Shares of Pipavav Shipyard, the country’s youngest private shipbuilding company rose 11% to touch its life-time high of Rs 71 on Monday on the Bombay Stock Exchange (BSE).

This was after Delhi-based engineering and offshore construction company, Punj Lloyd, sold its 19.43% stake in the company to Pipavav promoter SKIL Infrastructure on Sunday for Rs 650 crore.

SKIL Infrastructure bought the stake at Rs 49.80 a share, a 22% discount to Pipavav Shipyard’s closing price of Rs 63.85 a share on the BSE on Friday.

Punj Lloyd’s shares were down 4% on the BSE on Monday and closed at Rs 178. SKIL Infrastructure will now hold around 40% stake in Pipavav Shipyard. SKIL Infrastructure, which is into developing ports, shipyards, railway lines, expressways and special economic zones (SEZs), is also expected to make an open offer soon to buy another 20% of Pipavav Shipyard (valued at Rs 850 crore) from the public at Rs 61.5 a share to comply with the norms set by Securities and Exchange Board of India. The open offer will open on May 21 and close on June 9.

Following the open offer, SKIL Infrastructure’s stake will increase to 60% in Pipavav Shipyard, with a total investment of about Rs 1,500 crore. An email query to Nikhil Gandhi, group chairman, SKIL Infrastructure, went unanswered.

“It will be a positive transaction for Pipavav Shipyard, since promoters increasing their stake only shows that they are confident about long-term prospects. Punj Lloyd’s brand equity has already pre-qualified Pipavav Shipyard to bid for defence and ONGC orders and, hence, its exit won’t hurt the shipyard,” Intime Spectrum Securities analyst Gyanesh Changlani said.

Pipavav Shipyard has an order book of about Rs 4,500 crore, and it has not delivered any vessel since its n September 2009 IPO, which raised Rs 500 crore. The stock price has been negatively impacted since then, due to the delay in commissioning of Goliath Cranes and order book cancellations. “We are focusing on existing businesses and continuously evaluating our portfolio in line with shareholder interests and value. This decision is in line with our overall growth strategy,” said Luv Chhabra, director (corporate affairs), Punj Lloyd.

“Punj Lloyd exiting Pipavav at a 22% discount only highlights its need for cash. Its balance sheet was under pressure following its acquisition of Simon Carves in the UK and SemCorp Engineers in Singapore and it needed cash to shore up its balance sheet,” said Kunal Lakhan, analyst, KR Choksey.