Started in 1934, Mazagon Dock Shipbuilders Limited is a defence public sector undertaking shipyard under the Department of Defence Production, MoD with a maximum shipbuilding and submarine capacity of 40,000 DWT (as per CRISIL Report), engaged in the construction and repair of warships and submarines for the MoD for use by the Indian Navy and other vessels for commercial clients. It is a wholly-owned GoI company, conferred with the 'Mini-ratna-I' status in 2006, by the Department of Public Enterprises. It is India's only shipyard to have built destroyers and conventional submarines for the Indian Navy. They are also one of the initial shipyards to manufacture Corvettes (Veer and Khukri Class) in India (as per CRISIL Report). The business divisions in which company operates are (i) shipbuilding and (ii) submarine and heavy engineering. Their shipbuilding division includes the building and repair of naval ships. They are currently building four P-15B destroyers and four P-17A stealth frigates for the MoD for use by the Indian Navy. Their submarine and heavy engineering division includes building, repair and refits of diesel electric submarines. They are currently building five Scorpene class submarines under a transfer of technology agreement with Naval Group for the MoD for use by the Indian Navy. Since 1960, company has built a total of 795 vessels including 25 warships, from advanced destroyers to missile boats and three submarines. Company has also delivered cargo ships, passenger ships, supply vessels, multipurpose support vessels, water tankers, tugs, dredgers, fishing travellers, barges and border outposts for various customers in India as well as abroad. Company's shipyard is strategically located on the west coast of India, on the sea route connecting Europe, West Asia and the Pacific Rim, a busy international maritime route. Company is headquartered in Mumbai which is also the headquarters of the Western Naval Command of the Indian Navy. Company is also exploring the possibilities of developing a greenfield shipyard at Nhava, Navi Mumbai with a shiplift, wet basin, workshops, stores and buildings and a ship repair facility spread over an area of 40 acres. Further, as of February 28, 2018, company's Order Book for shipbuilding and submarines and heavy engineering was Rs 5,27,608 million comprising of two major shipbuilding projects and one submarine project. As of February 28, 2018, Company had employed 4,809 permanent employees, comprising of 1,112 executives, 440 staff and 3,257 workmen. Since they are a project based organisation, they have also employed 3,800 personnel on fixed term contract basis for temporary period of two years. As per financial performance, ICFL has posted total income/net profits of Rs. 396.91 cr. / Rs. 112.13 cr. (FY14), Rs. 528.06 cr. / Rs. 149.04 cr. (FY15), Rs. 644.05 cr. / Rs. 191.64 cr. (FY16) and Rs. 719.92 cr. / Rs. 210.80 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 164.08 cr. on total revenue of Rs. 585.95 cr. So company has posted consistent growth over last couple of years. ICFL has posted an average EPS of Rs. 25.53 and average RoNW of 11.62% for last three fiscals. Issue is priced at a P/BV of 2.17 as per NAV of 263.96 on 31.12.17. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 24. As per RHP, industry average P/E ratio is 28.66 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, five merchant bankers associated with this issue and have handled 58 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 6 issues opened below their offer price and 4 opened at par on listing dates. As per financials, company's growth is consistent and very good, RoNW is 11.62% for last three fiscals and issue is priced at P/E of around 24 as per latest earnings. Company is an NBFC with principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing. Last two business segments (Vehicle Finance & Housing Finance) are started in recent past and it may give further boost to company's growth, but increasing bond yields and FD rates may put pressure on margins. So we give "SUBSCRIBE FOR LONG TERM" rating to this IPO.
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