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The modern infrastructure facilities coupled with the vast expertise give GRSE a significant edge over other domestic defence shipyard. GRSE has undertaken major modernization of its infrastructure. In the year 2013, they developed a new integrated shipbuilding facility at the Main Works Unit that allows them to use modular construction when building warships. In addition, they have constructed new hull shop, module shop for mega block integration, dry dock and building berth. Their in-house facilities are also augmented by hiring larger dry docks of the Kolkata Port Trust on as-and-when required basis. GRSE has also recently inaugurated modern pump test bed facility at Taratala unit on June 11, 2018 for testing the pumps they manufacture. To further increase their construction capacity, GRSEL use Rajabagan Dockyard exclusively for the construction and fitting out of small ships. Further, they completed the moderisation of their DEP unit in Ranchi in 2016. With commissioning of the “Modernised Diesel Engine Assembly Shop”, the DEP unit is poised to take up work on next generation of marine diesel engines and also move ahead on to produce marine diesel engines under 'Make in India' initiatives.

Valuation and Outlook

Garden Reach Shipbuilders & Engineers Ltd.( GRSEL) stands to gain from operating leverage and also raise Stability from government infrastructure projects. At a P/E of 16.5x we believe that GRSEL is fairly valued. We assign a Subscribe rating to the IPO.

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