Mazagon Dock Shipbuilders Ltd on Wednesday (10 September) announced that it has commenced negotiations with the Indian Navy for the long-delayed submarine programme Project P-75(I).

The move follows approval from the Ministry of Defence in August, permitting the state-run shipbuilder to begin cost discussions with Germany’s Thyssenkrupp Marine Systems for building six conventional submarines, in a deal valued at nearly Rs 9.3 billion. Sources had earlier informed CNBC-TV18 that the contract is expected to be awarded to Mazagon Dock and Thyssenkrupp about six months after the successful completion of cost negotiations.

Mazagon Dock and Thyssenkrupp signed a memorandum of understanding in June 2023. Under the agreement, the German defence firm would handle engineering and design, while Mazagon Dock would be responsible for constructing and delivering the six submarines to the Indian Navy.

Brokerage firm JPMorgan recently flagged limited positive triggers for the project in a note, reiterating its ‘underweight’ stance on Mazagon Dock with a price target of Rs 2,468.

It cited an unfavourable risk-reward outlook despite the stock’s nearly 30 per cent correction from a peak of Rs 3,775. The company’s earnings in the past two quarters were affected by provisions related to cost overruns, though management has indicated that margins are likely to recover going forward.

Meanwhile, Mazagon Dock is set to be included in the Nifty Next 50 index from the end of September as part of the NSE’s biannual reshuffle, which could provide an additional boost to the stock.

Shares of Mazagon Dock closed higher by over Rs 70 at Rs 2,754.85 on the BSE on Wednesday, 10 September.