BHEL divestment put on hold as stock slumps

The government has shelved plans to sell stake in power equipment maker Bharat Heavy Electricals Ltd (BHEL), after the BHEL stock registered its worst fall in nine years on Monday.

Price of the share hit its seven-year low – the lowest since January 2006 - after the power gear maker's first quarter 2013-14 profit nearly halved due to the slowdown in orders.

The department of disinvestment, which had proposed to sell a 5 per cent stake in BHEL, has withdrawn the proposal in view of BHEL's low share price, decreased capital expenditure and less demand for power-sector equipment.

The BHEL share hit a one-year low of Rs120.05on the Bombay Stock Exchange (BSE) today, down 19.64 per cent, after the company's June quarter net profit almost halved to Rs465.43 crore on sales slumped.

The BHEL stock has lost over 60 per cent since 2011, when the stake sale was approved.

"The power sector itself is not doing well, which has depleted BHEL's order book. The share price has also been taking a beating and so the DoD decided to withdraw the disinvestment proposal," an official said.

The ministry of heavy industries has also been opposed to BHEL divestment under unfavourable market conditions and was rather looking to reap the right value for a Navratna PSU.

The union cabinet had, in August 2011, approved the proposal to sell 5 per cent of the company's stock through a follow-on public offer.

The government had earlier, in July 2011, appointed Morgan Stanley, DSP Merrill Lynch (Bank of America), ICICI Securities and Kotak Mahindra Capital as managers to BHEL's follow-on public offer.

The government now holds a 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 market regulator SEBI.

BHEL had reported a 23.7 per cent decline in its first quarter 2013-14 profit to Rs6,352.55 crore, from Rs8,326.24 crore a year earlier.

At the end of the June 2013, the company's outstanding order book stood at over Rs1,08,000 crore, less than over Rs1,15,000 crore in the quarter ended 31 March 2013.

Sluggish prospects in the domestic power sector as well as cheap overseas imports have combined to affect BHEL's business adversely.

The government is looking to raise around Rs40,000 crore through divestment of stake in public sector units in the current fiscal.