New Delhi: Buoyed by the success of the Initial Public Offering (IPO) of the Mazagon Dock Shipbuilders Limited (MDL), the government is looking at a similar disinvestment process for more defence public sector undertakings, it is learnt.

The IPO for MDL closed Thursday with an overwhelming response from investors. “The issue was subscribed more than 157 times,” a source in the defence establishment said.

A report in MoneyControl quoted data from stock exchanges to say the “public issue has received bids for 481.6 crore equity shares against offer size of 3.06 crore equity shares”. IPO is the process by which a company’s shares are first offered to the public.

Government sources said the response is evidence that investors are seeing defence as a sunshine sector, and that the demand will increase with a greater ‘Make in India’ push.

“Defence, as a theme, is picking up even for investors. The response the MDL IPO has received is a big boost to our plans to increase disinvestment in defence,” a government source said.

Asked if this means that more such disinvestment could take place, the source added that the government as a whole is working on disinvestment.

“Defence is critical and hence disinvestment is being done in a calibrated manner. It is not being rushed,” the source said, refusing to give details of what is being planned next.

Large Order Book Boosts Interest In MDL IPO

Not all IPOs have gathered the same interest as that of the MDL.

In March 2018, the public offer of state-run Hindustan Aeronautics Ltd (HAL) remained undersubscribed on the last day of subscription despite an overbidding by institutional investors.

However, with MDL already having a large order book — the Scorpene submarines are being built there, besides being one of the main contenders for the Navy’s Project 75 India, under which six more conventional submarines are to be built — its IPO received huge interest.

Compared to other companies in shipbuilding, MDL’s stock valuation on FY20 earnings of six times is marginally lower than that of Cochin Shipyard Ltd’s seven times, and much lower than Garden Reach Shipbuilders Ltd’s 15 times, Live Mint noted in a report.

Further, the MDL order book of Rs 54,070 crore, about 11 times its current revenues, adds comfort that growth would be stable for the next few years, it added.

Defence sources said the government has also completed another round of 15 per cent disinvestment for HAL in the second quarter of this fiscal.

“The government had earlier disinvested 10 per cent and now it has completed another 15 per cent of disinvestment. More is not planned at this moment,” a source said when asked about the disinvestment plans for the HAL.