Bharati Shipyard: Opportunity?

Bharati Shipyard is one stock that's trading at a tremendous discount. Its IPO had a band of 55-66 rupees. It got oversubscribed by 78 times. It listed at a nice premium. It has touched a high of around 850 rupees. And now, as on 21/03/09, its Last Traded Price on the Bombay Stock Exchange is 51.1 rupees.

The negatives to the company are in the form of the FCCBs that are maturing. The company had a total debt of $100 million, out of which $48.9 mil remain to be repaid. FCCBs worth $1.4 mn matured on Dec 13, 2008. The remaining $46.9 mil have to be dealt with before Dec 13, 2010.
The company has the Total Order Book - Rs 46353.575 million as on March 2008. With reserves (excluding revaluation reserves) of 5452.723 mil rupees as on March 2008, I think the troubles are not so severe, and the bear has mauled this scrip. It has definitely bottomed out, in my opinion.

Bharati Shipyard also won a defence order worth 281 crore rupees. If the reports are correct, Bharati Shipyard has decided to build the first LNG fuelled ships in India. LNG is cheaper fuel, and such ships will be in great demand globally. Apart from the debt position and the possibilty that Bharati Shipyard may get lesser orders now courtesy the economic slowdown and the credit squeeze, nothing is wrong for Bharati Shipyard. But this is a major issue also. The debt to be repaid is significant. If the company does not want to hurt its reserves, it has to book better profits. But with rising input costs and lower orders, I personally doubt that the profits will be beautiful. There is a ray of hope here, since ship builders do not pile inventory like others and naval architects from IIT, the promoters of this company may manage it all in this slowdown. One more negative news I heard about this company was that its group company gave a loan of 200 crores to Great Offshore's promoter(Sheth) who pledged his shares to them as collateral. The company needs money, according to my analysis, to pay off the debt. If there is a brighter side to this news, it is a possibility that the company does have enough money to give loans, and pay off debts. If the promoters know what they're doing with this company, and that their intent is not selfish (as Raju's), the stock will prove to be a multi multi bagger.

I opine that this scrip may reach Rs. 900 in a time frame of three to four years. Four years is a lot of time, yes. But at the moment, no one really knows what the dollar is up to.