Shares of Mazagon Dock Shipbuilders Ltd. nosedived by over 13% in Monday’s trading session after the Indian government decided to offload more of its stake in the state-run defense shipbuilder.
The government initially planned to sell a 2.83% stake but has now decided to exercise the oversubscription option, increasing the total stake on offer to 4.83%. This includes an additional 1.18% that caught investors by surprise and sparked a wave of sell-offs.
The floor price for the Offer for Sale (OFS) has been set at ₹2,525 per share — nearly 8% lower than the previous day’s closing price. That steep discount led to investor jitters and a sharp fall in the stock.
Before the announcement, Mazagon Dock shares had been on a solid run, gaining nearly 23% since January. However, Monday’s dramatic dip wiped out a large portion of those gains in just a few hours.
The government currently holds 84.83% in Mazagon Dock and is working toward reducing that figure in line with SEBI’s requirement for at least 25% public shareholding in listed companies.
This move is part of a broader disinvestment strategy aimed at increasing market liquidity and attracting more retail investors. But while the long-term objective is market-friendly, the short-term market reaction was anything but — with shares of other shipbuilding companies like Cochin Shipyard and Garden Reach Shipbuilders also taking a hit.
The sharp correction suggests that investors are concerned about the sudden increase in supply of shares and its impact on pricing. With more government stake sales expected in other public sector units, market watchers are keeping a close eye on how these moves will influence stock prices across the board.
What This Means for You: If you’re holding Mazagon Dock shares or eyeing the defense sector, this sell-off serves as a reminder of how government policy moves can create short-term volatility. Keep an eye on future OFS announcements, especially if you’re invested in PSU stocks.
