Reliance Defence

The company has posted a good set of numbers for Q1FY14. YoY, total revenue at Rs.703 crore was up 23% but QoQ, it fell 3%. It ended the quarter with a net profit at Rs.7.28 crore, up more than 3.5 times (YoY) but sequentially, due to the fall in topline and an over 3 times rise in estimated cost for revenue received, net profit was down 12%. The company’s finance cost is huge and in current Q1, it was over Rs.100  crore and in FY13, it had incurred an outgo of almost Rs.400 crore.  At the end of FY13, the company had a debt of Rs.4486 crore and at the end of current fiscal, FY14, debt is expected to go up to Rs.5118 crore.  The company plans to raise $150 million through a listing on the London Stock Exchange (LSE) by October this year to reduce debt and invest in its subsidiaries.

The company currently has order for building several panama sister vessels. The company has received provisional approval from FIPB to raise $200 million. The company has got the government's nod to build warships for the Indian Navy. There seems to be some good tidings rolling in the company after the Ministry of Defence lifted the hold on the Mazagon Dock-Pipavav Defence JV to build warships for the Indian Navy. This JV could be the big game changer for the company in the long run but immediately, in the short run, concerns on the high interest cost and uncertainty over orders coming in remains. The company continues to have strategic investors like Swedish defence major Saab and Singapore's shipyard SembCorp Marine. Rakesh Jhunjhunwala also is a major stakeholder.