Decision on BHEL likely next week

Shares of IndianOil Corp Ltd (IOC) will be divested at 10 per cent discount. At the current price, this comes to around ₹220.

An Empowered Group of Ministers (EGoM) approved the pricing mechanism for IOC on Friday. It will meet again next week to finalise the modalities for selling a 5 per cent stake in Bharat Heavy Electricals Ltd. Disinvestment in both these companies will be done through block deals.

The Government is expected to raise at least ₹6,500 crore from divestment in these companies, and to complete the process by March 31 to meet the revised divestment target of ₹16,000 crore for 2013-14.

The Government plan is to sell 10 per cent of its stake in IOC to Oil and Natural Gas Corp (ONGC) and Oil India. Both these companies will get 5 per cent each. After the EGoM meeting, Petroleum and Natural Gas Minister Veerappa Moily confirmed about the discount. Petroleum Secretary Vivek Rae said: “The two companies (ONGC and Oil India) will now work out the deal and the stake sale will happen very shortly. It should be happening in the next few days. The Government advises the board and the two boards will meet and decide. It will be an off-market deal.”

Off-market transaction through block deal is a mechanism where large trade is executed through single transaction. There could be one or more than one buyers. Shares are sold at a price not exceeding 1 per cent from the prevailing market price. The stock exchanges are required to provide a separate trading window. The minimum quantity or minimum value to be offered will be 5 lakh shares or ₹5 crore, respectively. The best part of the entire process is that it gets completed in two days.

“We expect to raise around ₹5,300 crore from the IOC stake sale,” Disinvestment Secretary Ravi Mathur said. On Friday, IOC shares closed flat at ₹248.10.

Meets again for BHEL

Later in the evening, the EGoM met again to decide on stake-sale in BHEL. Although, no formal decision was taken, Mathur told reporters that Life Insurance Corp of India will pick up a 5 per cent stake. However, a senior Heavy Industries Ministry (the administrative ministry for BHEL) official said the final decision will be taken keeping SEBI guidelines on investment by a financial institution. The decision is expected in 7-10 days.

On Friday, BHEL’s shares closed 3 per cent higher at ₹167.20 on the BSE.

(This article was published on February 28, 2014)
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