Shares of Cochin Shipyard Limited (CSL), a state-run entity, experienced a notable decline on Wednesday, October 16, 2024, falling as much as 4.9% to ₹1,590 per share on the BSE. This drop followed the government’s announcement of an offer for sale (OFS) to divest up to 5% of its stake in the company at a floor price of ₹1,540 per share, starting today.
The Department of Investment and Public Asset Management, led by Secretary Tuhin Kanta Pandey, confirmed via social media platform X that the OFS would open for non-retail investors on October 16, while retail investors and CSL employees would have the opportunity to bid on Thursday, October 17. The government’s current holding in Cochin Shipyard stands at 72.86%.
In this stake sale, the government intends to divest 2.5% equity, amounting to approximately 65.77 lakh shares, with the option to sell an additional 2.5%. At the established floor price, the total sale could generate around ₹2,000 crore for the exchequer. Notably, this floor price represents a discount of about 8% compared to Tuesday’s closing price of ₹1,672 on the BSE.
Recent Performance and Financial Results
Despite the current dip, Cochin Shipyard has shown remarkable growth in its financial performance. For the first quarter of FY25, the company reported a staggering 76.61% year-on-year rise in net profit, reaching ₹174.2 crore. The consolidated total income for the quarter also rose significantly, up by 52.77% year-on-year to ₹855.4 crore.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the same quarter surged by 60.55% year-on-year, totaling ₹261 crore. Additionally, the earnings per share (EPS) grew impressively by 76.53% year-on-year to ₹6.62.
A breakdown of revenue sources reveals strong performance across both the shipbuilding and ship repair segments. The shipbuilding revenue increased by 61.77% year-on-year to ₹526 crore, while the ship repair segment’s revenue grew even more, climbing 62.88% year-on-year to ₹244.77 crore. Profit before interest and taxes (PBIT) for the shipbuilding segment rose by 44.67% year-on-year, with the ship repair segment’s PBIT skyrocketing by an impressive 188.50%.
Stock Performance Overview
In terms of stock performance, Cochin Shipyard has seen its share price soar over 215% in the past year and 145% year-to-date, reflecting strong investor interest prior to the government’s stake sale announcement. Despite the current downward trend due to the OFS, the long-term outlook remains positive given the company’s robust earnings growth and expanding operational capabilities.
As the OFS proceeds, market watchers will be keen to see how investor sentiment shifts, particularly among retail and institutional buyers, as they weigh the attractive financials against the newly introduced selling pressure. With a significant stake in Cochin Shipyard now up for grabs, it remains to be seen how the market will respond in the coming days.
