In an effort to boost revenue, the Government is expected to seal the process of disinvestment in Indian Oil Corp (IOC) and Bharat Heavy Electricals Ltd (BHEL). Stake sale in the two public sector units can fetch the Government more than ₹6,500 crore.

An Empowered Group of Ministers is scheduled to meet on Friday to decide the price at which shares of IOC will be sold to ONGC and Oil India. The Government aims to sell 10 per cent of its equity in IOC through a block deal. ONGC and Oil India will get 5 per cent each. Indian Oil shares closed at ₹247.95, almost flat in comparison to Wednesday’s closing. At this price, it is expected to get around ₹5,400 crore

Block deal is a mechanism where large trades are executed through single transaction. There could be one, or more than one, buyer. Shares are sold at a price not exceeding +1 per cent from the prevailing market price. The stock exchanges are required to provide a separate trading window. The minimum quantity or minimum value to be offered will be five lakh shares or ₹5 crore, respectively. The best part of the entire process is that it gets completed in two days.

ONGC and Oil india will use part of its cash reserve to buy stakes in Indian Oil. As on March 31, 2013, Oil India had a cash reserve of ₹18,610 crore while ONGC had ₹13,200 crore. There will be no lock-in period for shares, if transferred through the proposed route. It means that if investors want money for capital expenditure, they can sell shares any time.

BHEL

The EGoM will meet again in the evening to take a call on stake sale in BHEL through a block deal. The intention is to offload 5 per cent stake in the company which could yield between ₹1,300-1,500 crore. The Finance Ministry aims to complete the sell-off process by March 31. BHEL’s shares closed at ₹162.05 on Thursday with a gain of over 1.5 per cent.

With these two companies, disinvestment through direct sale of shares is expected to be over. Next month, the Government plans to launch an Exchange Traded Fund having shares of 10 Central PSUs as underlying assets.

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