Anil Singhvi Managing Editor of Zee Business says listing of Mazagon Dock today was much above the issue price but didn’t open as strong as it was expected. Some buying is happening in this counter but that was also not as strong as expected. The Market Guru said this is the first time in IPO history, on the listing day the channel is doing Bulls vs Bears case for a newly listed company. The reason for doing this analysis today is to help those participants understand who have got allotment about what they should do from here - hold or exit. It is also about telling those investors who didn’t get the allotment, whether they should invest at current market price.  

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Bulls Case:  

Mazagon Dock is the only PSU shipyard company that makes conventional submarines and destroyers for Indian Navy. Order book of the company is extremely strong for next 6-7 years and strong revenue is guaranteed for next few years. It is expected that company’s revenue will improve 8-10% on yoy basis. Modi government has ordered incremental focus on “Atmanirbhar Bharat” and the company is expected to get big orders from domestic companies because of this. Company has adequate capacity to fulfil new and more orders in future. Varun highlights that the company has been regurarly giving dividend for past 15 years.  

Bears Case:  

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The company is highly dependent on Indian Navy and Government for new orders. It can take a few years to get new orders from here on. Also, securing order from Government may get delayed sometimes which will impact company’s revenue. Execution is the key issue like any other PSU company. For Mazagon Dock, delay in executing the order may not only increase the cost of the project but also lead to hefty fines which in turn will impact the profitability of the company. Selected domestic orders will give fixed margins of only 7.5% while some news orders will give even lower margins. Company has got only domestic orders in last 6 years; they haven’t secured any export order which can help the company to improve their margins. Mazagon Dock may not give dividend this year as they are holding negative cash flows of around Rs 256 cr on their books. 

(Authored by Rahul Kamdar)