Garden Reach Shipbuilders and Engineers Ltd (GRSE) has made headlines with a significant surge in its share price. On June 24, GRSE shares rose by more than 9%, fueled by a substantial $54 million order from a German company.
Let’s dive into the details and understand the factors behind this impressive performance.
The big order
Garden Reach Shipbuilders and Engineers Ltd (GRSE) is a premier shipbuilding company in India, known for its expertise in designing and building a wide range of vessels. From warships and offshore patrol vessels to commercial ships and passenger vessels, GRSE has a rich legacy of maritime excellence.
Established in 1884 and based in Kolkata, GRSE has grown to become a key player in both the defence and commercial shipbuilding sectors. The company’s commitment to quality, innovation, and timely delivery has earned it a strong reputation both domestically and internationally.
GRSE announced a $54 million contract with a German shipping company. The contract involves the construction and delivery of four multi-purpose vessels, each with a deadweight tonnage (DWT) of 7,500.
This order is set to be executed within 33 months and includes an option for the German firm to order an additional four ships in the future. This development is significant for GRSE, marking a major international order that showcases the company’s growing global footprint.
A historical perspective: First Indian shipyard to export a warship
Garden Reach has a notable history in ship exports. In 2014, it became the first Indian shipyard to export a warship, the CGS Barracuda, to Mauritius. This milestone highlighted GRSE’s capabilities and paved the way for future international contracts, such as the recent $54 million order from Germany.
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Market reaction: Share prices skyrocket
The stock market reacted positively to the news of the $54 million order. On June 24, GRSE shares opened at ₹1721.85, a 4% increase over the previous close of ₹1645.15 on the BSE (Bombay Stock Exchange). The stock continued to climb, reaching a high of ₹1818.20, marking more than a 9% gain in morning trades. This surge helped GRSE shares snap a three-day losing streak, showcasing strong investor confidence.
The stock has doubled in the past six months, underscoring its strong performance. Over the past year, GRSE shares have risen more than 200%, delivering multibagger returns to investors. Year-to-date, the stock has gained over 106%, reflecting robust growth and investor optimism.
The role of defence sector and make in India initiative
Investor confidence in defence sector companies, including GRSE, remains strong. This is partly due to the Indian government’s Make in India initiative, which aims to boost domestic manufacturing and reduce dependence on imports.
The recent outcome of the Lok Sabha elections in 2024, with the ruling BJP-led National Democratic Alliance regaining power, has further boosted market sentiment. With policy continuity anticipated, defence sector companies like GRSE are expected to benefit from favourable government policies and increased defence spending.
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Financial performance and revenue visibility
In addition to the recent order, GRSE has given multi-bagger returns of 169% to its investors in the last year. Over the past six months, the shares have increased by 60.3%, reflecting strong financial performance and investor confidence. The company clarified that none of the promoter/promoter group/group companies have any interest in the entity that awarded the order, ensuring transparency and avoiding any related party transactions.
| Particulars (Figures in ₹ crore) | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
| Sales | 3,592 | 2,561 | 1,757 | 1,140 | 1,433 |
| Other Income | 299 | 201 | 160 | 187 | 225 |
| Total Income | 3,892 | 2,762 | 1,918 | 1,328 | 1,658 |
| Total Expenditure | 3,399 | 2,451 | 1,660 | 1,118 | 1,433 |
| EBIT | 492 | 311 | 258 | 209 | 225 |
| Interest | 11 | 6 | 0 | 2 | 1 |
| Tax | 123 | 77 | 67 | 53 | 60 |
| Net Profit | 357 | 228 | 189 | 153 | 163 |
Looking ahead: Future prospects
The recent $54 million order from Germany is not just a one-off event but a part of a broader trend of increasing international orders for GRSE. The company’s strong track record in ship exports, combined with favourable government policies and rising defence spending, positions it well for future growth.
The option to build an additional four ships for the German company further enhances GRSE’s revenue visibility and growth prospects. If exercised, this option could lead to more significant orders and increased production capacity for GRSE.
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Conclusion
Garden Reach Shipbuilders and Engineers Ltd has demonstrated its capabilities and potential with the recent $54 million order from Germany. The company’s robust order book, historical achievements, and favourable policy environment position it well for continued growth and success in the future.
As GRSE continues to secure large international orders and benefit from favourable government policies, it remains a promising player in the defence sector. Given its strong financial performance and growth prospects, investors looking for long-term growth opportunities may find GRSE an attractive option.
