The Empowered Group of Ministers headed by Finance Minister, P Chidambaram met today to decide on the timing and mode of disinvestment in Bharat Heavy Electricals Ltd (BHEL).
The government will sell a 5 percent stake in power equipment manufacturer BHEL to state-owned Life Insurance Corporation of India, fetching the exchequer about Rs 2,046 crore.
"BHEL disinvestment will happen this fiscal through a block deal to LIC," said Ravi Mathur, Disinvestment Secretary.
Also read: Bhel wins Rs 321cr order for Hydro Electric Proj in Punjab
BHEL shares gained 3.18 per cent to Rs 167.20 apiece at the close on the BSE today, valuing the company at Rs 40,923 crore. A 5 per cent stake would be worth about Rs 2,046 crore.
The Department of Heavy Industries, which is the administrative ministry of the company, has for long opposed the proposed disinvestment in state-run BHEL, citing unfavourable market conditions.
It wanted the issue not to look like a "distress sale" but rather one that would reap "good value."
"As far as the BHEL stake sale is concerned, we have ruled out going to the market for 5 per cent divestment because we feel that market conditions are not suitable for the moment for such a valuable company to be sold in the open market," Heavy Industries Minister Praful Patel had said.
In August 2011, the Cabinet had cleared the sale of a 5 percent stake in BHEL through a follow-on public offer (FPO).
The government holds a 67.72 percent stake in the Navratna company.
However, market conditions led to a delay in the issue and the company in April 2012 withdrew the draft prospectus filed with market regulator Sebi.
Bhel reported a net profit of Rs 694.81 crore in the October-December quarter, down from Rs 1,181.85 crore in the corresponding period a year earlier. It was the sixth straight quarterly drop in profit for the PSU, mainly due to a slowdown in sales.
The company's order book stood at about Rs 1,00,600 crore at the end of December 2013.
The government in July 2011 had appointed Morgan Stanley, DSP Merrill Lynch (Bank of America), ICICI Securities and Kotak Mahindra Capital to manage BHEL's follow-on offer.
The government has so far raised about Rs 5,093.87 crore through stake sales in PSUs. As per the revised estimates in the Interim Budget, the disinvestment target was lowered to Rs 16,027 crore in this financial year from Rs 40,000 crore.
Earlier today, the EGoM had cleared a 10 percent stake sale in Indian Oil Corporation to ONGC and Oil India , which would fetch the exchequer about Rs 5,300 crore.
BHEL stock price
On February 28, 2014, Bharat Heavy Electricals closed at Rs 167.20, up Rs 5.15, or 3.18 percent. The 52-week high of the share was Rs 210.00 and the 52-week low was Rs 100.35.
The company's trailing 12-month (TTM) EPS was at Rs 19.83 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 8.43. The latest book value of the company is Rs 124.38 per share. At current value, the price-to-book value of the company is 1.34.
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