Pipavav Shipyard – Review – AVOID – Shady Gandhi Promoters

Pipavav Shipyard Ltd – PSL is setting up the country’s largest state-of-the-art private sector shipyard in Gujarat for construction and repairs of a range of vessels. The total amount to be invested in the yard stands at Rs25bn, of which Rs19.8bn has already been invested.

PSL is jointly promoted by Nikhil / Bhavesh Gandhi and Punj Lloyd Group.

Current IPO Details:
Face Value – Rs 10
Price Band – Rs 55 to Rs 60
Retail – 25,455,068 Equity Shares available for allocation

Reasons to Avoid Investing in Pipavav Shiyard IPO:
The Gandhi promoters of Pipavav are facing are criminal charges and manipulation of stock prices charges.

The promoters of PSL have vast experience in development of infrastructure projects. However, they have not ventured into anything connected to shipbuilding in the past.

PSL’s reported order book currently stands at Rs44.5bn. This includes orders
for 22 Panamax vessels from foreign companies and 12 OSVs from ONGC. However, as per our understanding from the company’s RHP, a large percentage of these orders are under renegotiation or arbitration.

Poor Financial Track Record – The company is expected to report an EPS of Rs 0.20 for FY10 and Rs 4.5 for FY11 and FY12.

As compared to ABG and Bharati Shipyards, PSL looks expensive on almost all parameters such as P/E, P/BV and EV/EBITDA, etc. Even on a replacement cost basis.

Gandhis have had a passion in the past to takeover unknown finance companies JPT Securities and later merge their projects using another company [Awaita Properties Private Limited] and thus seek backdoor listing. Read Draft RHP Page 239. Such list of companies go on and on.

Looks like Gandhi’s are alumni of Ambani school of Manipulation and Malpractices 🙂

Every Broking House is raising questions on Stock Price Rigging by Shady promoters Mr. Gandhis.

We strongly recommend VALUE investors to stay away from Pipavav Shipyard IPO.

5 thoughts on “Pipavav Shipyard – Review – AVOID – Shady Gandhi Promoters

  1. Angel Broking Recommends to AVOID:

    The IPO is also expensive compared to the company’s
    domestic peers, ABG and Bharati Shipyard, which have a diversified Order Book with strong
    Revenue and Operating visibility over the next two-three years and higher Return Ratios.
    Thus, considering that the IPO is at premium valuations, we recommend an Avoid.

  2. Appollo Sindhuri – Aditya Birla Group Company..
    The issue seems to be highly priced compared to its peers. Further its short operational history and trend of the industry, seems unfavorable for investment. So we recommend to AVOID the issue.

  3. We at KR Choksey recommend as follows,

    we have used the financials of FY11 of PSL and its
    peers for comparison. On the basis of FY11 financials, PSL is trading at expensive valuation as compared
    to its peers. We would thus recommend an Avoid on the issue

  4. HDFC Sec said,
    On P/BV, P/E and Market cap to orderbook basis, PSL seems expensive in the given price band compared to established and revenueearning players like Bharati Shipyard & ABG Shipyard. However, given the large capacity of 4,00,000 DWT (largest Shipyard capacity in India), focus to service the defence sector, diversified businesses of offshore and fabrication along with SEZ & EOU, the company holds a decent opportunity only in the long run.

  5. Sharekhan Equities said,
    The current enterprise value (EV) to order book (excluding orders which are under arbitration and renegotiation) of the company stands at ~2x as compared to ABG Shipyard's 0.29x and Bharti Shipyard's 0.32x. On price/book value (P/BV) the stock is available at ~2.7x as compared to industry average of 1.5x. It is difficult to justify the steep premium over its peers.

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