Institutions oversubscribe Cochin Shipyard OFS; opens for retail today

Falling for the second consecutive session, Cochin Shipyard's share price dropped 2 percent in intraday trade on Thursday, while the company's offer for sale (OFS) opened for retail investors.

The OFS opened for non-retail investors on October 16. Cochin Shipyard's share price opened at ₹1,559.55 against its previous close of ₹1,588.50 and fell to the level of ₹1,558. Around 12:50 pm, the stock traded 1.5 percent lower at ₹1,565.

The government proposes to sell a 5 percent stake in Cochin Shipyard through the OFS with a floor price of ₹1,540 per share. The government sold up to 65,77,020 shares, representing 2.50 percent of the total paid-up equity share capital of the company on Wednesday, and is selling an equal number of shares on Thursday.

Over-subscription by institutions

Meanwhile, according to a PTI report, the OFS received bids worth over ₹1,900 crore from institutional investors on Wednesday. Institutional investors over-subscribed the portion of shares reserved for them. As against 59.19 lakh shares offered, institutional buyers on Wednesday bid for 1.28 crore shares at an indicative price of ₹1,550.13 apiece, the PTI report added.

Mint reached out to several experts for their opinions on whether investing in the OFS is a good move. Here's what they said:

Sagar Shetty of StoxBox: Cochin shipyard boasts a strong order book of ₹22,500 crore, with significant revenue from the defence sector. Such a solid order book ensures robust revenue visibility in the upcoming quarters, while its healthy pipeline highlights a steady flow of potential business opportunities. Their strong performance is reflected in their share price, as the company generated over 200 percent returns in one year.

This further highlights the company’s strong appeal to the participants.  After the decision on OFS here, the government will sell up to a 5 percent stake; the shares are currently trading at a discount, indicating some volatility. While the company holds strong fundamentals and displays a strong order book, it is essential for retail investors to prudently evaluate their risk tolerance and investment horizon before making a decision.

Wait for recovery

Ajit Mishra of Religare Broking: Cochin Shipyard has experienced a correction over the past three months following a remarkable surge. The stock has declined approximately 45 percent from its all-time high and is currently trading near its long-term moving average, the 200-day exponential moving average (DEMA).

If the decline continues, the stock has immediate support at the ₹1,500 level, with the next support around ₹1,350. Investors should wait for a recovery and sustained trading above ₹1,850 before considering new long positions.

Jathin Kaithavalappil of Choice Broking: The OFS made by the government in benefits not only the state but also the investors who missed the first upsurge. The current valuation at a price-to-earnings ratio (P/E ratio) of 50 is realistic for the government to divest, while long-term investors can take advantage of the company’s sound fundamentals, strong order book, and good market visibility.

(By arrangement with livemint.com)