The Securities and Exchange Board of India (SEBI) has okayed the initial public offering plan of Garden Reach Shipbuilders & Engineers Ltd, putting the state-run warship maker among a raft of companies looking to go public as part of the government’s divestment plan.
Garden Reach got SEBI's final observations for the share sale on 22 May, according to the regulator's website. The warship maker is the 20th company to have received SEBI nod for an IPO in 2018.
Garden Reach had filed its IPO proposal with the regulator on 26 March. The IPO, whose size is estimated at Rs 1,000-1,200 crore, will entail a share sale by the government.
The government, which fully owns the company, will sell 200.46 million shares, or a 17.5% stake. It will get three years from the date of listing to bring its stake to 75% or below.
The share sale is part of the government’s aim to raise Rs 80,000 crore from stakes sales in state-run companies in 2018-19, as it looks to boost rural and infrastructure spending as well as contain the fiscal deficit ahead of general elections next year.
IDBI Capital Markets & Securities and Yes Securities (India) are the merchant bankers managing Garden Reach's IPO.
Other government-owned companies preparing their maiden share sales include Rail Vikas Nigam Ltd, Mazagon Dock Shipbuilders Ltd, Ircon International Ltd and Indian Railway Finance Corporation.
As part of its divestment programme for the last financial year, the government pared its stakes in fighter jet maker Hindustan Aeronautics Ltd, defence equipment producer Bharat Dynamics Ltd and alloy manufacturer Mishra Dhatu Nigam Ltd.
Garden Reach
Garden Reach was incorporated in 1934 and was acquired by the government from Macneill & Barry Ltd in 1960. Garden Reach built the first India-made warship, INS Ajay, the following year.
The company mainly builds warships for the navy and coast guard. It also makes deck machinery items, pre-fabricated portable steel bridges and marine pumps.
Its shipbuilding product line spans across frigates, corvettes and fast-patrol vessels. It has built more than 750 vessels since it was acquired by the government. It has three shipbuilding facilities, all in Kolkata.
The shipbuilding division accounts for a major chunk of its revenue. In the April-September period of 2017-18, the division accounted for 81% of its revenue from operations, up from 75% in 2016-17.
The company reported a net profit of Rs 18.06 crore for the six months ended September 2017 on revenue from operations of Rs 493.15 crore. For 2016-17, the firm saw operating revenue and net profit at Rs 930.40 crore and Rs 12.22 crore, respectively.