Indian Government Plans Discounted Offer for Sale of up to 3.5% Stake in HAL

The Indian government is planning to sell up to a 3.5% stake in Hindustan Aeronautics Ltd (HAL), a public sector aerospace and defense company, according to a recent exchange filing. The stake sale is estimated to be valued at Rs 2,867 crore, with a floor price of Rs 2,450 apiece. The floor price is at a discount to the company’s current market value and yesterday’s closing price of Rs 2,625.20.

Currently, the government holds a 75.15% stake in HAL, making it the majority shareholder. The offer for sale aims to achieve the minimum public shareholding of the company in compliance with the Securities and Exchange Board of India’s listing obligations.

HAL is a well-established company in the Indian defense sector, and the current market cap of the company stands at Rs 87,800 crore. The company has a wide range of products and services, including aircraft and helicopter production, design and development, and aircraft upgrades and repairs.

In 2020, the government sold a 15% stake in HAL as part of its disinvestment program, which received a strong response from investors, with the offer for sale receiving an oversubscription of over three times. The government’s plan to sell up to a 3.5% stake in HAL at a discounted floor price is likely to attract significant interest from investors, given HAL’s strong reputation in the Indian defense sector.

The Indian government has planned to sell 3.5% of its equity shares in Hindustan Aeronautics Ltd (HAL) via an offer for sale (OFS), as part of its disinvestment program. The government plans to sell 1.75% of the equity shares on March 23 and March 24 and an additional 1.75% stake if the oversubscription option is exercised. The offer for sale is subject to a floor price of Rs 2,450 per share, which is at a discount to HAL’s current market value.

Retail investors can bid for up to 10% of the offer size, subject to valid bids, and retail investors are defined as individuals who bid for shares with a total value of not more than Rs 2,00,000. The government’s divestment in state-owned firms, including HAL, is a key revenue-raising measure that helps the government to fund infrastructure-building initiatives. HAL is a well-established company in the Indian defense sector, and the offer for sale is expected to attract significant interest from investors.

The Indian government has exceeded its divestment target for the financial year ending March 31, having raised Rs 31,100 crore by selling its shares in state-run firms, against a target of Rs 500 crore. However, the government may miss its divestment target for the next financial year, as it plans to halt the sale of its stake in Hindustan Zinc (HZL) unless the company cancels its planned $3 billion cash acquisition of two Vedanta Group subsidiaries. Source