State-owned Cochin Shipyard Ltd made a stellar debut in the stock markets on Friday, with shares rising 20 per cent on listing day. The strong start came even as the wider markets continued to tumble. The BSE Sensex was trading over 220 points or 0.7 per cent lower.
The company, which is building the Indian Navy's first indigenous aircraft carrier, hit the capital markets earlier this month to raise Rs 1,470 crore. The IPO, which included a 10 per cent stake sale by the government and a 20 per cent fresh issue of shares, was offered in the Rs 424-432 range and the issue price was set at Rs 432.
On Friday, Cochin Shipyard listed on the BSE at Rs 435, and sailed ahead to trade at around Rs 522 in the afternoon trade, up close to 21 per cent from its issue price.
Mrinalini Chetty, research analyst at Centrum Wealth Research, pointed out that the company is the only profitable shipyard compared to peers like ABG Shipyard, Reliance Defence and Bharati Defence, which reported losses.
Cochin Shipyard has drawn up a capital expenditure plan, of almost Rs 2,800 crore, to build a new dry dock and an international ship repair facility. This capex, which will enable it to build and repair a broader variety of vessels including new generation aircraft carriers and oil rigs, will augur well for Cochin Shipyard in the long run, Chetty added.
Cochin Shipyard also sees huge growth opportunities in India's inland water transport segment.
The company is forming a joint venture with another state-owned firm Hooghly Dock and Ports Engineers in Kolkata, Madhu Nair, chairman and managing director of Cochin Shipyard, had said in a recent interaction. The JV company will lease land in Kolkata where a shipyard will be developed exclusively to build all types of small vessels to cater to the inland shipping market.
Cochin Shipyard's IPO had received huge response from investors, and was oversubscribed 76 times.
Jaikishan Parmar, research analyst at Angel Broking says the issue was reasonably priced on the back of “healthy order book with execution capability and experienced management, average ROE (return on equity) and ROCE (return on capital employed) for last five years at 15 per cent plus and despite cyclical business, it has maintained net cash-positive balance sheet.”