AVOID. IPO Report GARDEN REACH SHIPBUILDERS & ENGINEERS LTD. IPO Details. Research Analyst : Astha Jain

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1 IPO Report AVOID IPO Details Issue Date 24 th Sept-26 th Sept 2018 Price Band /Share * Bid Lot 120 & in multiplethereof Face Value Rs 10/Share Listing BSE, NSE Offer For Sale 29,210,760 Eq Shares Fresh Issue ---- Pre Issue Eq Shares Cr Eq Shares Post Issue Eq Shares Cr Eq shares BRLM IDBI Capital Markets & Securities Ltd, Yes Securities Ltd Registrar Alankit Assignments Ltd Note : Discount of Rs 5/share offered to Retail & Employee Research Analyst : Astha Jain For Private Circulation Only Company is a shipbuilding company in India under the administrative control of the MoD and primarily adhere to the shipbuilding requirements of the Indian Navy and the Indian Coast Guard. In addition to its ship and warship building capabilities, company is engaged in engineering and engine production activities. As a part of company s engineering division, company manufacture deck machinery items, pre-fabricated portable steel bridges and marine pumps. Modern Manufacturing Platform and Integrated Shipbuilding Facilities to deliver quality products: Company s modern infrastructure facilities available at its shipyard coupled with its vast expertise give company a significant edge over other domestic defence shipyard. Company has been taking steps to ensure simplification in the process and procedures, adopt modern practice and technology, enhance capacity and modernize infrastructure and improve on governance. Strong and Established Relationships with Indian Navy and Indian Coast Guard : Company have long-standing relationships with the Indian Navy and Indian Coast Guard. Company s relationship and experience with the Indian Navy is over five (5) decades, beginning when company delivered the INS Ajay, the first indigenous warship, to the Indian Navy in These relationships allow company to secure shipbuilding projects. Company have delivered 96 ships to the Indian Navy and Indian Coast Guard on an aggregate basis. Both company s historical operations and ongoing operations exhibit the level of satisfaction and depth of relationships company possess with respect to the Indian Navy and Indian Coast Guard. Strong Order Book Company s aggregate order book as on July 31, 2018 was 203, million, comprising gross order value in the shipbuilding segment, engineering segment and the engine segment of 200, million, million and 1, million, respectively. Valuation The co is bringing the issue at p/e multiple of approx. 14 on FY18 eps at price band of Rs /share. Although, company is one of India s leading public sector shipyards catering to the defence sector but due to weak financial performance (Loss at operating level in FY17 & FY18),co is not looking attractive to deploy the funds in at present level. Hence, we recommend Avoid on issue.

2 - Company Overview Company is a shipbuilding company in India under the administrative control of the MoD and primarily adhere to the shipbuilding requirements of the Indian Navy and the Indian Coast Guard. In addition to its ship and warship building capabilities, company is engaged in engineering and engine production activities. As a part of its engineering division company manufacture deck machinery items, pre-fabricated portable steel bridges and marine pumps. Company s shipbuilding division contributes a significant majority of its revenue from operations. Company have derived 94.14%, 90.13%, 92.19% and 94.76% of its gross revenue from operations in Fiscals 2018, 2017, 2016 and 2015 respectively from its shipbuilding division. Company was incorporated in 1934 under the Indian Companies Act, 1913, and was later acquired by the Government of India from Macneill & Barry Limited on May 19, Shortly after becoming a CPSE in 1960, company built India s first indigenous warship the INS Ajay, in the year Company s shipbuilding product line spans from technologically sophisticated Frigates and Corvettes to Fast Patrol Vessels. In last five (5) decades, company have built and delivered ships ranging from small to large and advanced vessels including frigates, anti-submarine warfare corvettes, missile corvettes, landing ship tanks, landing craft utilities, survey vessels, fleet replenishment tankers, fast patrol vessels, offshore patrol vessels, inshore patrol vessels, WJ-FAC, hover crafts and fast interceptor boats to the Indian Navy, Indian Coast Guard, MHA and Governments of other countries. Company have built and supplied more than 750 vessels to carry men and materials as well as for the surveillance of the coast line. Over the years, company have responded to the varied shipbuilding requirements of the Indian Defence Services and have evolved from building simpler vessels to building bigger and technically advanced warships. Presently, company have three (3) separate facilities for shipbuilding, all of which are located in close vicinity of each other at Kolkata, India. Company build its ships at the Main Works Unit and the Rajabagan Dockyard. Company s third facility, the FOJ Unit is primarily used for fitting out and repair of ships. On September 5, 2006, company was conferred with the status of Schedule B & Mini Ratna-Category I Company by the Department of Public Enterprises under the Ministry of Heavy Industries and Public Enterprises, Government of India. For Private Circulation Only \

