ABG Shipyard targets $200m from share sale
ABG Shipyard, India’s largest private sector shipbuilder, has revealed plans to raise Rs8bn ($200m) in a share sale this year.
The sale, which is expected to take place in the third quarter of this year, will help fund the construction of a third shipyard and expand an existing facility on the Gujarat coast.
The Mumbai-based company is reported to be in talks with financial institutions, including ICICI Bank, to underwrite the deal.
ABG managing director Rishi Agarwal said that the company was keen to put up a third shipbuilding facility and that it was in discussions with several merchant banks to firm up plans for the share issue, but declined to identify the date of the offer.
Most Indian shipbuilders, including the private-sector yards like ABG, Bharati and Pipavav Shipyard have benefited from the worldwide boom in shipping in the past two years, and have full orderbooks through to 2011.
“Two years ago, the consolidated private sector order-order in India was $400m; today, the order-book is $4bn and growing,” said Mr Agarwal.
“A KPMG report on shipbuilding showed that revenues at private yards in India have gone up from $250m to $1bn in just two years. India’s share of the global shipbuilding industry is just 1% at the moment, but it is not too much to hope that it will reach 5% within the next five years.”
ABG’s orderbook stands at $1.7bn, with bulk carriers of different sizes dominating orders and offshore vessels like anchor handlers getting an honourable mention. It has been delivering vessels at the rate of one ship every five weeks.
Prime amongst the vessels on order are a dozen 35,000 dwt handysizes each for Thailand’s Precious Shipping and Hamburg-based Vogemann.
There are also six supramax double-hull, double-bottom bulkers for Mumbai’s Essar Shipping and three 54,000 dwt supramaxes for Precious Shipping, the first such vessels to be ordered by the Bangkok-based shipowner.
ABG’s proposed third facility will be able to build vessels measuring 350 m in length, compared with 250 m at its existing facility in Dahej, said chief financial officer Dhananjay Datar. The company is yet to decide on the location of the new yard.
The share issue comes at a precarious time in financial markets. ABG shares, which had risen on Monday by nearly 5% to Rs719.60, declined to Rs694.45 on Tuesday as India’s Sensex index swung alarmingly, losing more than 300 points before settling at 15,626, only marginally lower than its Monday closing mark.
The Sensex has lost 23% in the first three months of this year, from a record level of nearly 21,000. The US sub-prime crisis and galloping inflation in India, and a proposal in the budget to raise tax on short-term capital gains from 10% to 15%, have all contributed to the decline.
Two large public offerings in the Indian market — from Dubai construction company Emaar and pharmaceutical firm Wockhardt — were withdrawn for fear they would not receive adequate public support.
Nevertheless, financial analysts feel that a further sale of shares by ABG would probably be fully subscribed.
“We expect several public issues to hit the market in the second quarter of the new fiscal year,” said Standard Chartered Mutual Fund’s managing director Naval Bir Kumar.
“While the retail investor, who has been badly stung in recent months by negative returns from issues like Reliance Power, may baulk at the thought of putting money into them, the good offerings will be lapped up by financial institutions, banks and mutual funds. Shipyards appears to be a good sector, and an offer from ABG should go through comfortably.”
The sale, which is expected to take place in the third quarter of this year, will help fund the construction of a third shipyard and expand an existing facility on the Gujarat coast.
The Mumbai-based company is reported to be in talks with financial institutions, including ICICI Bank, to underwrite the deal.
ABG managing director Rishi Agarwal said that the company was keen to put up a third shipbuilding facility and that it was in discussions with several merchant banks to firm up plans for the share issue, but declined to identify the date of the offer.
Most Indian shipbuilders, including the private-sector yards like ABG, Bharati and Pipavav Shipyard have benefited from the worldwide boom in shipping in the past two years, and have full orderbooks through to 2011.
“Two years ago, the consolidated private sector order-order in India was $400m; today, the order-book is $4bn and growing,” said Mr Agarwal.
“A KPMG report on shipbuilding showed that revenues at private yards in India have gone up from $250m to $1bn in just two years. India’s share of the global shipbuilding industry is just 1% at the moment, but it is not too much to hope that it will reach 5% within the next five years.”
ABG’s orderbook stands at $1.7bn, with bulk carriers of different sizes dominating orders and offshore vessels like anchor handlers getting an honourable mention. It has been delivering vessels at the rate of one ship every five weeks.
Prime amongst the vessels on order are a dozen 35,000 dwt handysizes each for Thailand’s Precious Shipping and Hamburg-based Vogemann.
There are also six supramax double-hull, double-bottom bulkers for Mumbai’s Essar Shipping and three 54,000 dwt supramaxes for Precious Shipping, the first such vessels to be ordered by the Bangkok-based shipowner.
ABG’s proposed third facility will be able to build vessels measuring 350 m in length, compared with 250 m at its existing facility in Dahej, said chief financial officer Dhananjay Datar. The company is yet to decide on the location of the new yard.
The share issue comes at a precarious time in financial markets. ABG shares, which had risen on Monday by nearly 5% to Rs719.60, declined to Rs694.45 on Tuesday as India’s Sensex index swung alarmingly, losing more than 300 points before settling at 15,626, only marginally lower than its Monday closing mark.
The Sensex has lost 23% in the first three months of this year, from a record level of nearly 21,000. The US sub-prime crisis and galloping inflation in India, and a proposal in the budget to raise tax on short-term capital gains from 10% to 15%, have all contributed to the decline.
Two large public offerings in the Indian market — from Dubai construction company Emaar and pharmaceutical firm Wockhardt — were withdrawn for fear they would not receive adequate public support.
Nevertheless, financial analysts feel that a further sale of shares by ABG would probably be fully subscribed.
“We expect several public issues to hit the market in the second quarter of the new fiscal year,” said Standard Chartered Mutual Fund’s managing director Naval Bir Kumar.
“While the retail investor, who has been badly stung in recent months by negative returns from issues like Reliance Power, may baulk at the thought of putting money into them, the good offerings will be lapped up by financial institutions, banks and mutual funds. Shipyards appears to be a good sector, and an offer from ABG should go through comfortably.”