Swan Defence and Heavy Industries is gearing up to hit the capital markets with a Qualified Institutional Placement (QIP) offering, aiming to raise approximately Rs 750 crore. This strategic move is part of the company’s broader plan to expand its shipbuilding capacity and support its ongoing business growth initiatives, according to highly placed sources who spoke to Moneycontrol on condition of anonymity.

QIP and Promoter Stake Dilution

The QIP involves the company’s promoter entity, Hazel Infra, reducing its stake by 5 percent from the current 94.91 percent held in Swan Defence. Hazel Infra is a special purpose vehicle (SPV) floated by Swan Energy specifically to facilitate the acquisition of Reliance Naval & Engineering through an insolvency resolution process.

Under regulatory mandates, the company must comply with the Securities and Exchange Board of India’s (SEBI) norms on minimum public shareholding (MPS). To meet these, Swan Defence and Heavy Industries will be required to dilute at least 20 percent public shareholding. The proposed 5 percent stake sale via QIP is an initial step to fulfill these obligations, with a valuation estimated at Rs 15,000 crore for the company, translating the 5 percent stake to about Rs 750 crore.

Utilization of Funds

The capital raised through the QIP will be directed primarily toward increasing the shipbuilding capacity of Swan Defence. This expansion is crucial as the company consolidates its position in the shipbuilding, ship repairing, and heavy fabrication industries following the acquisition of Reliance Naval & Engineering.

The acquisition marked Swan Energy’s entry into the defence and heavy engineering sector, diversifying its presence beyond its traditional business areas, which include textiles, real estate, oil and gas, and petrochemicals.

Regulatory Compliance and Market Strategy

Swan Defence’s board of directors recently formed a committee tasked with exploring various options for raising equity capital, including QIPs, rights issues, or further public offerings, in one or more tranches. This strategic committee aims to ensure the company’s full compliance with SEBI’s minimum public shareholding rules, which require listed companies to maintain at least 25 percent public shareholding three years post-IPO.

Swan Energy is reported to be in advanced talks with JM Financial, a reputed investment bank, to advise and manage the QIP process. However, official comments from JM Financial were not available at the time of publishing.

Background of Acquisition and Corporate Structure

In early 2024, Swan Energy took over the management control of Reliance Naval & Engineering after emerging as the successful bidder in the insolvency resolution process. Hazel Infra, the SPV floated for this purpose, holds 94.91 percent of Swan Defence. Swan Energy owns 74 percent of Hazel Infra, with the remaining 26 percent held by Hazel Mercantile, a strategic investor linked to Swan.

The acquisition signaled Swan’s entry into a strategic and capital-intensive sector with significant growth potential given India’s focus on expanding its naval and maritime infrastructure. This diversification aligns with Swan Group’s broader vision to evolve into a multi-sector conglomerate with strongholds in defence and heavy industries alongside its existing business verticals.

The proposed QIP by Swan Defence is a critical step in scaling operations and meeting regulatory requirements, while positioning itself to capitalize on growing demand in India’s defence manufacturing and shipbuilding sectors. This move is likely to attract considerable attention from institutional investors looking for opportunities in strategically important and emerging sectors.

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