Mahindras set to buy up to 30% stake in Pipavav Defence

The Mahindra Group, seeking a bigger presence in the defence sector, is in talks to acquire a 26-30 per cent stake in India's largest private sector shipyard, Pipavav Defence & Offshore Engineering Company.

The board of the Nikhil Gandhi-led Pipavav Defence will meet to approve the stake sale soon. Following the sale, the companies will also make an open offer to Pipavav Defence shareholders, according to widespread reports today.

Mahindra refused to confirm the reports, calling them ''speculation'', while Pipavav officials refused to comment.

A deal is expected to be announced following the board approval, the reports said.

Pipavav Defence, founded by Nikhil Gandhi, had said in 2010 that it was selling 26 per cent to a strategic investor. But the deal did not go through.

If the deal goes through this time, both the Mahindra Group and Pipavav will have an equal stake in the company. Mahindra will also get two seats on the board of Pipavav Defence.

Started as Pipavav Shipyard Ltd in the Gujarat port city of that name, the company came out with an initial public offering in September 2009, and listed on both the Bombay Stock Exchange and the National Stock Exchange on 9 October the same year.

A year later, it was granted an industrial licence by the government, permitting it to build strategic and defence vessels.

In 2011, the company changed its name to Pipavav Defence & Offshore Engineering Co. Ltd. During the same year, it also got a Rs200-crore investment from Swedish defence firm Saab AB.

The company has facilities to build warships, submarines and LNG carriers.

According to earlier media reports, Mahindra & Mahindra, the Hero Group and a French shipbuilder were in separate discussions to buy about 20 per cent in the company.

Apart from Mahindra, Larsen & Toubro, which has a shipyard in Tamil Nadu, was in the race to buy a stake in the shipyard. However, the Mahindra group won due to its better offer and a promise to take the company to the next level.

Pipavav is a prized asset due to its well-established infrastructure and a strong order book. Apart from making warships, Pipavav also constructs patrol boats and cargo ships for customers across the world.   For 2013-14, the company reported revenue of Rs2,278 crore and a profit of Rs8.36 crore.

Currently, Mahindra supplies armoured vehicles to the Indian Army, Air Force, and paramilitary and state police forces. Its vehicles are also exported, through the home and external affairs ministries. The company is the largest private-sector supplier of bullet-proof vehicles in the country.