Govt clears 26% strategic sale in Bharat Earth Movers

The government will sell 26 per cent stake in defence equipment manufacturer Bharat Earth Movers (BEML), making it the first major public sector undertaking (PSU) to be sold through strategic disinvestment, which may fetch the exchequer over Rs 1,000 crore.

In a notification to the stock exchanges, BEML said the Cabinet has given an ‘in-principle’ approval for strategic disinvestment of 26 per cent equity shares in BEML out of the government’s shareholding of 54.03 per cent.

At the current market pricing of Rs 999.50 a share, 26 per cent stake of BEML could fetch the exchequer over Rs 1,000 crore.

After the strategic sale, the government stake in the PSU would come down to 28.03 per cent.

“The said shareholding would be sold to the strategic buyer(s) to be identified by the government of India following due procedure,” BEML said.

The strategic sale approval is just the third in over 12 years. In September, the Cabinet had cleared strategic sale of Bharat Pumps & Compressors, while, in December, it had approved sale of India’s first pharma company Bengal Chemicals & Pharmaceuticals as well as Hindustan Antibiotics.

These PSUs will be the first privatisation since sale of Jessop & Company in 2003-04 under the National Democratic Alliance (NDA) government headed by Prime Minister Atal Bihari Vajpayee.

These are among the PSUs that NITI Aayog has identified for sale of the government’s majority stake to private companies in order to bring in greater efficiency and professionalism in their functioning.

Established in May 1964, BEML operates on three major business verticals for associated equipment manufacturing - mining and construction, rail and Metro, and defence and aerospace. Its turnover has risen to more than Rs 3,500 crore.

The PSU, under the administrative control of the defence ministry, provides equipment support to the Indian Army and other defence forces by manufacturing variants of Tatra vehicle for all terrain operation.

It also supports aerospace operations by supplying ground support equipment such as aircraft tow tractors, multipurpose weapon loaders and crash fire tenders.

The government is targeting Rs 56,500 crore in disinvestment proceeds this financial year. Of this, Rs 36,000 crore is to come from minority stake sale in PSUs and another Rs 20,500 crore from strategic stake sale.

The fiscal target continues to remain far off, with total collections of around Rs 24,000 crore in the nine months of the financial year so far.

Incidentally, the first strategic sale in a PSU also happened under the NDA rule in 1999. In 2000, the government sold 74 per cent equity in Modern Food Industries to Hindustan Lever for Rs 105.45 crore.

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