Hindustan Aeronautics (HAL) share price fell in early trade today after the state-owned firm said government would sell up to 15 per cent stake through an offer for sale (OFS). The stake sale could fetch about Rs 5,000 crore to the exchequer.
The share sale will be part of the Narendra Modi government's ambitious Rs 2.1 lakh crore disinvestment target for fiscal 2020-21.
Share price of HAL declined 11.43 % to Rs 1043 against previous close of Rs 1,177 on BSE. Total 0.57 lakh shares of the firm changed hands amounting to turnover of Rs 6.43 crore. Market cap of HAL fell to Rs 35,376 crore.
In one year, HAL share has risen 81% and grown 61% since the beginning of this year. The stock has gained 32.44% in a month.
The government plans to sell 3,34,38,750 equity shares, constituting 10 per cent paid-up share capital of the company, with an option to sell an additional 5 per cent stake or 1,67,19,375 equity shares (oversubscription option).
Jyoti Roy, DVP- Equity Strategist at Angel Broking said,"The 15% stake sale by Government in HAL works out to be Rs 5,000 cr at floor price of Rs 1,001 per share. While the Government will initially put 10% stake for sale, it can offer additional 5% based on market demand. The stock has corrected sharply on the news as the stake sale by the government will mean increased supply in the markets. Currently the company has an order backlog of Rs 52,000 cr which is expected to go substantially over the next few years as the company is likely to get many new orders in the coming years including orders for 83 LCAs will go for Cabinet approval soon. The company also has various other projects in the pipeline including Light Utility Helicopter (LUH). These projects will ensure constant order flow for the company and we are positive on the future outlook of the company. However, given likely revenue shortfall for the government, there is a possibility of more supply coming into the markets which will increase supply."
Currently, government owns 89.97 per cent stake in Hindustan Aeronautics. The firm was listed on stock exchanges in March 2018. 20 per cent of the offer size will be reserved for retail investors and 25 per cent for mutual funds. Retail investors will be allocated offer shares at a discount of 5 per cent to the cut-off price in accordance with the OFS guidelines, the government firm said.
Through the OFS route, a listed company can sell its shares via exchange platform itself. In an OFS, a minimum of 25% of shares offered are reserved for institutional investors such as mutual funds and insurance companies.
IDBI Capital Markets & Securities, SBICAP and YES Securities (India) will be acting as the settlement broker for the offer. The floor price for the offer has been fixed at Rs 1,001 per equity share of the company. The price is at 15 per cent discount to Wednesday's closing price of Rs 1,177.75. The OFS will take place on August 27-28 on a separate window of the stock exchanges, HAL said.
By Aseem Thapliyal