Govt to take BEML private with 26% equity sale

07 Jan 2017

Government will sell 26 per cent equity capital of defence equipment manufacturer Bharat Earth Movers Ltd (BEML), to raise around Rs1,000 crore and transform the state-owned company a majority private sector company.

BEML will be the first major defence PSU to be privatised through strategic disinvestment process.

A BEML notification to the stock exchanges said the cabinet has given 'in-principle' approval for strategic disinvestment of 26 per cent equity in BEML Ltd out of government's shareholding of 54.03 per cent.

"The said shareholding would be sold to the strategic buyer/s to be identified by the government of India by following due procedure," BEML said.

At the current market price of the BEML stock is worth Rs999.50 and, the sale of a 26 per cent equity capital of the company could fetch the exchequer over Rs1,000 crore.

After the strategic sale, government stake in the PSU would come down to 28.03 per cent.

Established in May 1964, BEML is engaged in the manufacture of equipment for three major business verticals such as mining and construction, rail and metro and defence and aerospace. BEML's turnover has risen to more than Rs3,500 crore.

The PSU, under the administrative control of defence ministry, provides equipment support to Indian Army by manufacturing variants of Tatra vehicle for all terrain operation.

It also supports the aerospace operations by supplying ground support equipment such as Aircraft Towing Tractor, Multi Purpose Weapon Loader and Crash Fire Tender.

With the latest sale, total divestment collections of the central government will go up to about Rs25,000 crore against the fiscal year target of Rs56,000 crore.

Of the targeted Rs56,500 crore in disinvestments, Rs 36,000 crore is to come from minority stake sale in PSUs and another Rs20,500 crore from strategic stake sale.

This is the third time the government is taking state-owned firms private in over 12 years. In September, the cabinet had cleared strategic sale of Bharat Pumps and Compressors Ltd, while in December it had approved sale of India's first pharma company Bengal Chemicals and Pharmaceuticals Ltd as well as Hindustan Antibiotics Ltd.

Incidentally, the first strategic sale in a PSU also happened under the NDA government under former NDA Prime Minister Atal Behari Vajpayee's rule in 1999-2000 when the government sold 74 per cent equity in Modern Food Industries to Hindustan Lever for Rs105.45 crore. And, in 2003-04, the NDA government sold Jessop and Co to private parties.

BEML is among the public sector units that NITI Aayog has identified for sale of government's majority stake to private companies in order to bring in greater efficiency and professionalism in their functioning.