Mumbai: Pipavav Defence & Offshore Engineering, formerly Pipavav Shipyard, will sell a 10% stake for Rs600 crore to a global aerospace and defence technology company. The company is expected to provide critical technology necessary to manufacture equipment for the armed forces.

Pipavav expects to finalise the deal by December this year. The company remains unidentified.

Market speculation says the most likely candidate is the American defence contractor Northrop Grumman.

Pipavav Defence will issue 81.9 million shares on a preferential basis to an international strategic investor for Rs110 a piece, the company said in a regulatory filing, without divulging the identity of the buyer.

On receipt of news shares of the company went up 10%, to hit Rs62.

"We will clinch the deal with the investor by December this year," says Nikhil Gandhi, chairman, Pipavav. "All I can say is that the investor is one of the world's biggest defence conglomerates."

Pipavav had signed a memorandum of understanding in February with Northrop to leverage each other's strengths.

Northrop is a Fortune Top 500 company, ranking 72.

Last year, it recorded sales of $34 billion.

The investor will initially purchase a 5% stake in Pipavav for Rs385 crore, and scale it up to 10% within three months, the company said in the filing.

In September, Pipavav made a major announcement of a joint venture with Mazgaon Dock Ltd to build submarines and warships. The move is now stuck with rival shipyards contesting the selection process on alleged lack of transparency. The venture has been stayed by the ministry of defence which is looking into the charges.