Nikhil Gandhi, chairman, Pipavav Shipyard told CNBC-TV18 that the promote stake after the deal will come down to 41 percent from 45 percent initially.
Nikhil Gandhi, chairman of Pipavav Shipyard says the private ship-builder is in talks with a French company for a strategic stake sale. He says this partnership is primarily aimed to bring in the technological knowhow and proprietary knowledge of military hardware into the country.
SAAB AB of Sweden has already a stake in Pipavav. SAAB AB and the new partner, if the stake sale goes through, will together own 15 percent in the company, says Gandhi.
"The promoter stake would come down from 45 percent to around 41 percent," Gandhi told CNBC-TV18 in an interview.
Below is verbatim interview of Nikhil Gandhi's comment on CNBC-TV18
Q: Any update that you can give us on the stake sale and the strategic partner that you all have been looking for?
A: Yes, we had the strategic partnership with the SAAB AB of Sweden and we are also in negotiation with another French giant. This partnership is primarily to bring in the technology and knowhow process and proprietary knowledge of those companies to manufacture military hardware for the first time in the country. It will be totally indigenous production which will benefit the country and also the shareholders. We are currently in the process of getting government approval so that we can complete the transaction.
Q: What will be the stakes of the two companies?
A: Together they will own 15 percent.
Q: Are you not looking at further sales?
A: Deal making is the right and the obligation of the entrepreneur if it benefits its shareholders. Beyond that I would not like to comment, because a lot of speculation is going around and I do not think that I want to comment on that. If anything benefits shareholders I am open to it. I have always done it in my life and will always do it, if it benefits my shareholders.
Q: How soon can this transaction get concluded? The stakes could be close to 15 percent for that French company. What could be the valuations that you all have worked up, negotiated, discussed and agreed upon?
A: I need to wait for the government approval. All those things may take couple of weeks because it is in the advance stage of the approval by the government. This is standard as per the government regulation and policy. There is nothing extraordinary. We hope that should come through in coming days and weeks. Once that is done we will be able to announce the valuation which is of interest to my shareholders and would be interesting.
Q: What was the promoter stake before the deal and what will it come down to?
A: The promoter stake would come down from 45 percent to around 41 percent.
Q: What will you be comfortable with as a minimum promoter’s stake?
A: 51 percent.
Q: Are you planning to buy more shares?
A: I would always look for avenues to increase my stake to 51 percent, because this is a special company. Defence is an exclusive sector. We are number one in terms of investment in the country and number one in terms of the infrastructure to produce the defence hardware.
We would like to see that the stake of the promoter remains 51 percent. That gives a long-term comfort because the way this sector and the company are growing, we do not want any misadventure. So, 51 percent is ideal stake. It would be our endeavour to do it as per the Securities and Exchange Board of India (Sebi) guidelines as early as possible.
Q: Is 15 percent certain? Will it not be more? News reports were suggesting that you all will offer 26 percent stake which could result in an open offer as well. Is that second option, 26 percent plus open offer ruled out and is it finalised at 15 percent stake?
A: No, I do not know. That discussion is different. I would rather stay away from commenting on that speculation. What I told you is the information shared with the stock exchange and the government for securing the approval. So, I can tell you only that much right now about these two deals. Rest of it, I would refrain from making any comments.
Q: You spoke about getting technology with this tie up. Apart from that will there be any other kind of financial impact on the back of this tie up?
A: There are two things. Firstly, when the global giants come and make investment in the company they see a long-term potential both in the company and the country. Secondly, they are transferring the proprietary knowhow, the knowledge bank and technology and also supervision which will enormously help us to deliver the military hardware faster to the government and build indigenously. So far, for 65 years since independence they have been imported.
It is a big advantage for the company and also for the country that these products are going to be manufactured in India. So it is not only financial benefit, but also a technological benefit and going forward our people will be able to absorb the technology which is very important for us to become a global player to reckon with in few years’ time that is our ambition for which we need to absorb the technology which can be done through these partnerships.
Q: What is the order book looking like?
A: Currently we are nearly Rs 9,000 crore and have put in several bids which are hoping to get some more contracts in this current year. We are pretty comfortable. We have received of late first very prestigious contract from Oil and Natural Gas Corporation (ONGC) for maintenance and dry-docking of one of the largest rigs in the world. We also have the contract from two of the largest offshore companies globally called Transocean and Noble. We have made good progress in last two quarters.
Q: This order book will last for how long? When you say Rs 9,000 crore that is executable by what time?
A: If I do not get any new contracts over the next 24 months, I will be busy executing these contracts over the next two years. We are hoping that some more contracts this year can keep us busy for next five-six years.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.