Mumbai: State-run Bharat Heavy Electricals , India’s top power gear maker, said its board recommended that the government divest 5% of the company, worth roughly $1 billion at current levels, helping send the stock down 7%.
No details were given on the timing of a possible stake sale by the government, which owns nearly 69% of BHEL.
The statement was the first from the firm about a possible divestment by New Delhi, which needs to approve the plan.
The government is in the midst of a programme to raise about $8.9 billion through share sales in public sector firms including ONGC and SAIL this fiscal year (April-March) to cut its fiscal deficit and generate funds for schemes for the poor.
“The announcement that there will be a divestment is sufficient reason for the stock to be hammered as this caps the upside for the stock,” said K.K. Mital, head of portfolio management services at Globe Capital.
BHEL also posted a 46.5% jump in fourth-quarter profit to Rs 2798 crore ($622.5 million), with the board also approving splitting each of the company’s shares into five.
Power Finance Corp’s $1 billion share sale earlier this month was subscribed 4.3 times, lifting sentiment for upcoming share sales despite a volatile equity market.
State-run Steel Authority of India plans a Rs 3500 crore share sale and its board was set to meet on Monday to finalise the exact dates to launch a share sale that is tentatively set to open 14 June and close 17 June.
The pipeline of government share sales also includes deals planned by Indian Oil Corp and Hindustan Copper.
BHEL shares fell 7% to close at 1, Rs 931.75, while the main Mumbai market ended down 1.8%. The stock is down 11% in 2011, in line with the broader market.