Reblog: IPO Review – Garden Reach Shipbuilders and Engineers

Garden Reach Shipbuilders and Engineers is entering the primary market on Monday 24th September 2018, with an offer for sale (OFS) of up to 2.92 crore equity shares of Rs.10 each by the Government of India (GoI), in the price band of Rs. 115 to Rs. 118 per share, with a discount of Rs. 5 per share for retail category. Representing 25.50% of the post issue paid-up share capital, total issue size is Rs. 340 crore at the upper end of the price band. Issue closes on Wednesday 26thSeptember and listing is likely on 5th October.

Company Overview:

Garden Reach Shipbuilders and Engineers is a Mini-Ratna Category 1 company under the Ministry of Defence, manufacturing warships for Indian Navy and Indian Cost Guard (90%+ revenue derived from them) under its ship building division. It also has an engineering division, accounting for less than 10% of revenues, manufacturing deck machinery for ships, pre-fabricated steel bridges and marine pumps. With 3 manufacturing facilities in Kolkata, company’s order book position (31-7-18) of Rs. 20,314 crore is very healthy, as it includes order for 3 ships for the Indian Navy, aggregating Rs. 19,300 crore, to be delivered from FY24 onwards. This will contribute to revenues meaningfully from FY21 onwards, as company is yet to commence work on these orders. Till then financial performance may be subdued as revenue peaks in the middle of the typical contract duration of 5-6 years.

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