Pipavav Defence Sinks 10% on Reliance Infra Deal

Pipavav Defence and Offshore Engineering shares slumped 10 per cent on Thursday after analysts said it settled for a lower-than-expected price for selling a majority a stake in the company to Anil Ambani promoted Reliance Infrastructure.

Reliance Infrastructure will take over management control of Pipavav Defence and Offshore Engineering by acquiring a stake of about 18 per cent for Rs 819 crore.

Reliance Infrastructure subsidiary Reliance Defence Systems Private will acquire 130 million shares in Pipavav Defence at Rs 63 a share, the company said in a statement. The deal represented a 17.6 per cent discount to Pipavav Defence's closing price on Wednesday.

Avinnash Gorakssakar of Moneyinvestments.in told NDTV that the acquisition price is below expectations. "The deal was expected between Rs 70 and Rs 80 per share," he added.

Reliance Infra shares, however, surged over 3 per cent as the deal is seen to be positive for the company at a time when the government is pushing the "Make in India" campaign to encourage domestic manufacturers.

"They get hands on a large defence company with good order book at fairly decent price," said T S Harihar of HRBV Client Solutions.

Mr Gorakssakar agreed that the deal is positive for Reliance Infra, but said investors should not rush to buy Reliance Infra shares. It remains to be seen as to how Reliance Infra arranges the funding for the Rs 819-crore deal, he added.

Shares in Reliance Infra ended 2.8 per cent higher at Rs 488.65, while Pipavav Defence closed 10 per cent lower at Rs 68.85.