Mazagon Dock share price tanks 7% as government's OFS to sell up to 4.83% stake opens; check details

Shares of Mazagon Dock closed at ₹2,737.55 apiece on the NSE on Thursday. This shows that the floor price for the OFS is 7.76% lower from its previous close.

"Offer for Sale in Mazagon Dock Shipbuilders Limited (MDL) opens tomorrow for non-retail investors. Retail investors can bid on Monday. The government will divest 2.83% equity with an additional 2% as a green shoe option," DIPAM Secretary Arunish Chawla said in a post on X.

The OFS will open for institutional investors on Friday. Retail buyers can put in bids on April 7.

The government is selling 1.14 crore equity shares, with a greenshoe option to sell an additional 80.67 lakh shares.

The share sale of up to 4.83% at a floor price of ₹2,525 apiece would fetch about ₹5,000 crore to the exchequer.

The defence PSU reported a 28.8% increase in its consolidated net profit to ₹807 crore in the December quarter (Q3 FY25) as compared to ₹627 crore logged in the year-ago period.

Revenue from operations grew 33% to ₹3,144 crore in the October- December FY25. The company’s revenue during Q3 FY24 stood at ₹2,362 crore.

Its earnings before interest, taxes, depreciation, and amortisation (EBITDA) saw a 51.5% jump to ₹817 crore in the reporting quarter as against the ₹539 crore of the corresponding quarter last financial year. Mazagon Dock’s EBITDA margin advanced by 317 basis points (bps) to 26% in Q3 FY25 as compared to 22.8% in Q3 FY24.

Mazagon Dock (MDL) also declared a total interim dividend for FY25 of ₹467.72 crore, i.e., ₹23.19 per share (231.90% of face value ₹10), which is the highest ever, the company said.

The company in FY25 planned to provide one destroyer, one frigate, and a submarine.

Its order book stood at ₹39,800 crore as of 2QFY25. Its potential significant projects include the P75-I submarines, four P17A stealth frigates, four next-generation destroyers, and the P17 Bravo project.

The firm also secured a ₹19,900 crore contract from the Ministry of Defence to construct an air-independent propulsion plug to improve conventional submarines' endurance.

Why are shares falling today?

The stock price, when the government sells stake via OFS, generally sees a sharp decline due to several factors such as more supply, market perception, and discounted pricing.

The sale of a large quantity of shares increases the supply of that particular stock in the market. If the demand doesn’t match the supply, the stock price falls.

Secondly, when the government sells its stake in a PSU, it might be perceived by some investors as a sign that the government is reducing its commitment to the company. This impacts the stock price negatively.

Besides, often, OFS transactions are priced at a discount to the last traded price to attract investors. While this helps in ensuring the shares are sold, it can lead to an immediate drop in the stock price to align with the OFS pricing, as traders anticipate the stock price adjusting to the lower sale price.

Mazagon Dock Shipbuilders share price trend

Shares of Mazagon Dock Shipbuilders rallied 150% in the past 12 months and over 34% in the past six months. In the past 30 days, the stock has gained over 26%.