Cochin Shipyard to go Public

July 28, 2017 0 Comments

Cochin Shipyard Limited is all set to be a publicly traded company as of August 1 2017

Text Credit: Rochelle D’Souza Feature Image source: CSL

Cochin Shipyard Ltd (CSL), India’s biggest public sector ship builder, will launch its initial public offer (IPO) on August 1.

The company aims to raise up to Rs 1,468 crore via the IPO. Of that, as much Rs 489 crore will come from an offer for sale by the government. The rest will come via a fresh issue of shares by the company. The public issue comprises a fresh issue of 22.65 million shares besides an offer for sale of 11.32 million shares by the government, as per draft papers. The issue is priced at Rs 424 to Rs 432 per share. It comes with a discount of Rs 21 per share for retail and employees.

fwd business Cochin Shipyard to go Public (2)

Image source: CSL

The money from the IPO will be used to fund its expansion plans. Cochin Shipyard has a capital expenditure plan worth over Rs 3,000 crore over three years. This plan includes the construction of a dry dock – a narrow vessel that can be flooded to allow a load to be floated in, then drained to allow that load to come to rest on a dry platform used for the construction, maintenance, and repair of larger ships. They also plan to invest in a 42 acre ship repair facility.

fwd business Cochin Shipyard to go Public (3)

Image source: flickr.com

The government-owned CSL filed a draft red herring prospectus (DRHP) with the capital markets regulator Securities and Exchange Board of India (SEBI) for an initial public offering (IPO) in March this year. The IPO would value Cochin Shipyard at an estimated Rs 4,000 crore (around $612 million).

Everything You Need to Know About the Cochin Shipyard IPO:

Company:

CSL was incorporated in March 1972 and started operations in 1975.
As of 31 March 2015, it was the largest public sector shipyard in India in terms of dock capacity, according to a report by rating agency CRISIL.
CSL caters to clients engaged in India’s defence segment and global commercial shipping sector.
It also undertakes shipbuilding and ship repair activates besides offering marine engineering training. As of 31 January 2017, CSL had two docks with a total capacity of 235,000 deadweight tonnage (DWT), according to CRISIL.

fwd business Cochin Shipyard to go Public (4)

Image source: imgur.com

Issue:

The government owns 100% stake in Cochin Shipyard.
It will divest 10% stake besides issuing fresh shares representing 15% stake through the IPO.
After the issue and listing, the government’s stake in the company will stand at 75% in compliance with SEBI’s minimum public shareholding norms.
The IPO is estimated to be worth Rs 1,500 crore. This will value the Kochi-based company at Rs 4,000 crore

Use of proceeds:

The company aims to use Rs 443 crore to set up a new dry dock within its existing premises.
Rs 229.5 crore allotted for building an international ship repair facility near Cochin Port Trust.
The company will use an undisclosed amount (not greater than 25% of proceeds from the fresh capital) towards meeting general corporate expenses.