According to a report in a leading business daily, the government is mulling a 51% stake divestment in Bharat Heavy Electricals Ltd. (BHEL)
BHEL is the leading manufacturer of capital goods equipment for the power sector in particular and range of other sectors (railways) in general.
The news report revealed that the heavy industry ministry has recommended 49% divestment, while the divestment department is in favour of divesting 51% stake. The government had earlier divested 32% stake in BHEL.
Unlike the proposal to divest stake in Air-India and Indian Airlines, the proposed divestment of stake in BHEL is expected to ruffle some feathers in the government. The reason behind this is that, while the former are loss-making and a drain on resources, BHEL has been posting impressive gains and is a golden goose, so to speak. It is debatable whether the government will part with a 51% stake that easily.
But given the huge deficit staring the country in the face, the government may not really have a choice. A divestment in BHEL will fetch the government necessary funds to reduce fiscal deficit. Moreover, if a BHEL in the hands of the public sector has functioned so well, it can do wonders in the hands of a private group.
Right now, BHEL is focused on the local market and lacks a global perspective. This could change on its divestment, as a private group could help BHEL graduate to a global level, which the government can never really do.
Moreover, there is a limit to the technical inputs that the government can supply to BHEL. In the engineering business, technology comes second to nothing else, and a private owner can fulfill that need. And of course, bureaucracy, the death of many a strong PSU. That could go with the divestment, along with the excess employees. But large-scale retrenchment will be opposed by the workers' union tooth and nail.
BHEL has announced third quarter results for the financial year 2016-2017. The company has reported an 18% YoY growth in sales, and a Rs 875 million net profit during the period. Here is our analysis of the results.
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