An empowered group of ministers (EGoM) on disinvestment headed by the finance minister P Chidambaram approved on Thursday the sale of a 10 per cent stake in Engineers India (EIL) through a follow-on public offer (FPO), which may add Rs 500 crore to the government’s kitty.
A total of 3.36 crore shares of EIL will be sold, of which up to 5 per cent of the offer would be reserved for employees. At Thursday’s close of Rs 146.65, a 10 per cent stake in Engineers India (EIL) amounted to Rs 494.10 crore.
In 2010, the government had last offloaded similar percentage of its stake in EIL through FPO route.
“EGoM has decided to clear the FPO of EIL. Ten per cent equity will be divested through an FPO. We are looking at around close to Rs. 500 crore,” disinvestment secretary, Ravi Mathur was reported by PTI as saying.
The stock has been falling for some time due to concerns over weak order book, which is expected to keep execution and margins tepid for the engineering firm. It has fallen 12 per cent this month so far.
The firm has reported a marginal rise in its year-on-year (YoY) growth in net profit to Rs 135 crore in the December 2013 quarter, compared with Rs 132.33 crore in the corresponding quarter of last year.
This was the first quarter in the past five quarters when the firm reported a growth on YoY basis. Revenue fell 30 per cent YoY for the December quarter.
“We expect FPO price to be set at a five to 10 per cent discount at the prevailing prices,” said Rikesh Parekh, vice-president at Motilal Oswal Securities.
Prakash Diwan of Altamount Capital Management said, “A discount as low as 5 per cent would offer no purpose; we see the FPO to price at around 8 per cent discount to the prevailing share price.”
As of December 30, the government holds 80.40 per cent in the public sector undertaking.
This comes not more than week after a cabinet committee on economic affair (CCEA) approved the sale of government’s residual shares in Hindustan Zinc and an unlisted entity Balco promoted by Anil Agarwal-led Vendanta group. The stake sale is estimated to fetch around Rs 21,000 crore to the government.
The EGoM had earlier approved a 10 per cent stake sale in IndianOil Corporation to ONGC and Oil India (OIL) via block deal, which will add another Rs 4,800-Rs 5,000 crore.
The department of disinvestment has already held overseas roadshows to attract foreign investors to the EIL stake sale. This would help the government reach close to its disinvestment target of Rs 40,000 crore for FY14. The total disinvestment by the government so far stood at Rs 5,095 crore in the ongoing financial year.
Other than disinvestment route, the government would also gain from a generous dividend payout by Coal India (CIL) that along with the dividend distribution tax totaled Rs 19,600 crore.
A total of 3.36 crore shares of EIL will be sold, of which up to 5 per cent of the offer would be reserved for employees. At Thursday’s close of Rs 146.65, a 10 per cent stake in Engineers India (EIL) amounted to Rs 494.10 crore.
In 2010, the government had last offloaded similar percentage of its stake in EIL through FPO route.
“EGoM has decided to clear the FPO of EIL. Ten per cent equity will be divested through an FPO. We are looking at around close to Rs. 500 crore,” disinvestment secretary, Ravi Mathur was reported by PTI as saying.
The stock has been falling for some time due to concerns over weak order book, which is expected to keep execution and margins tepid for the engineering firm. It has fallen 12 per cent this month so far.
The firm has reported a marginal rise in its year-on-year (YoY) growth in net profit to Rs 135 crore in the December 2013 quarter, compared with Rs 132.33 crore in the corresponding quarter of last year.
This was the first quarter in the past five quarters when the firm reported a growth on YoY basis. Revenue fell 30 per cent YoY for the December quarter.
“We expect FPO price to be set at a five to 10 per cent discount at the prevailing prices,” said Rikesh Parekh, vice-president at Motilal Oswal Securities.
Prakash Diwan of Altamount Capital Management said, “A discount as low as 5 per cent would offer no purpose; we see the FPO to price at around 8 per cent discount to the prevailing share price.”
As of December 30, the government holds 80.40 per cent in the public sector undertaking.
This comes not more than week after a cabinet committee on economic affair (CCEA) approved the sale of government’s residual shares in Hindustan Zinc and an unlisted entity Balco promoted by Anil Agarwal-led Vendanta group. The stake sale is estimated to fetch around Rs 21,000 crore to the government.
The EGoM had earlier approved a 10 per cent stake sale in IndianOil Corporation to ONGC and Oil India (OIL) via block deal, which will add another Rs 4,800-Rs 5,000 crore.
The department of disinvestment has already held overseas roadshows to attract foreign investors to the EIL stake sale. This would help the government reach close to its disinvestment target of Rs 40,000 crore for FY14. The total disinvestment by the government so far stood at Rs 5,095 crore in the ongoing financial year.
Other than disinvestment route, the government would also gain from a generous dividend payout by Coal India (CIL) that along with the dividend distribution tax totaled Rs 19,600 crore.
