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Bharat Dynamics IPO subscribed 32% on Day 1

The govt intends to offload 2.25 crore shares in the OFS in the Rs 413-428 range.

Updated: Mar 13, 2018, 05.53 PM IST
The govt intends to offload 2.25 crore shares in the OFS in the Rs 413-428 range.
NEW DELHI: The initial public offering (IPO) of mini-ratna Bharat Dynamics received 32.24 per cent subscription till 5 pm on the first day of the bidding process on Tuesday.

According to the data available with the NSE, investors bade for a total of 72,49,970 shares till 5 pm against the issue size of 2,24,51,953 shares.

At the price band of Rs 413-428 per share, the issue is priced at 10.3-10.7 times P/E for FY2017 earnings.

The issue seems to be attractively priced, as its only peer (to an extent) i.e. Bharat Electronics is trading at 23 times FY17 earnings, said Sharekhan.

The government intends to offload 2.25 crore shares or 12.27 per cent stake in the offer for sale (OFS) in the Rs 413-428 range. The retail investors and employees will be offered a discount of Rs 10 per share in the issue, which closes on March 15.

A pure defence play, Bharat Dynamics has no direct listed peer. At present, the company is the only manufacturer of anti-tank guided missiles (ATGMs) and surface to air missiles (SAMs). It also manufactures test equipment, underwater weapons, launchers, countermeasures, among others. Besides, it is co-development partner with the DRDO for the next generation of ATGMs & SAMs.

With order book presently standing at Rs 10,543 crore, the missile maker is likely to gain from the government’s New Defence Procurement Policy (DPP) 2016 and Make in India initiative. But delays in awarding of contracts and postponement in the company’s foray into international markets will be among key risks.

At the higher end of the price band, the issue is priced at post dilution P/E of 16 times on FY17 basis and 22.7 times on H1FY18 annualised basis.

“At this valuation, the issue seems reasonably priced. The opportunities that are expected to arise in the defence space given the government focus along with upcoming orders from the Akash Weapon System and need for equipment modernisation are likely to be positive for BDL,” said Centrum Broking.

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