Mazagon Dock Issues Clarification On Rs 70,000 Crore Submarine Order

Mazagon Dock Shipbuilders Ltd. on Monday issued a clarification that there are "no negotiations" currently with the Defence Ministry for the Rs 70,000-crore deal for six submarines — to be built in India with German support under 'Project 75 India'.

The clarification comes after news agency ANI reported on Sunday, quoting Defence officials, that the Centre has given clearance to Defence Ministry and Mazagaon Dock, to begin negotiations. However, in an exchange filing on Monday, the shipbuilder said, "No negotiations have been commenced with Ministry of Defence for the project."

In January, the Defence Ministry selected the state-owned Mazagaon Dock for building six submarines with Air Independent Propulsion systems with Germany's ThyssenKrupp Marine Systems as its partner.

The two companies had signed a Memorandum of Understanding in June 2023. Under the MoU, Thyssenkrupp would manage engineering and design, while Mazagon Dock would undertake construction and delivery of the submarines for the Indian Navy.

During earnings call in May, Mazagon Dock management said they are expecting the P-75 additional submarines and the P-75(I) submarines contract to be signed in the current financial year. That is expected to increase the company's order book from the present Rs 32,000 crore to more than Rs 1.25 lakh crore.

"We have already augmented our capacity from the construction of six submarines to 11 submarines because we are preparing to take both the additional submarines of 75 and the six P-75(I) for which we have already set up the SSA facility or the submarine section assembly workshop," Chairman and Managing Director Capt. (Retd.) Jagmohan said.

The clarification on the Rs 70,000-crore deal was shared after market hours. The stock settled 2.05% higher at Rs 2,755.70 apiece on the NSE, compared to a 0.39% advance in the benchmark Nifty 50.

Mazagon Dock's shares have risen 24.93% in the last 12 months and 23.7% year-to-date.

Out of six analysts tracking the company, four maintain a 'buy' rating, three recommend a 'hold' and two suggest 'sell', according to Bloomberg data. The average 12-month consensus price target of Rs 3,232.5 implies a potential upside of 17.3%.