3 Investment Rationale Strong Order Book Company s aggregate order book as on July 31, 2018 was 203, million, comprising gross order value in the shipbuilding segment, engineering segment and the engine segment of 200, million, million and 1, million, respectively. The aggregate value of company s order book represents the total nominal value of the contracts that have not been completed, excluding the portion of revenue in respect of those orders that company have recognized as of such date. Strong and Established Relationships with Indian Navy and Indian Coast Guard Company have long-standing relationships with the Indian Navy and Indian Coast Guard. Company s relationship and experience with the Indian Navy is over five (5) decades, beginning when company delivered the INS Ajay, the first indigenous warship, to the Indian Navy in These relationships allow company to secure shipbuilding projects. Company have delivered 96 ships to the Indian Navy and Indian Coast Guard on an aggregate basis. Both company s historical operations and ongoing operations exhibit the level of satisfaction and depth of relationships company possess with respect to the Indian Navy and Indian Coast Guard. Modern Manufacturing Platform and Integrated Shipbuilding Facilities to deliver quality products Company has undertaken major modernization of its infrastructure. In the year 2013, company developed a new integrated shipbuilding facility at the Main Works Unit that allows company to use modular construction when building warships, which enable company to reduce the shipbuilding period, improve quality through the implementation of integrated construction technology, and to construct ships in line with the global practices in the shipbuilding industry. Company s facilities allow company to produce eight (8) large ships and twelve (12) medium/ small ships concurrently. In addition, company have constructed new hull shop, module shop for mega block integration, dry dock and building berth. Risk factors Company primarily caters to requirement of the Indian Navy and Indian Coast Guard. Its revenue from operations made to Indian Navy and Indian Coast Guard has been 12, million, 8, million and 15, million comprising of 93.69%, 90.10% and 92.18% of its total revenue from operations for the Fiscals 2018, 2017 and 2016 respectively. Company expect to continue to derive most of its sales from work performed under the MoD contracts for Indian Navy and Indian Coast Guard. These contracts depend upon the continuing availability of budgets extended to the MoD, which in turn allocates the funding to the Indian Navy and the Indian Coast Guard, company s largest customers. A decline or reprioritisation of funding in the Indian defence budget or any reduction or unavailability of funds to its customers, Indian Navy and Indian Coast Guard or delays in the budget process could have an adverse impact on the funding of these contracts and award of new contracts. For Private Circulation only

4 Objects of Offer The objects of this Offer are: (i) to carry out the disinvestment of 29,210,760 Equity Shares by the Selling Shareholder; and (ii) to achieve the benefits of listing the Equity Shares on the Stock Exchanges. Company will not receive any proceeds from this Offer and all proceeds shall go to the Selling Shareholder. Financial Statements Rs Cr Particulars FY15 FY16 FY17 FY18 Total Income Operating Exp EBIDTA (161.10) (14.83) EBIDTA Margin (%) (17.34) (1.10) Other Income Depreciation EBIT Interest PBT E/O Item PBT After E/O Item Tax PAT Other Comp Inc (5.92) (4.80) Adjusted PAT Equity Capital Net Worth EPS ROE (%) ROCE (%) Book Value For Private Circulation only

5 HEM SECURITIES LIMITED MEMBER-BSE,CDSL,SEBI REGISTERED CATEGORY I MERCHANT BANKER Sebi Registration No For Research Analyst: INH MUMBAI OFFICE: 904, A WING. 9 TH FLOOR, NAMAN MIDTOWN, SENAPATI BAPAT MARG, ELPHINSTONE ROAD, LOWER PAREL,MUMBAI PHONE FAX JAIPUR OFFICE: , JAIPUR TOWERS, M I ROAD, JAIPUR PHONE FAX GROUP COMPANIES HEM FINLEASE PRIVATE LIMITED MEMBER-NSE HEM MULTI COMMODITIES PRIVATE LIMITED MEMBER-NCDEX, MCX HEM FINANCIAL SERVICES LIMITED NBFC REGISTERED WITH RBI Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an investment advice. Reader is requested to rely on his own decision and may take independent professional advice before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited, Directors and any of its employees shall not be responsible for the content. The person accessing this information specifically agrees to exempt Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and further agrees to hold Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The companies and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities there of, company (ies) mentioned herein and the same have acted upon or used the information prior to, or immediately following the publication. Analyst Certification The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the

IPO Report ICICI SECURITIES LTD SUBSCRIBE. Valuation. IPO Details. Research Analyst : Astha Jain

IPO Report ICICI SECURITIES LTD SUBSCRIBE IPO Details Issue Date 22 nd Mar-26 th Mar 2018 Price Band 519-520/Share Bid Lot 28 & in multiplethereof Face Value Rs 5/Share Listing BSE, NSE Offer For Sale