Public sector banks and cash-rich Government-owned companies are keen to pick up a stake in Bharat Heavy Electricals Ltd (BHEL). This will help the Government in its disinvestment programme.
The Finance Ministry has written to the Heavy Industries Ministry seeking its views on selling BHEL’s shares to other Central Public Sector Enterprises (CPSEs). The Government aims to sell 5 per cent of the shares of the power generation equipment maker.
“After the Finance Ministry’s letter last week, BHEL has been asked to consult with market intermediaries. Accordingly, we will revert to the Finance Ministry about the plan for selling stakes to different entities,” a senior Heavy Industries Ministry official told Business Line.
The ‘Maharatna’ tag has prompted many banks and cash-rich companies to show interest in BHEL. Selling shares to institutions will help in two ways. First, the Government will get the money it is aiming for, and second, BHEL’s already-subdued shares will not be affected.
Cabinet approval
The Cabinet Committee on Economic Affairs had approved 5 per cent disinvestment in BHEL. This was to be done through an auction or offer for sale through bourses. However, the Heavy Industries Ministry vetoed the proposal saying the current market situation is not favourable and offloading would depress the share price further.
Following this, in a meeting chaired by the Prime Minister on December 3, BHEL was asked to provide options.
The options before BHEL were: pay a special dividend, buy back shares, or sell part of the Government’s stake to other companies. The official said that the first two options have been ruled out and work is in progress on the third option.
Cash mobilisation
The Government aims to mop up Rs 40,000 crore through divestments in various CPSEs and Rs 14,000 crore by selling residual stakes in various non-PSUs, such as Hindustan Zinc, Balco and Axis Bank. Thus far, it has managed to mobilise less than Rs 3,000 crore through disinvestment, while the residual stake sale plan is yet to be formalised.
BHEL’s shares closed at Rs 166.10 on Friday. At this price, the Government can get over Rs 1,300 crore. It may be noted that when the CCEA had decided on offloading the shares on August 30, 2011, the face value of the share was Rs 10 and its closing price on the BSE on that day was Rs 1,767. Later, each share was split into five shares of face value Rs 2. At this face value, the share price in October 2011 was Rs 318. Since then, it has dropped.
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