Here’s All You Need To Know Ahead Of Cochin Shipyard Listing

Cochin Shipyard Ltd., India’s largest public sector shipbuilder, will list on stock exchanges on Friday after its initial public offer was subscribed more than the average demand for all IPOs so far this year.

The shipbuilder, which is making India’s first indigenous aircraft carrier INS Vikrant, sold shares at Rs 432 a piece through the IPO to raise Rs 1,468 crore.

Here’s all you need to know about the company and its offer:

IPO Highlights

• The offer was subscribed 76.2 times compared to the average of 60.8 times for the 16 IPOs so far this year.
• High net-worth individuals put in bids for 288 times the shares set aside for them compared to the average subscription of 166 times for the category.
• Most brokerages, including Motilal Oswal, Prabhudas Lilladher, ICICI Direct and IIFL, had a ‘subscribe’ rating on the initial public offer.
• The company will use proceeds for a new shipbuilding and repair facility, besides general purposes.

Shareholding Pattern

The government’s holding in the company will come down to 75 percent after the IPO. It sold 10 percent stake and the company issued 2.3 crore fresh shares.

Business

Cochin Shipyard builds and repairs ships and also offers marine engineering training. It has two docks – one for shipbuilding that can accommodate vessels with a capacity of 1,10,000 deadweight tonnes and the other for repairing vessels with a capacity of 1,25,000 DWT.

The company, which has built and repaired some of the largest ships in India, caters to the Indian defence sector and commercial sector worldwide.

Market Share

It has the second largest shipbuilding capacity in India and the highest market share in ship repairs.

Revenue

The shipyard’s revenue grew at a compounded annual growth rate of 7 percent to Rs 2,227 crore in the last three years, with most of it coming from defence shipbuilding, according to its draft red herring prospectus.

Peer Comparison

Its listed peers include ABG Shipyard Ltd., Reliance Defence and Engineering Ltd. and Bharati Defence and Infrastructure Ltd. — all of which are loss-making.

The company can’t be compared to international peers because of different operational and market dynamics.

Financials Highlights

• Cochin Shipyard’s net worth was close to Rs 2,031 crore as of March 31, translating into a book value of Rs 149 per share after the IPO.
• At the upper end of the price band – Rs 432 apiece – the earnings per share and price-earnings ratio for the year ended March, after issuing new shares, stands at Rs 23 and 18.8 times, respectively, according to BloombergQuint’s calculations.
• At the lower end of the price band – Rs 424 apiece – the price-to-earnings ratio for the year ended March, after issuing new shares, stands at 18.4 times.
• Cochin Shipyard’s revenue rose at a CAGR of 8 percent and net profit increased 15 percent over five years to March.
• Earnings before interest, tax and depreciation and amortisation grew at a CAGR of 13 percent, while the EBITDA margins expanded by 300 basis points to 17 percent during the period.
• Order book stood at Rs 3,306 crore and the company has bid for three major tenders worth Rs 12,000 crore floated by the Indian Navy. Shipbuilding order book stood at Rs 2,936 crore and repairs at Rs 370 crore.
• The company has been consistently paying dividends over the last five years.
• Debt stood at Rs 123 crore, mostly in tax-free infrastructure bonds. The company had cash worth Rs 2,003 crore as of June 30.