Bharat Dynamics IPO opens

Marco Green
March 13, 2018

The Rs 960-crore initial public offering (IPO) by mini-ratna Bharat Dynamics will get off the ground today. The offer comprises of offer for sale (OFS) by Government of India (GoI) of 2.24 crore shares.

The minimum lot bit is 35 shares.

The issue closes on Thursday, 15 March 2018.

SBI Capital Markets, IDBI Capital Markets and Securities and Yes Securities will manage the public issue.

Incorporated in 1970, Bharat Dynamics is engaged in the manufacture of surface-to-air missiles (SAMs), anti-tank guided missiles, underwater weapons, launchers, and test equipment, and supplies them to the Indian armed forces.

With an order book of Rs 10,543 crore, the missile maker is likely to gain from the government's New Defence Procurement Policy (DPP) 2016 Make in India. BDL's focus on increase in indigenisation of products, strong focus on R&D and exports is expected to boost revenue visibility and profitability going forward.

Bharat Dynamics has priced its shares in a band of Rs413-428 per share. Further, BDL has a strong order book and revenue visibility, coupled with superior return ratios compared to peers. But delays in awarding of contracts and postponement in the company's foray into worldwide markets will be a key overhang. The stock is being offered at reasonable valuations (16x FY17 EPS), at the upper band of Rs 428 per share. At this valuation, the issue seems reasonably priced. While opportunity size is huge, order inflow/execution could be bumpy, given the nature of the defence industry.

The Hyderabad-based company has three manufacturing facilities located in Hyderabad, Bhanur and Visakhapatnam. These facilities will be used to manufacture MRSAMs and VSHORADMs, respectively.

Bharat Dynamics functions in a lucrative and attractive sector having strong backing from the government, yet faces challenges driven by the government itself.

Cancellation/modification of existing orders, lower budget allocation may adversely affect the business.

Other reports by Click Lancashire

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