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Cash-rich PSUs such as Coal India, NMDC, SAIL, NTPC and ONGC may buy a stake in power equipment producer Bharat Heavy Electricals Ltd (BHEL), a ‘Maharatna’ category Central public sector enterprise (CPSEs).
The proposal was discussed at the high-level inter-ministerial meeting called by Prime Minister Manmohan Singh on Tuesday.
“This will help in two ways. First, the Government will get money. Second, it will not affect already subdued shares of BHEL on the stock exchanges,” a senior government official told Business Line . A sale of 5 per cent shares of BHEL to other PSUs at current market prices could fetch over Rs 1,300 crore.
At the meeting, the Heavy Industries Ministry was asked to come out with viable options for BHEL. The options include buyback, dividend payment and disinvestment. However, the official added, considering the cash surplus position of BHEL, a buyback is not feasible.
Dividend payment will not be possible before April, while the Government requires money by March to meet its disinvestment target.
The Finance Ministry has set a target of Rs 40,000 crore through disinvestment of CPSEs. So far, it has just managed to get a little over Rs 1,300 crore and now, with PowerGrid, over Rs 1,750 crore. Next on line is Coal India, where a 5 per cent stake sale could fetch over Rs 8,000 crore.
“Selling a stake to cash rich CPSEs seems to be best option at the moment,” the official said, adding that BHEL can buy back shares from these companies in future. Such an option will create crossholdings, which had been in practice earlier among oil companies.
The Cabinet Committee on Economic Affairs had approved disinvestment in BHEL in August 2011.
At that time, the face value of the share was Rs 10 and the closing price at the BSE on August 30, 2011 was Rs 1,767. Later, the share was split and the face value fixed at Rs 2. At this face value, the share price in October 2011 was Rs 318.
Continuous slide Since then, the scrip has been on a continuous slide. On Wednesday, it closed at Rs 164.10. Such price trends and market situations prompted the Heavy Industries Ministry to refrain from pushing for a selloff. The crossholding option is also being considered at a time when the Finance Ministry is mulling exchangeable bonds. Here, a CPSE can issue bonds with an option of exchanging them with shares of another CPSE held by it. For instance, if Coal India buys shares of BHEL and later issues exchangeable bonds, it may offer the bondholder an option to exchange the bonds with BHEL shares at a later date. This is seen as a win-win situation for all.
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