Punj Lloyd Update

Punj Lyod update...

Friday, January 18, 2008

Punj Lloyd has entered into an agreement with Pipavav Shipyard (PSL) to acquire 129,361,538 equity shares of Rs 10 each at a price of Rs 27 a share aggregating to Rs 3.49 billion, which constitutes 28.84% of the present paid up share capital of PSL and which shall constitute 25.56% of the fully diluted paid up share capital of PSL upon issuance of equity shares by PSL to 2i Capital PCC and IDBI against in-principle equity commitments. Punj Lloyd had bought the stake for around Rs 400 crore valuing the company at around Rs 1600 crore. Sources say that Papavav Shipyard is likely to file for an IPO in a weeks time. They have appointed merchant bankers towards this issue. Pipavav Shipyard is likely to raise around Rs 800 crore from this IPO, but whether this will be a frsh issue or from dilution of promoters stake is not known. But what is certain is that this will be great value unlocking for Punj Lloyd. Watch this space for more. Punj Lloyd Limited (PLL), a global EPC services provider in energy and infrastructure domains, has signed a Memorandum of Understanding (MOU) to invest Rs 403 crore for acquiring 25.1% stake in Pipavav Shipyard Limited (PSL). This is a strategic investment by Punj Lloyd to support the growth of its business in the offshore sector. In view of the robust oil prices and the substantial E&P activities in the country, the opportunity for revamping existing offshore platforms and deploying new platforms by upstream oil and gas companies is expected to be significant. The proposed investment in PSL will provide Punj Lloyd access to capabilities to serve this market more effectively. PSL will provide Punj Lloyd access to fabrication facilities for platforms, SBMs, rigs and jackets to exploit the opportunities in this sector. Punj Lloyd is currently executing the Heera Field Redevelopment project for ONGC. The facility at Pipavav Shipyard can also be used for fabrication of vessels for petrochemicals and refineries. Punj Lloyd expects to gain through this association given the increasing demand for offshore facilities in India and abroad and with the ongoing shortage of shipyard capacity in India and globally. Growth in the shipyard industry is expected to be over 30 % per annum in the next few years. According to our assessment of the value unlocking on the expected book building price P L is valued at Rs 750 per share whereas IDBI will get close to Rs 350 crs unlocked value. IDBI and Punj Lloyd were CNI research calls for S C sections. We maintain our BUY in IDBI as well as Punj irrespective market behaviour. Punj Lloyd may be looking at significant value unlocking via Pipavav Shipyard. According to reports, Pipavav Shipyard is likely to enter the capital market soon. And Punj Lloyd had only recently bought 25% stake in Pipavav Shipyard in August.