India’s largest public sector shipyard Cochin Shipyard has filed its Draft Red Herring Prospectus (DRHP) with the capital market regulator SEBI. The upcoming IPO is estimated to mobilize INR1,400-1,500 crore (INR14-15 billion). Cochin Shipyard IPO will comprise of 33,984,000 equity shares consisting of a fresh issue of 22,656,000 equity shares and an offer for sale (OFS) of 11,328,000 equity shares by the President of India. The company is completely state-owned as of now with 99.99% shares with the President of India.
Cochin Shipyard IPO – Use of proceeds
Proceeds from Cochin Shipyard IPO are proposed to be used towards setting up of a new dry dock within the existing premises of the company, setting up of an International Ship Repair Facility (ISRF) at Cochin Port Trust area and for other general corporate purposes. INR443 crore will be used to establish the new dry dock while INR229.5 crore will be invested in the ISRF.
The company will not get any proceeds from the shares sold by the President of India. SBI Capital Markets Limited, Edelweiss Financial Services Limited, JM Financial Institutional Securities Limited are the book running lead managers to the issue and Link Intime India Private Limited is the registrar.
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According to a CRISIL report, Cochin Shipyard is the largest public sector shipyard in India in terms of dock capacity as of 31 March 2015. Cochin Shipyard caters to clients engaged in the defence sector in India and clients engaged in the commercial sector worldwide. Currently, Cochin Shipyard has two docks. The Shipbuilding Dock can accommodate vessels with a maximum capacity of 110,000 DWT (Dead Weight Tonnage). Its Ship Repair Dock is one of the largest in India and accommodates vessels with a maximum capacity of 125,000 DWT.
Cochin Shipyard IPO – Part of government’s divestment drive
The upcoming IPO is part of the government’s efforts to reduce its stake in state-owned enterprises. After clearing the IPO last year, the central government set the ball rolling for Cochin Shipyard IPO by asking for proposals from merchant bankers. Apart from Cochin Shipyard, the government plans to bring IPOs of general insurance companies and HUDCO. Hindustan Aeronautics Ltd (HAL), Pawan Hans and Airport Authority of India (AAI) are other public sector companies which are planning to bring their IPOs.
Cochin Shipyard is a profitable company with strong margins and thus, investors are expected to lap up the IPO when it hits the market. In the financial year ended 31 March 2016, Cochin Shipyard’s turnover jumped to INR2099.3 crore while its net profit stood at INR285.8 crore.