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After the pop, the drop

Pipavav Defence tanking below Reliance Infra's open offer price does not augur well

It was a deal that got everybody scratching. Their heads, that is. A leveraged buyer (Reliance Infra) acquiring a leveraged shipbuilder (Pipavav Defence) to get to that proverbial pot of gold. And given that everything with Reliance in it tends to get minutely dissected, the story for this move goes thus: India’s yearly defence budget is ₹240,000 crore and more than two-thirds is met through imports and middlemen. With inefficient government shipyards operating at full capacity, imagine the taxpayer money that would come to the Indian private sector if they get a chunk of the action. In fact, Shankar K, analyst at Edelweiss, says, “Reliance Infra anticipates a potential order book of ₹120,000 crore over the next five years in Pipavav Defence.”