Shailesh Kumar, National Defence
New Delhi, 01 October 2017
Government of India approved 10% disinvestment in Defence Public Sector Undertaking (DPSU) Hindustan Aeronautics Limited (HAL). Accordingly, HAL has initiated the process of Initial public offer (IPO) with the filing of the Draft Red Herrring Prospectus (DRHP) on September 29, 2017 with market regulator SEBI. “This is a major milestone towards listing of the defence PSU which is slated for partial disinvestment by the Govt. of India” says T. Suvarna Raju, CMD HAL.
The Government of India approval for the sale of a 10 percent stake in Hindustan Aeronautics Ltd ( HAL) follows the unfinished move initiated in November 2012, when Cabinet approved offloading of 10 per cent stake . HAL through its IPO likely to offload some 3.615 crore equity shares of face value of Rs 10 each representing 10 % of its paid up equity capital.
The offer is made by the President of India through the Department of Defence Production, Ministry of Defence. The Government had appointed four merchant bankers – Axis Capital Ltd, Karvy Computershare Pvt Ltd, Goldman Sachs (India) Securities Pvt Ltd and SBI Capital Markets Ltd for managing the stake sale.
Retired Air Vice Marshal Kapil Kak, a leading defence expert asks, “The bigger question is what has impelled the government to do so? It’s only a file with SEBI that we will disinvestment. Who will pick up this amount? What is the business plan following its past performance?
“Its a good move forward. This should have been done 2 years back when Government came to power . The policy of disinvestment is a way to go. It is more an opportunity for private sector to come on board”, says AVM Kak.
“Ten percent is too little and too late. The Government is cautious therefore waiting for time. They may do it incrementally. In 3 to 4 month’s time the disinvestment could go up to 15 to 20 % of its paid up equity”, remarks AVM Kapil Kak.
“It is in keeping with the Government policy on disinvestment but timing is also important because as per the latest reports the fiscal deficit target for the current year nearing exhaustion so while it will be to some help to HAL and will also help the Government to over the fiscal situation”, says Amit Cowshish, former Financial Adviser (acquisition), Ministry of Defence.
“It will not be surprising if similar partial disinvestment in some other DPSUs also comes about before the end of the current fiscal”, Cowshish adds.
“I don’t think disinvestment is the answer to strengthen the defence industrial base. Instead, what the Government should be doing is to encourage the private sector to come up with integration capability and they also should also encourage HAL to focus on integration capabilities rather than manufacture every sub systems themselves”, Pallam Raju, former Minister of State (MoS) for Defence commented.
Former HAL chairman, Dr. RK Tyagi welcomes the disinvestment move. “Ten per cent disinvestment means the control remains with the Government. When you are quoted on stock market the Corporate Governance and accountability measures are better. The company has to file reports every quarter meaning budgets, balance sheet will be made”, says Dr. Tyagi
He adds, “We have seen in DPSUs, PSUs, whatever have gone in disinvestment, the companies have benefited as it add value to the company. It is a very good move. In times to come, not only 10 per cent but it should be dis-invested more. Government can have majority share but it is good disinvestment done.
— NationalDefence (@NDIndiaFirst) October 1, 2017