Govt to sell 5% stake in BHEL to LIC via block deal
01 Mar 2014
The government is selling a 5 per cent stake in public sector power equipment maker Bharat Heavy Electricals Ltd (BHEL) to Life Insurance Corp of India (LIC), another state-run entity, through a block deal worth about Rs2,046 crore, disinvestment secretary Ravi Mathur said.
The block sale to LIC would help the government avoid a distress sale in unfavourable market conditions and reap better value.
The ministry of heavy industry and public enterprises, the administrative ministry that controls BHEL, has been pushing for crossholding in the company, instead of sale of shares in the market.
A similar arrangement has been worked out for the sale of stake in Indian Oil Corp Ltd, which will sell stake to Oil and Natural Gas Corp Ltd, after the petroleum ministry opposed divestment in the fuel retailer.
''As far as the BHEL stake sale is concerned, we have ruled out going to the market for 5 per cent divestment because we feel that market conditions are not suitable for the moment for such a valuable company to be sold in the open market,'' heavy industries minister Praful Patel had said.
The cabinet committee on economic affairs had, in August 2011, approved divestment of 5 per cent stake in BHEL through a follow-on offer, but no action has been taken so far.
The government holds 67.7-per cent stake in BHEL.
The government has pegged its divestment target at Rs16,000 crore for the current fiscal against the earlier proposals to raise around Rs40,000 crore through divestment in public sector units.
Shares of BHEL closed at Rs167.75 on the National Stock Exchange on Friday, up 3.3 per cent from the previous close.
