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DCNS, the French defence major is likely to pick up a little less than 10% equity stake in Nikhil Gandhi-promoted Pipavav Defence and Offshore Engineering for about Rs 800 crore, according to Pipavav Defence officials.
"DCNS will invest a little more than 800 crore to acquire a significant minority stake in Pipavav Defence. They had earlier signed a strategic alliance with Pipavav, but have now decided to be a strategic investor. In the next few days, we will complete the stake sale", said a senior company official on condition of anonymity.
DCNS, which posted revenues to the tune of $3.3 billion last year, is owned by the French government and specialises in manufacturing surface combatants, submarines, systems and equipments. The deal values the shares of Pipavav Defence at a substantial premium of more than 32% of its last closing price. DCNS did not respond to an email query by ET.
Pipavav Defence, which had recently received an invitation from the Defence ministry to partner country's biggest naval shipyard - Mazagon Dock, had in May sought the shareholders' approval to raise up to $200 million (about Rs 1,100 crore) to finance its growth plans for the defence sector. Interestingly, in February, Mazagon Dock had said that it is manufacturing six SSK Scorpene submarines (P75) under transfer of technology (ToT) from DCNS.
In a regulatory filing to the Bombay Stock Exchange last year, Pipavav Defence, formerly Pipavav Shipyard, had said the company will issue 81.9 million fresh shares to a strategic investor with interest in the defence sector for 110 apiece amounting to about Rs 900 crore. According to officials, the promoter of the company is also looking to divest 26% of their holding in the company to the strategic investor in the future.
In recent times, the Government of Singapore Investment Corporation(GIC), the sovereign fund of Singapore government had expressed their interest in investing close to Rs 200 crore in Pipavav Defence to acquire a 2.5% stake in the company, the same source said.
The deal with Mazagon Dock, which was recently notified by the Defence ministry, will help Pipavav execute at least some of Mazagon's order book which runs into atleast Rs 1 lakh crore. Domestic insurance company, LIC had also recently increased their stake in Pipavav after the defence ministry gave approval for the joint venture and currently holds 8.74% stake in Pipavav.
Indian shipyards, led by Pipavav Defence and L&T shipbuilding, have been leading the pack in attracting global investors to invest in their companies. While Japanese major Mitsubishi expressed its interest in acquiring a stake in Larsen and Toubro's shipbuilding subsidiary, DCNS's interest in Pipavav is seen as a growing interest among foreign players to invest in the country's defence related businesses.
While Indian shipyards only contribute 0.1% of the global shipbuilding industry, shipyards in China, Japan and South Korea produce more than 75 % of the vessels manufactured globally, forcing Indian shipyards to look for orders from the domestic defence sector.
In 2011, the government had agreed to allow public private partnerships in the defence sector and Mazagon Dock was the first to get off the block while the other three - Cochin Shipyard, Hindustan Shipyard and Garden Reach Shipbuilders -- were expected to follow suit.
India has about 150 warships in service with its navy and another 75 warships with its coast guard.
DCNS may buy 10% in Pipavav Defence for Rs 800 crore - The Economic Times
"DCNS will invest a little more than 800 crore to acquire a significant minority stake in Pipavav Defence. They had earlier signed a strategic alliance with Pipavav, but have now decided to be a strategic investor. In the next few days, we will complete the stake sale", said a senior company official on condition of anonymity.
DCNS, which posted revenues to the tune of $3.3 billion last year, is owned by the French government and specialises in manufacturing surface combatants, submarines, systems and equipments. The deal values the shares of Pipavav Defence at a substantial premium of more than 32% of its last closing price. DCNS did not respond to an email query by ET.
Pipavav Defence, which had recently received an invitation from the Defence ministry to partner country's biggest naval shipyard - Mazagon Dock, had in May sought the shareholders' approval to raise up to $200 million (about Rs 1,100 crore) to finance its growth plans for the defence sector. Interestingly, in February, Mazagon Dock had said that it is manufacturing six SSK Scorpene submarines (P75) under transfer of technology (ToT) from DCNS.
In a regulatory filing to the Bombay Stock Exchange last year, Pipavav Defence, formerly Pipavav Shipyard, had said the company will issue 81.9 million fresh shares to a strategic investor with interest in the defence sector for 110 apiece amounting to about Rs 900 crore. According to officials, the promoter of the company is also looking to divest 26% of their holding in the company to the strategic investor in the future.
In recent times, the Government of Singapore Investment Corporation(GIC), the sovereign fund of Singapore government had expressed their interest in investing close to Rs 200 crore in Pipavav Defence to acquire a 2.5% stake in the company, the same source said.
The deal with Mazagon Dock, which was recently notified by the Defence ministry, will help Pipavav execute at least some of Mazagon's order book which runs into atleast Rs 1 lakh crore. Domestic insurance company, LIC had also recently increased their stake in Pipavav after the defence ministry gave approval for the joint venture and currently holds 8.74% stake in Pipavav.
Indian shipyards, led by Pipavav Defence and L&T shipbuilding, have been leading the pack in attracting global investors to invest in their companies. While Japanese major Mitsubishi expressed its interest in acquiring a stake in Larsen and Toubro's shipbuilding subsidiary, DCNS's interest in Pipavav is seen as a growing interest among foreign players to invest in the country's defence related businesses.
While Indian shipyards only contribute 0.1% of the global shipbuilding industry, shipyards in China, Japan and South Korea produce more than 75 % of the vessels manufactured globally, forcing Indian shipyards to look for orders from the domestic defence sector.
In 2011, the government had agreed to allow public private partnerships in the defence sector and Mazagon Dock was the first to get off the block while the other three - Cochin Shipyard, Hindustan Shipyard and Garden Reach Shipbuilders -- were expected to follow suit.
India has about 150 warships in service with its navy and another 75 warships with its coast guard.
DCNS may buy 10% in Pipavav Defence for Rs 800 crore - The Economic Times
