Pipavav on a hat-trick, on likely M&M buy

Shares of Pipavav Defence continue their upwards trajectory for the third straight day, up 10% today at Rs. 70 per share, having risen 32% since Tuesday, when share was trading at Rs. 53. Pipavav's parent and NSE-listed SKIL Infra is locked in 5% upper circuit at Rs. 26.30. News reports suggest that M&M will acquire close to 51% stake in the company, at roughly Rs. 66 per share, for a consideration of nearly Rs. 3,000 crore, in a three-phase deal.

In the first phase, M&M’s Mahindra Defence Systems will acquire 19% stake from promoters Nikhil and Bhavesh Gandhi. Second phase will be a preferential issue by Pipavav to raise Mahindra’s stake to 40%. Finally, M&M will make an open offer to public for additional 26% stake. Pipavav’s board is likely to meet tomorrow to approve the deal, although an announcement to the stock exchange is still awaited.

Pipavav is a prized asset due to its well-established infrastructure and a strong order book. Apart from making warships, Pipavav also constructs patrol boats and cargo ships for customers across the world.   For FY14, it reported revenue of Rs 2,278 crore and net profit of Rs 8.4 crore. Its current order book stands at Rs. 9,000 crore while it has submitted bids for another Rs. 30,000 crore worth of projects. Other players such as L&T, Hero Group and French firm DCNS were also reportedly eyeing a pie in Pipavav Defence.