An Empowered Group of Ministers is expected to meet soon to consider disinvestment of Government’s holdings in power equipment major, Bharat Heavy Electricals Limited, through the block deal route.
Revised estimate The intention is to offload 5 per cent stake. The stake dilution is expected to yield between ₹1,300 crore and ₹1,500 crore to the exchequer. Th
e Finance Ministry aims to complete the sale process by March 31.
After the sell-off, Government’s holding in BHEL will come down to 62.72 per cent.
From the Budget estimate of ₹40,000 crore, the Ministry has revised downwards the amount it hopes to mop up through disinvestment in Central Public Sector Enterprises at ₹16,027 crore.
Block deal is a mechanism where a large trade is executed through a single transaction. There could be one or more 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 for the purpose. The minimum quantity or minimum value to be offered will be five lakh shares or ₹5 crore, respectively. The highlight of the process is that it gets completed in two days.
A senior Government official said in order to identify willing buyers, discussions will be held with financial institutions such as LIC, IFCI, IIFCL, SBI and other nationalised banks, besides General Insurance Corporation, National Insurance and New India Assurance.
Selling shares to institutions will help in two ways.
First, the Government will get the money it requires and second, it will not affect the already subdued share prices on the stock exchanges.
The Cabinet Committee on Economic Affairs approved a 5 per cent disinvestment in BHEL.
This was to be done through the auction or offer-for-sale methods. However, the Heavy Industries Ministry vetoed the proposal saying the current market situation is unfavourable and offloading in the market will further depress the share prices.
Value declines BHEL shares closed at ₹150.50 on Friday. At the time when the CCEA decided on offloading shares (August 30, 2011) the face value of the share was ₹10 and the closing price on the BSE on August 30, 2011 was ₹1,767.
Later, the share was split and the face value fixed at ₹2. At this face value, the share price in October 2011 was ₹318. Since then, it has been sliding continuously.