The United Progressive Alliance (UPA) government is considering a proposal to sell part of its stake in one of its most valuable companies, Bharat Heavy Electricals Ltd (BHEL). The UPA government had planned a stake sale in BHEL in 2005 but withdrew following opposition from the Left parties on which it depended for support in the Lok Sabha.
The resumption of the divestment plan is part of a proposal to use proceeds from stake sales in major Public Sector Undertakings (PSUs) to bridge the fiscal deficit. Bhel is a listed Navratna PSU, meaning it enjoys a high level of autonomy, with a net worth of around Rs 28,000 crore.
The government holds a 67.72 per cent in the company. Divesting a 10 per cent stake would bring down the government’s share to 57.72 per cent. This will leave little headroom for the company to raise fresh capital without bringing down government holding.
Based on the current market capitalisation of Rs 102,334 crore, the government will get Rs 10,234 crore if it sells 10 per cent of its stake in BHEL. If BHEL announces a fresh sale of equity, as well as the government’s own stake sale, both parties benefit. Bhel will be able to raise resources to finance its expansion plans and the government could use the proceeds to help reduce the fiscal deficit.
BHEL has a current power equipment manufacturing capacity of around 10,000 MW and accounts for over 55 per cent of the domestic power equipment market. The company, which has an order book worth over Rs 100,000 crore, plans to invest around Rs 4,000 crore to ramp up its equipment manufacturing capacity to over 15,000 MW by the end of 2009.
crackcrack| Company Name | CMP |
|---|---|
| BHEL | 284.65 |
| Thermax | 3645.00 |
| Kirloskar Oil Eng | 1473.25 |
| Skipper | 384.90 |
| GMM Pfaudler | 911.75 |
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