Why Mazagon Dock Shipbuilders shares are down 50% on few trading apps today

Against a previous close of Rs 4,728.80 apiece, Mazagon Dock Shipbuilders Ltd shares opened at Rs 2,375 apiece on Friday, down 49.77 per cent, surprising many investors. The fall in the shares of the defence player was due to the stock getting split from face value of Rs 10 each into shares with face value of Rs 5 each. It is possible that trading apps of certain brokerages might be showing the unadjusted Mazagon Dock Shipbuilders share price for yesterday and, thus, suggesting a 50 per cent-odd fall on the counter.

Adjusted for the stock split, Mazagon Dock Shipbuilders shares were trading 0.45 per cent higher on BSE.

Mazagon Dock Shipbuilders is among the leading shipbuilding yards in India. It offers services to the Indian Navy & Coast Guard.  Since 1960, MDL has built a total 802 vessels including 28 warships, from advanced destroyers to missile boats and 7 submarines. MDL had also delivered cargo ships, passenger ships, supply vessels, multipurpose support vessels, water tankers, tugs, dredgers, fishing trawlers, barges & border outposts for various customers.

The stock split activity was carried out to comply with DIPAM guidelines on capital restructuring, the PSU told stock exchanges earlier. It would encourage wider participation of small investors. Besides, it will enhance liquidity of the equity shares of the company in the stock market, Mazagon said in a BSE filing earlier.

Mazagon Dock Shipbuilders recently suggested that the normalised PBT margins for the industry range from 12-15 per cent. Margins in recent quarters have been higher due to cost efficiencies and project completions ahead of schedule, Arihant Capital Market said in a November note.

It noted that Mazagon Dock Shipbuilders is on track to deliver significant projects by December 31,2024. This includes the 6th submarine, the final 15B destroyer, and the first 17A frigate. Some minor delays were reported, though Mazagon Dock Shipbuilders remains optimistic about completing these projects largely on schedule, it said.

Mazagon Dock is nominated for 3 additional Scorpene submarines, with revenue recognition on a percentage-of-completion basis. The expected execution timeline is six years for the first submarine, followed by one per year. For Project 75I, Mazagon has partnered with a German designer and has submitted a bid. The company is optimistic about securing this order.

"The company has initiated plans to expand its facilities significantly. They recently acquired 15 acres adjacent to the existing yard and another 40-acre parcel near JNPT for future shipbuilding and repair capabilities. These expansions will allow Mazagon Dock to handle larger vessels and up to double its current capacity.  Execution of these projects is expected over the next four to five years, with a planned capex of around Rs 5,000 crore," Arihant Capital Markets said last month.

Mazagon maintains a strong cash position, with around INR 40bn in reserves. These funds are being deployed for capacity expansion, with limited plans for dividend payouts in the short term, Arihant Capital Markets noted.