Pipavav aims for Rs 900-cr investment

A strategic investor abroad is to buy up to 10 per cent of stake in Pipavav Defence and Offshore Engineering for Rs 900 crore.

A company statement said it’d issue 81.88 million shares to the ‘strategic investor’ at a price not less than Rs 110 per share or a Securities and Exchange Board of India-prescribed formula, whichever is higher. At Rs 110 per share, nearly double the closing price on Tuesday, Pipavav will get Rs 900 crore from the deal. For bringing in critical technology needed to build defence sector equipment, the investor would get to nominate a director on the board of the company.

The investment is subject to the requisite approvals, including that of the members of the company. Pipavav said, "The investor is a leading and extremely reputed global conglomerate, with strong interest in the defence sector. The investor will bring in critical technology required for manufacture of complex and critical equipment, systems required by the armed forces."

The share price of Pipavav closed on Tuesday at Rs 58.15 per share, up by 2.8 per cent on the Bombay Stock Exchange. The price zoomed up by close to 10 per cent in intra-day trading.

Pipavav did not divulge the investor’s name or when the investment would be done. Nikhil Gandhi, chairman, did not answer calls or reply to messages. The investor is to initially subscribe to five per cent of the paid-up capital and, within a specified time, increase the holding to 10 per cent, it said.

Pipavav has focused itself towards the defence sector and said the investment will be a long-term one. At 400,000 dwt, it has one of the largest shipyards in India. The yard also boasts of being the only one in India with a licence to produce warships. It had successfully bagged a Rs 3,000-crore deal for naval gunboats this year. The company has also tied up with Mazagon Dock to expedite the latter's Rs 100,000 crore of defence orders. The order book of Pipavav is currently Rs 7,000 crore.

On November 14, Pipavav had allotted five million warrants each, at Rs 78 per warrant, to investor Rakesh Jhunjhunwala and his wife, Rekha Jhunjhunwala. Utpal Sheth was allotted 500,000 shares. The company has also allotted 25.4 million fully compulsorily and mandatorily convertible unsecured debentures of a face value of Rs 70 each to Valiant Mauritius Partners FDI Ltd. The Foreign Investment Promotion Board has approved. Pipavav also said its authorised share capital had been increased to Rs 1,000 crore from the earlier Rs 800 crore.