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Govt to sell 10% stake in BHEL
By agencies
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Friday, 27 May 2005, 19:30 IST
NEW DELHI: The UPA government has resumed the disinvestment process by clearing the sale of 10 percent government equity in Bharat Heavy Electricals Ltd (BHEL) to the public through the book-building route.
The exercise would fetch the government Rs 2.15 billion at the current market price and pare its equity in the navaratna company from 67.72 percent at present to 57.72%.
Briefing newspersons after a meeting of the cabinet committee on economic affairs (CCEA), finance minister P Chidambaram said the BHEL stock would be split to ensure small retail investors participated in the offer. Of the stake sale, 15 percent would be reserved for BHEL employees, Chidambaram said. He, however, made no mention of any discount in pricing.
The ratio of stock split and pricing of the issue would be decided after appointing lead managers to the offer, the minister said. Around 24 million shares constitute 10 percent of BHEL equity.
Chidambaram asserted the money to be raised through the disinvestment would be accrued to the National Investment Fund, of which 75 percent would be spent on health and education and the remaining 25 percent on bringing back to strength the revivable PSUs. The entire process would be outside the Budget.
He sought to vindicate the decision, saying the National Common Minimum Program had mandated that investment avenues must be found for retail investors and for reviving PSUs. He said the Left parties were consulted before the Cabinet approved the sale. The Left parties, however, maintained they were not consulted at all.
According to sources, the proposed split of the BHEL stock is expected to impart more liquidity to the stock. Currently, the financial institutions hold 23.5 percent of the total market float of 33 percent. The stock split would also bring down the face value of the share, allowing retail investors to take part in the offer.
BHEL is the second disinvestment case so far in the UPA regime. Earlier, in November 2004, the government had divested 5.25 percent of its stake in power major NTPC.