My views on Mazagon Dock Shipbuilders Limited IPO –
IPO Price – ₹135 to ₹145 per equity share
Last date – Oct 1, 2020
Proposed listing date – Oct 12, 2020
Minimum bid quantity – 103 shares
Minimum bid amount – ₹14935
Incorporated in 1934, Mazagon Dock Shipbuilders Ltd (Miniratna category-1′ status company) is the India’s leading defence public sector undertaking shipyard under the Ministry of Defence. Mazagon Dock is primarily engaged in constructing and repairing warships and submarines.
The major customers for the shipyard include Indian Navy and Coast Guard. The company is India’s only shipyard to have built destroyers and conventional submarines for the Indian Navy.
MDS’s shipbuilding and submarine contracts have a long gestation period and its revenues under these contracts are dependent on the achievement of certain milestones. In order to diversify its revenue streams, the company intend to increase its ship repair activities in the future as such activities are for a shorter period of time and result in the early booking of revenues. The company has undertaken ship repairs in the past for its clients in the defence and commercial sectors. This will help generate more revenues, increase the company’s client base and reduce its dependency on the MoD for future orders.
The company is a consistent dividend paying company with an average payout ratio of over 36.8% over FY17-20. Company has very strong order book. Profit after tax has declined on annual basis. At higher price band, company is valued at PE of 6.8, And industry PE is near 8.
My final view on IPO –
IPO looks good to me. But chances of allotment are very less. Lucky ones, who’ll get allotment can expect 50% or more profit on listing day. Company looks good even for long term holding.