose support vessels, dredgers and water tankers,” Prashanth Tapse, AVP Research at Mehta Group, said.

Also read: PSU disinvestment: Mazagon Dock's IPO to open on September 29

“On valuations parse at upper price band (Rs 145), the issue is asking for market capitalisation Rs 2,925 crore with PE (FY20) 6x compared to industry average of around 10x and P/BV below 1x versus industry average of around 1.52x, which seems to be fairly and reasonably prices with something left on the table for listing gains,” Tapse said.

Mazagon Dock Shipbuilders

Mazagon Dock Shipbuilders was incorporated in 1934 as a private company which was later taken over by the government under warship development programme and is now India's leading defence PSU under Ministry of defence.

The defence PSU is primarily engaged in constructing and repairing warships and submarines and other types of vessels i.e. cargo ships, multipurpose support vessels, barges and border outposts, tugs, dredgers, water tankers, etc. for commercial clients. It is the only shipyard to build destroyers and conventional submarines to be used by the Indian Navy with a maximum shipbuilding and submarine capacity of 40,000 DW. As of now, it has built 795 vessels, including 25 warships, 4 missile boats, 3 submarines, 6 Leander class frigates, 3 Godavari class frigates, 3 Shivalik class frigates, 3 corvettes, and 6 destroyers.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Telegram. Join PSU Watch Channel in your Telegram and stay updated)

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