Mazagon Dock Shipbuilders IPO fully subscribed in Few Hours

The IPO of state-owned defense firm Mazagon Dock Shipbuilders Ltd (MDL) opened for subscription today. The price band for the issue has been fixed at ₹135-145 per share. Mazagon Dock Shipbuilders IPO will close for subscription on October 1. The initial public offer is for 3,05,99,017 shares through an offer for sale (OFS). The offer is expected to raise about ₹444 crore at the upper end of the price band. As of 2 pm today, the issue was 100% subscribed.

The government is selling shares constituting 15.17% of Mazagon Dock Shipbuilders pre-offer paid up equity share capital in this issue. The company, which received the 'Miniratna' status in 2006, is the only shipyard to have built destroyers and conventional submarines for the Indian Navy. With an order book to the tune of ₹54,0470 crore, it is also one of the first shipyards to manufacture Corvettes (small warships) in the country.

For FY18-20, revenue grew at a CAGR of 6% while net profit de-grew by 2% CAGR. In FY20, Mazagon Dock Shipbuilders reported PAT of ₹477 crore on revenue of ₹4,978 crore.

YES Securities, Axis Capital, Edelweiss Financial, IDFC Securities and JM Financial are the managers to the offer.

UTI AMC has also come out with an IPO which will close on October 1.

New defence procurement policy 2020, is expected to accelerate indigenization, which is positive for the domestic defence industry, Geojit Financial Services said in a note.

"At the upper price band of Rs.145, Mazagon Dock Shipbuilders is available at a P/E of 6.1x which is significant discount to its peers. Considering strong technological & execution capabilities, healthy order book and attractive dividend yield, we assign a subscribe rating for this IPO," the brokerage said.

LKP Securities also recommends subscribe. "At the higher price band of ₹145, the stock is valued at 6.7x FY20 earnings of ₹21.4, which looks quite attractive considering its healthy order book, long term visibility of topline growth, competitive edge, profitability, return ratios and dividend payout policy. We recommend investors to subscribe."