Workers carry material to a ship being built at the ABG Shipyard Ltd. in Surat. Photographer: Amit Bhargava/Bloomberg News

State-Run Shipbuilder Garden Reach’s IPO Fails To Attract Investors

The initial public offer of the sixth state-run company this year was also the first in three years to be extended due to poor response from investors.

Garden Reach Shipbuilders & Engineers Ltd.’s IPO, which aimed to raise around Rs 345 crore from the primary market, was subscribed 0.67 times on the third and final day of bidding today, according to a filing with the National Stock Exchange. This, the filing said, prompted bankers to extend the subscription period by three working days till Oct. 1.

The price band of the share sale has also been revised down to Rs 114-118 from Rs 115-118. The IPO is a complete offer for sale where the government was looking to divest 25.5 percent of its stake in the shipbuilder.

Six out of the last 10 IPOs conducted by the government in the last three years have witnessed tepid demand and of the eight listed companies, six are trading below their issue prices. The other two companies are the railways engineering and construction firm Ircon International, which is yet to be listed, and Garden Reach.

The listing of Housing and Urban Development Corporation was the most successful. Yet, it has failed to create wealth for investors as it currently trades below its issue price of Rs 60.

Similarly, Cochin Shipyard Ltd.’s IPO was subscribed over 76 times, but the scrip now trades below its issue price of Rs 432.

IPOs of the five companies that received tepid demand—Hindustan Aeronautics Ltd., The New India Assurance Company Ltd., Mishra Dhatu Nigam Ltd., Bharat Dynamics Ltd. and General Insurance Corporation of India—were bailed out by India’s largest life insurer, Life Insurance Corporation of India. Nearly 55 percent of the amount raised by the Government of India by offloading stake in these companies were provided by LIC.

Garden Reach engages in shipbuilding, engineering and engine production activities.