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The government holds 67.72 per cent equity in BHEL at present and after the sale of it's stake, its share in the Navratna company will come down to about 57.72 per cent, Finance Minister P Chidambaram said after a CCEA meeting, which cleared the proposal.
The offer will be conducted through book building route and the stock of BHEL will be split in consultation with department of heavy industry and the department of divestment to provide affordability to small retail investors in the offer, Chidambaram said.
"Out of the stake sale, 15 per cent will be reserved for BHEL employees. This would enable small and retail investors also in prized share," he said.
BHEL stock was ruling at around Rs 896 a share, up almost three per cent from Wednesday's closing of Rs 870.15, at the Bombay Stock Exchange.
Ten per cent of the BHEL equity amount to around 2.4 crore of shares. At the current market price of Rs 896, it would enable the Government to raise around Rs 2150.4 crore (Rs 21.50 billion).
However, the exact ratio of the split and pricing of the issue would be decided after lead manager to the offer is appointed.
To a question on possible reaction by Left parties, the Finance Minister said they have been consulted on the matter. However, CPI (M) in a statement ''strongly'' opposed the divestment in BHEL.
Chidambaram said the money to be raised through the divestment would be accrued to the National Investment Fund, of which 75 per cent money would be spent on health and education and the remaining 25 per cent on bringing back to strength the "revivable'' PSUs.
The proceeds would not be reflected in the Budget, he added. This is the second divestment case initiated by the Congress-led UPA regime despite opposition from Left parties since it assumed office last year.
The first was National Thermal Power Corporation in November 2004 in which the government divested 5.25 per cent of its stake along with the power company's initial public offer of the same amount.
Chidambaram expressed the hope that response to the BHEL issue would be as overwhelming as was to the NTPC offer.
Justifying the divestment in BHEL, he said the National Common Minimum Programme has mandated that investment avenues must be found for retail investors and for reviving PSUs. The decision meets both the requirements, he said.