In a major push to its divestment program, the Indian government has approved the initial public offering (IPO) of Cochin Shipyard. As a result, the government will be selling 10% of its equity stake in the country’s largest ship-building and repair facility.
The government is likely to raise around INR6-7 billion through Cochin Shipyard IPO while additional funds are planned from stake sale in Coal India.
Following a meeting of the Cabinet Committee on Economic Affairs (CCEA) which is chaired by Prime Minister Narendra Modi, Coal and Power Minister Piyush Goyal updated reporters about the decision.
Cochin Shipyard is a profitable company with strong margins and thus, investors are expected to lap up the IPO when it hits the market. The company will initiate the paper work for the public offer in due course. In the latest financial year, the company’s turnover jumped to INR18.59 billion while net profit stood at INR2.35 billion.
Cochin Shipyard IPO will partially fund an aggressive investment plan by the shipmaker over the next four years. This includes investment in a new ship repair facility for nearly INR9.5 billion as well as a new dry dock. These projects are currently at Detailed Project Report (DPR) level.
Our rough estimate is around INR25 billion for the two projects and proceedings from IPO will be used for the same
– K Subramaniam, managing director, Cochin Shipyard
On an annual basis, Cochin Shipyard generates nearly INR3 billion through ship repairs but following the expansion, this figure will increase to INR8 billion. Similarly, the new dry dock the company to build large ships, such as LNG vessels, large container vessels, new generation aircraft carrier, and VLCC ships.
Cochin Shipyard has already entered into technical service agreement with Korea’s Samsung Heavy Industries to collaborate on building at least three LNG vessels for Gas Authority of India under the government’s ‘Make in India’ campaign.