India Modi push for share sale in submarine-builder fetches impressive response

Photo: One of India’s Scorpene submarines built by Mazagon Dock.

New Delhi: India‘s lone submarine builder had a dream-like debut on the stock market today, finishing the opening trading day at Rs 173, a cool 19 per cent above its Initial Public Offering (IPO) price of Rs 145, strongly aided by its above par financial performance over the years and the military face-off with nuclear-armed rival China.

Mumbai-based Mazagon Dock Shipbuilders Limited had opened the day on the Bombay Stock Exchange at Rs 216.25, up 49 per cent from its IPO price, but some profit-taking happened during the day’s session, ending the day with a market capitalisation of Rs 3,490 crore ($476 million).

The state-run company’s Rs 444 crore ($61 million) IPO was oversubscribed 157.4 times between Sep. 29 and Oct. 1, the highest demand this year. “The resounding welcome of the company’s shares reflects investor confidence in the company’s shipbuilding capabilities as well as Prime Minister Narendra Modi‘s ‘Make In India‘ initiative,” the Nikkei Asian Review reported.

During the COVID-19 lock down, the government had announced in May that it plans to aggressively pursue disinvestment, including in Ministry of Defence-owned companies. The current IPO to shed 15 per cent of its stake in Mazagon Dock is part of the Modi government’s disinvestment plans for state-owned companies. The public issue received bids for over 4.8 billion equity shares against an offer size of 30.6 million equity shares, according to media reports.

The Mazagon Dock arms the Indian Navy with the most modern warships and submarines, which enables India to defend and protect its maritime interests not only in the Indian Ocean Region, but also beyond in the South China Sea.


The shipyard has capabilities that cater to nearly 50 percent of the Indian Navy’s warships and submarines requirement in terms of value. The three other government-owned warship builders cater to the rest of India’s naval needs.

Mazagon Dock is the most important state-run enterprise for the defence of India, as it is the only submarine builder for the navy. Its IPO doing exceedingly well is no surprise at all, as the investors expect it to fetch them considerable returns, with assured government orders to the shipyard being inevitable.

The shipyard itself is a national asset created with infusion of public funds for its modernisation over the recent years. The shipyard also has cargo shipbuilding capabilities and facilities that are an added revenue generator. The shipyard has also created an ecosystem of Indian suppliers that it plugs into to build a domestic defence industrial capability.

The Mazagon Dock’s order book as of July 31 includes four P15B destroyers, four P17A stealth frigates, four P75 Scorpene submarines, and other equipment worth a combined Rs 54,000 crore ($7.4 billion), all of them for the Indian Navy.

The company has been consistently profitable for the past four years, though its net profit slid around 19 per cent to Rs 380 core ($52 million) in the 2020 fiscal on a revenue of Rs 4,980 crore ($679 million), according to the company’s prospectus. Mazagon Dock has been under India’s defence ministry and has a maximum shipbuilding and submarine capacity of 40,000 dead-weight tons.

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