Massive ₹1,486 Crore Deal: Mazagon Dock Shipbuilders Scores Huge Order from ONGC

Shares of Mazagon Dock Shipbuilders Ltd (MDL) gained attention on Monday morning after the company disclosed it had secured a subsea pipeline replacement contract from Oil and Natural Gas Corporation Ltd (ONGC). The contract, awarded on an EPC reimbursable basis (OBE), is worth ₹1,486.40 crore, inclusive of all taxes and duties.

Despite the positive news, Mazagon Dock Shipbuilders shares slipped by 0.73%, closing at ₹4,368.05, while ONGC's stock took a bigger hit, falling 3.92% to ₹296.80 on the BSE.

This contract is part of ONGC's Pipeline Replacement Project 8 Group A (PRP 8 Group A), with a ceiling price set at ₹1,486.40 crore. The project is scheduled to be completed by February 28, 2026.

Mazagon Dock Shipbuilders is primarily engaged in shipbuilding and repair, including submarines and various types of vessels, while also offering related engineering products.

ONGC, a Maharatna public sector company, stands as India’s largest producer of crude oil and natural gas, accounting for roughly 71% of the country's domestic output. The company is equipped with full-service capabilities in exploration and production. As of June 2024, the Indian government holds a 58.89% stake in ONGC.

Mazagon Dock Shipbuilders' order book as of August 14 totaled ₹40,400 crore, the largest among India's three key shipyards. This includes major contracts such as the P17A stealth frigates (with ₹16,630 crore still pending out of the total ₹26,900 crore) and the P15B destroyers (with ₹9,850 crore remaining from the total ₹32,090 crore). Adjusting for spares and warranties, approximately ₹32,000 crore in orders are expected to be completed by MDL between FY25 and FY27.

Notably, Mazagon Dock is the only shipyard in India with experience constructing submarines and destroyers. Last week, Antique Stock Broking reaffirmed its 'Buy' rating on the stock, setting a target price of ₹5,483. The stock had closed at ₹4,400.30 on Friday.

Although MDL shares have dipped 10% over the past month, they are still up 92% year-to-date in 2024. The company’s 91st Annual General Meeting (AGM) will take place virtually on September 26 at 11:00 am.
Additionally, Mazagon Dock recently secured a contract with a European client to build three more 7,500 DWT Multi-Purpose Hybrid Powered Vessels (MPHPV) for $43 million, bringing the total export order for six MPHPVs to $85 million.

“There are only six major shipyards in India, and with increasing indigenization, rising naval capital expenditure, and government support, the medium-term outlook for Indian shipyards looks positive,” said Antique Stock Broking.

Mazagon Dock Shipbuilders Ltd is a key player in shipbuilding and offshore fabrication, focusing on the construction of warships, submarines, and merchant ships. The company, headquartered in Mumbai, Maharashtra, serves a diverse clientele, including the Indian Navy and Coast Guard.