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Updated: March 1, 2014 00:03 IST

IOC, BHEL stake sale to fetch over Rs.7,300 crore this fiscal

PTI
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Oil Minister Veerappa Moily said the IOC stake sale will happen at a discount of 10 per cent to market price. (File photo)
The Hindu Oil Minister Veerappa Moily said the IOC stake sale will happen at a discount of 10 per cent to market price. (File photo)

ONGC, OIL will buy 5 per cent each in Indian Oil Corporation. The Government will sell 5 % stake in BHEL through a block deal to LIC

The government, on Friday, cleared disinvestment in two blue-chip state-owned companies Indian Oil Corporation (IOC) and Bharat Heavy Electricals Limited (BHEL), which would fetch over Rs.7,300 crore to the exchequer in the current fiscal.

The decision to go ahead with the stake sale of 10 per cent in IOC and 5 per cent in BHEL was taken by the Empowered Group of Ministers on disinvestment, headed by Finance Minister P. Chidambaram.

No timeline for the stake sales, however, has been decided as yet, sources said.

The government will be selling 10 per cent stake in IOC to state-run ONGC and Oil India Ltd (OIL) at a discount of 10 per cent, which would fetch about Rs.5,300 crore to the exchequer.

The sale of 10 per cent stake or 24.27 crore shares will be through an off-market transaction, with ONGC and OIL buying 5 per cent stake each.

“The two companies (ONGC and OIL) will now work out the deal, and the stake sale will happen 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,” Oil Secretary Vivek Rae said.

IOC shares closed at Rs.248.10, up 0.06 per cent on BSE on Friday.

“We expect to raise around Rs.5,300 crore from the IOC stake sale,” Disinvestment Secretary Ravi Mathur said.

As regards BHEL disinvestment, the government will sell 5 per cent of its stake through a block deal to state-owned LIC, which would fetch about Rs.2,045 crore to the exchequer.

“BHEL disinvestment will happen this fiscal through the block deal to LIC,” Mr. Mathur added.

At the current market price of Rs.167.20, the sale of 5 per cent stake, or 12.23 crore shares, in BHEL would fetch about Rs.2,045 crore to the exchequer.

The Department of Heavy Industries, which is the administrative Ministry of the company, has, for long, opposed the proposed disinvestment in state-run BHEL, citing unfavourable market conditions.

In August, 2011, the Cabinet had cleared selling government’s 5 per cent stake in BHEL through the follow-on public offer (FPO). The government holds 67.72 per cent stake in the Navratna company.

However, market conditions led to a delay in the issue, and the company in April, 2012, withdrew the draft prospectus filed with the Securities and Exchange Board of India.

The government has so far raised about Rs.5,093.87 crore through the stake sale in PSUs. As per the revised estimates in the Interim Budget, the disinvestment target was lowered to Rs.16,027 crore in this financial year from Rs.40,000 crore

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Why does the government want the BHEL divestment now at a time when its price is quoting very low- Rs.167? At this price, it is a windfall for the Corporate buyers and a loss for the government. The scrip was quoting in the range Rs.1600-1800 for a long time. The divestment of the fundamentally strong Maharatna PSU where public money got invested and is at stake should be deferred. It should not be given on a platter to the FIIs.

from:  A.V. Narayanan
Posted on: Mar 1, 2014 at 15:09 IST

There is a mistake in the article . BHEL is a "Maharatna" Company now Company not a "navratna" as mentioned in the articla.

from:  Ayush Gupta
Posted on: Mar 1, 2014 at 10:24 IST

BHEL has ,long, been declared a Maharatna company. Kindly check up

from:  Pankaj Solanki
Posted on: Mar 1, 2014 at 08:33 IST

It may pls. be noted that BHEL is now a 'Maharatna Company' and not a
Navratna company as referred in your article above.

from:  ASHUTOSH KUMAR
Posted on: Mar 1, 2014 at 07:57 IST
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