Cochin Shipyard OFS opens for retail investors today; should you bet or avoid?

Cochin Shipyard OFS: Falling for the second consecutive session, Cochin Shipyard share price dropped 2 per cent in intraday trade on Thursday, October 17, while the company's offer for sale (OFS) opened for retail investors. The OFS opened for non-retail investors on October 16. Cochin Shipyard 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 per cent lower at ₹1,565.

The government proposes to sell a 5 per cent 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 per cent of the total paid-up equity share capital of the company on October 16, and is selling an equal number of shares on October 17.

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," PTI reported.

Should you bet?

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, Research Analyst, 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 per cent returns in one year.

This further highlights the company’s strong appeal to the participants.

After the decision of OFS here, the government will sell up to a 5 per cent 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.

Ajit Mishra, SVP- Research, Religare Broking

Cochin Shipyard has experienced a correction over the past three months following a remarkable surge.

The stock has declined approximately 45 per cent 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 are advised to wait for a recovery and sustained trading above ₹1,850 before considering new long positions.

Jathin Kaithavalappil, AVP institutional research, Choice Broking

The OFS made by the government in this case (Cochin Shipyard) 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.

Pravesh Gour, Senior Technical Analyst at Swastika Investmart

One of India's top shipbuilding and maintenance firms, Cochin Shipyard Ltd., has made a 5 per cent interest available for purchase at a minimum price of ₹1540 per share. 

Investors have a rare chance to purchase shares in a reputable public sector enterprise (PSU) at a competitive price through this OFS. 

One of the biggest shipbuilding and maintenance enterprises in India, Cochin Shipyard is renowned for its strong finances and government support. 

Investing in the company through an OFS offers a number of possible benefits. The shares may be offered at a discount to market prices due to their floor price of ₹1540, which could present a chance for a value purchase. 

By assisting the government in lowering its ownership, the OFS may increase the company's market liquidity.

Read all market-related news here

Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.