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Pipavav Defence to sell 10% stake to foreign defence company

25 Nov 2011 Evaluate

Pipavav Defence & Offshore Engineering, formerly Pipavav Shipyard, is planning to sell a 10% stake for Rs 900 crore to a foreign defence company, which will provide critical technology necessary to manufacture equipment for the armed forces. The company will issue 81.9 million shares on a preferential basis to an international strategic investor for 110 apiece.

The fresh issue of shares will take place at a 90% premium to the stock’s last closing price of 58.15. It will be the second instance when Pipavav is raising money by diluting its stake. Last week, the company issued warrants to big bull Rakesh Jhunjhunwala for 78 apiece.

Primarily, the investor will purchase 5% stake in Pipavav for Rs 385 crore, and scale it up to 10% within three months. The investor can nominate a director on the Pipavav board, and might raise its holding to 26% by March next year.

Pipavav Defence and Offshore Engineering Company is engaged in defence, offshore, marine and engineering sectors. The company has two units, one special economic zone (SEZ) unit spread over around 95 hectares of land and another export oriented unit (EOU) spread over around 103.92 hectares of land.

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