Mazagon Dock Clarifies on Rs 70,000 Crore Submarine Order: What It Means for Indian Investors
Mazagon Dock Shipbuilders Ltd. on Monday issued a clarification that there are ‘no negotiations’ currently with the Defence Ministry for the Rs 70,000-crore deal for six submarines — to be built in India with German support under ‘Project 75 India’. This clarification comes after news agency ANI reported on Sunday, quoting Defence officials, that the Centre has given clearance to Defence Ministry and Mazagaon Dock, to begin negotiations.
Background of the Project
In January, the Defence Ministry selected the state-owned Mazagaon Dock for building six submarines with Air Independent Propulsion systems with Germany’s ThyssenKrupp Marine Systems as its partner. The two companies had signed a Memorandum of Understanding in June 2023. Under the MoU, Thyssenkrupp would manage engineering and design, while Mazagon Dock would undertake construction and delivery of the submarines for the Indian Navy.
Impact on Mazagon Dock’s Order Book
During earnings call in May, Mazagon Dock management said they are expecting the P-75 additional submarines and the P-75(I) submarines contract to be signed in the current financial year. That is expected to increase the company’s order book from the present Rs 32,000 crore to more than Rs 1.25 lakh crore. ‘We have already augmented our capacity from the construction of six submarines to 11 submarines because we are preparing to take both the additional submarines of 75 and the six P-75(I) for which we have already set up the SSA facility or the submarine section assembly workshop,’ Chairman and Managing Director Capt. (Retd.) Jagmohan said.
Stock Market Reaction
The clarification on the Rs 70,000-crore deal was shared after market hours. The stock settled 2.05% higher at Rs 2,755.70 apiece on the NSE, compared to a 0.39% advance in the benchmark Nifty 50. Mazagon Dock’s shares have risen 24.93% in the last 12 months and 23.7% year-to-date.
Analyst Ratings and Price Target
Out of six analysts tracking the company, four maintain a ‘buy’ rating, three recommend a ‘hold’ and two suggest ‘sell’, according to Bloomberg data. The average 12-month consensus price target of Rs 3,232.5 implies a potential upside of 17.3%.
For Indian investors, this development is significant as it highlights the potential for growth in the defence sector, particularly in companies like Mazagon Dock that are involved in high-value projects like submarine construction. However, it’s also important to consider the risks and uncertainties associated with such projects, including delays and changes in government policies.
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Conclusion
In conclusion, the clarification by Mazagon Dock on the Rs 70,000-crore submarine order is a significant development for Indian investors. While the project has the potential to boost the company’s order book and growth prospects, it’s essential to consider the risks and uncertainties associated with such projects. As the Indian stock market continues to grow and evolve, it’s crucial for investors to stay informed and up-to-date on the latest developments and trends.
