The government plans to sell 5% stake in electrical equipment major BHEL next month through a block deal to state-owned financial institutions and PSUs to raise close to Rs 2,100 crore.
The move follows a decision by an empowered group of ministers last week, clearing sale of 10% stake in Indian Oil Corporation through a block deal to Oil India and ONGC, with an aim of garnering close to R5,000 crore. With these block deals, which would strengthen the practice of cross-holdings amongst the largest PSUs, and R20,000 crore that Coal India is set to hand out to it by way of a special dividend and dividend distribution tax, the government intends to reduce the shortfall in its receipts and fulfill the promise of reducing fiscal deficit to 4.8% of the GDP.
“The disinvestment programme for BHEL is on and the stake sale may happen in the first half of February, so that the process is completed before the election code of conduct comes into play. The empowered group of ministers under finance minister P Chidambaram would meet soon to decide the name of entities that would participate in this block deal,” said a government official privy to the development. The sale of IOC stake to ONGC (which already holds 8.77% in the oil marketing company) and fellow upstream player OIL is expected either this week or the next.
Sources said the disinvestment department is in talks with State Bank of India, Punjab National Bank and a few cash-rich PSUs for sale of the BHEL stake to them. The government may also agree for any one of these to pick up the entire 5% stake.
The government had decided against the offer for sale (OFS) or the auction route for selling its equity in BHEL, fearing further erosion of its share value. BHEL’s shares are currently trading at low levels of R167-172 per share against a 52-week high of R233.30 a share. Under the block deal, government shares are expected to be offered at a discount of 1% to the prevailing market price. The same has been approved for IOC. BHEL, sources said, would be given the option to buy back these shares at a per-determined price later.
A senior official in the heavy industries ministry confirmed the development, but said that formal concurrence of the ministry has not yet been given to the disinvestment department. This, however, is expected to be given next week so that the issue is wrapped up quickly, another source said.
Though the disinvestment department proposed equity sale in BHEL through market offer early last year, the move was opposed by the heavy industries ministry. The finance ministry is pushing for BHEL’s disinvestment so that it is able to reach closer to the PSU disivestment target of R40,000 crore for 2013-14. With the attorney general giving a favourable opinion on sale of the government’s residual stakes in Hindustan Zinc and Balco (both private companies promoted by Vedanta Group) without Parliament assent, the plan to raise about R14,000 crore from these sales is likely to materialise.