DREDGING CORP. : PM Modi Said Govt. targets 23 Inland waterways upto 2030.
Momentum visible in DREDGING CORP.
1 Like
.
Discl: The list is only for information and education purpose.
I may have investments from lower level in some of the stocks mentioned in this article. I may be biased. it is not a buy sell recommendation. Pl do your own assessment before buying selling.
Among the defence shipping stocks from the above list we may note that there is wide valuation disparity between Mazgaon dock and other two Garden reach & Cochin shipyards
If you see the financial performance of last few quarters, all the three have fared almost equally well. Mazgaon dock though has the highest order book currently trades at 42 P/E TTM, where as Garden reach trades at 67 P/E TTM and Cochin shipyards at 72 P/E 73 TTM.
One of the reason could be that the promoter holding for mazgaon dock is 84% where as for Garden reach and Cochin shipyard is 73% / 74% respectively.
As per norms the govt is supposed to bring down its holding to minimum 74% for all PSUās
Also, In a recent pre- budget meeting with the finance minister, the MF industries and other related institutions had suggested that the Govt should increase liquidity /floating stock in some of the PSU stocks to enable Mutual funds and other institutions to participate in owning those stocks.
So going by the above facts , the next OFS candidate could be Mazgaon dock.
If there is an OFS, the govt offers the stock at 5-8% discount to market price to enable institutions and MFās to buy the stock in bulk.
In such a scenario , the stock price falls by 5-8%.
So it could be the OFS hangover/ Low floating stock which perhaps haunts the MFās and other institutions and HNIās who are waiting to pick up at a lower discount during OFS.
But when is the OFS? should a retail investor should wait for the OFS?
Going by the historical data, Whenever there is an OFS at a discounted price, on first day the stock price falls by 5-8 % and MF and institutions / HNIās subscribe to the OFS. On 2nd day the retail investors subscribe and simultaneously the share price recovers as more and more investors buy from open market. Thereafter , the stock price stabilises and depending upon fundamentals the stock price goes up as more and more qty are bought into.
If you are a long term retail investor and if you find the fundamentals and valuations of the stock is reasonable , and you donāt bother for temporary blip ā¦ any time is the right time to buy without waiting for the OFS. If your assessment is high valuation , then you may consider adding in decline.
Discl:
Invested in defence shipping stocks from lower level. I may be biased. Please do your own assessment before buying. Investments in PSU stocks carry its own risk due to frequent changes in govt policy which may or may not be in favour of retail investors.
5 Likes
1 Like
Excellent analysis. Thank you for sharing this. If you can enlighten us further on
- As you said Mazgaon could be the next OFS. And price might fall
- But Mazgaon has the highest orders right now. Plus it has the lowest PE.
Thus I think, it will not fall that much (yes it will fall, but not to the price of what we can buy Mazgaon today or this week.
So this is right time to enter Mazgaon at todayās price and current PE.
This is my thinking. I might be wrong.
2 Likes
@1957 Om Bro !! (i know i knowā¦but allow me to use that salutation ! ā¦Its a modern saluā¦bahaha 
)
If we go by news and if OFS happens.
Does that mean all possible OFS candidates, IIRFC - NFL- RCF, may also follow similar ādropā pattern ?
1 Like
Cochin Shipyard signing large contract with European Client
2 Likes
What I have seen there are a couple of differences between OFS of pvt companies and OFS of PSUās.
In pvt companies most of the time OFS is carried out all of a sudden and the investors are taken on a surprise and the shares takes a hit where as the for PSU OFS/ stake sale , some hints are given well in advance which is healthy since existing share holders are are aware of the impending OFS, so they would not get surprised if the share slips a bit and the investors are also ready with cash to add in to such dips if the stock is fundamentally sound.
The second difference is normally , PSUās offer the OFS prices only @ 8-10% discount to market price where as pvt companies at times can give a huge discount to market price in order to onboard reputed investors. There may be other reasons too in offering huge discount to the market price in case of Pvt company OFS.
Another difference I have seen is post OFS, the share recovers very fast , where as in case of PVT company shares, it takes time to recover due to same huge discount to market price.
Having said that it does not matter much to long term investors if the selected stock is Fundamentally sound and available at a good valuation. I buy or add in every dip in such a stock whenever I have money without bothering or worrying much about OFS.
The Govt is the promoter and as per SEBI guidelines, the Govt need to ensure that they should ensure their stake to max 74% in any PSU to ensure enough liquidity. It is also good for the minority share holders as the investor base widens with institution / MF participation.
