Mumbai: ABG Shipyard Ltd, India’s biggest shipbuilder outside state control, plans to raise $200 million (Rs800 crore) in a share sale in the middle of the fiscal year to help fund a third shipyard and expand an existing facility in Gujarat.
The company is in talks with arrangers, including ICICI Bank Ltd, to sell new stock, Rishi Agarwal, managing director of Mumbai-based ABG Shipyard, said on Monday. The company started its new business year on Tuesday.
“We will do it at the right time,” he said, declining to provide further details.
Indian shipbuilders, including ABG and Bharati Shipyard Ltd, are increasing capacity to benefit from demand for new vessels, spurred by rising oil and commodity prices, as they face back orders stretching until 2011.
ABG Shipyard shares have lost 27% this year, compared with the benchmark Sensex’s 23% decline.
“They will be able to raise the money if they sell shares at a discount,” said R.K. Gupta, who manages the equivalent of $90 million as chief investment officer at Taurus Mutual Fund in New Delhi. His funds own more than 3,000 shares of ABG, according to Bloomberg data.
Shares of ABG Shipyard fell almost 3.5% on Tuesday to close at Rs694.45 each after rising to the day’s high of Rs734.85 on the Bombay Stock Exchange, while the Sensex ended the day down 0.11%.
The company’s proposed third facility will be able to build vessels measuring 350m in length, compared with 250m at its existing facility in Dahej, chief financial officer Dhananjay Datar said on Monday. The company hasn’t decided on the location for the new yard.
ABG Shipyard plans to use part of the sale proceeds to expand its yard in Surat.
“The company has a huge order book and about half of them are repeat orders from customers,” said ULJK Securities Pvt. Ltd analyst Omkar Vartak, who rates the stock a “buy”. He expects the stock to reach Rs1,200 in the next 12 months.
ABG Shipyard in December won more than Rs1,000 crore of orders from existing customers, including Thailand’s Precious Shipping Public Co., India’s Essar Shipping and Logistics Ltd, Lamnalco Ltd of Cyprus and Maridive and Oil Services SAE of Egypt.
The company earns 40% from building dry bulk ships and about 20% from smaller, multi-purpose vessels. Offshore vessels, which include tugs and support ships, contribute 40% to total sales.
Contributions from offshore vessels will decline to 30% after four years as ABG Shipyard expands revenue from smaller container ships, Agarwal said.