During Modi 3, the Govt seems to have decided few things :
(1) There would not be any divestment target set during Budgetā¦If they set a target , they have to achieve at any cost or else they have to face criticism for not achieving it.
If they achieve it , they may have to sell stake at any cost under any market conditions
(2) They would henceforth call it as Capital receipt. They would sell stake as and when market conditions are good and PSU financial performance is good.
So the basic target is to enhance financial performance of the PSU consistently which would result in to getting more dividends and share price appreciation and then they may like to sell small stakes.
(3) However , the Govt has made it clear that there would not be any strategic sale in some 6 sectors (major stake sale which could lead to Govt becoming a minority shareholders - less than 50%).
These critical sectors where our Govt would like to have full control with major stake are Defence , Atomic , Energy (oil & gas, coal, power ) , Rail transport , Finance,.
check differences in OFS price offered for SJVN, NHPC and others and CMP.
1 Like
SJVN was ~Rs.82 days before OFS & howevered ~70 after OFS. OFS was on 22.9.23
NHPC was ~Rs.75 days before OFS & howevered ~68 on news day i think, OFS was 19.1.24
Afterwards both went up ~40%.
I know this isnāt much of an analysis, but my average brain keeps trying to find simple patterns. 
So, basically, it corroborates Omās view:
I couldnāt gather the courage to hook up with Mazgaon throughout 2023. Letās see if I can muster up the courage this weekend! 
2 Likes
I think @hardik_shah1 perhaps wanted to know about OFS price and CMP of SJVN & NHPC !
SJVN OFS was on 21 sept 2023 ofs price 69ā¦CMP. 131 Return post OFS as on 29th June is 89% and annualized return is 118%
NHPC OFS was on 18 Jan 2024 OFS price was 66 ā¦CMP 100ā¦Return post OFS is 51.5% ā¦annualized return is 103%
As I had bought these stocks at 9-10% dividend yield , these return needs to be added.
Further appreciation post OFS would depend upon the quarterly financial performance, govt policy etc which we need to watch.
I feel Considering For an energy Utility company and good dividend paying stock , return is quite reasonable. we can not compare return from an utility company growing at slower pace with a defence company growing very fast.rate. My return expectation from an utility company is moderate and not Multibaggers.
Discl: I have investments in both sjvn & nhpc from lower level as a part of my renewable energy basket and would like to hold for long term subject to Govt policy continuance and good quarterly performance.
It is not a buy sell recommendation.Please do your own assessment before investment. PSU stocks carry risk of change in govt policy which may or may not be Favorable to minority share holder.
1 Like
@LarryWink and OM
Sorry. Comment was more to show what you have described just described. I held SJVN and NHPC during the time. adding NHPC during its OFS 
I meant to say that OFS really does not matter if it is known ahead of time and for obvious reasons. Shot off the comment as I lacked the time to give exact data.
2 Likes
Export orders for defence shipping companies.
Our defence Shipping companies have come a long way not only to assist to become self reliant India - Atma nirbhar Bharat, but also participating in generating revenues from export market.
Currently, India has less than one percent share of the global shipbuilding market, which is largely dominated by China, South Korea, and Japan. Replacement of aging fleets is a top concern for most shipowners, specifically in Europe which is implementing some of the toughest maritime environmental regulations. The growing orders from European shipowners are however helping India as it vies for a top position in the industry.
Earlier, Mazgaon dock and Cochin shipyards, Garden reach had signed master service agreement with US Navy.
While Defence shipping companies are taking the lead in exports, others are not lagging behindā¦HAL, BEL, Bharat dynamics , Midhani , Solar industries , L&T , Bharat forge and many others including ancillaries.
1 Like
Mazgaon Dock OFS
Since the Govt has already declared its intention of OFS in Mazgaon dock, the stock is likely to be under pressure until OFS is executed, since investors are likely to wait until OFS to buy in order to get a better price if possible.
And so the wide gap in valuation between its peers may continue.
But once the OFS is executed, it may try to catch up at a rapid rate l.
When would be the OFS of Mazgaon dock ,?
Now since a hint has been given, it could be any day all of a sudden depending upon market conditions.
However, there is a hitch here!
Could it be before budget or post budget ?
it is difficult to say because the Govt has decided not to take a target of āDisinvestmentā ,. They would call it capital receipt and this change in nomenclature is supposed to be officially declared in budget session.
However , if the Govt may also carry out OFS before budget , they may add the proceeds to capital receipts for 2024-25.
1 Like