Budget gains in mind, Hindustan Aeronautics Limited selloff may be pushed to March

NEW DELHI: The Finance Ministry may bring the public offer for Hindustan Aeronautics Limited only after the budget, hoping to capture the increase in valuations of the company because of the likely increase in defence allocation next year.

Department of Disinvestment, which is also pressing for listing of the Nuclear Power Corporation of India, or NPCIL, is hopeful that if HAL's public offer finds favourable response with investors other state-run defence companies may also be listed.

"We have other bigger issues also lined up. So, HAL can come up possibly by March," a finance ministry official said. In 2011-12, the government had increased the defence budget by 11% to Rs 1.64 lakh crore, from Rs 1.47 lakh crore in 2010-11.

"A lot will depend on how HAL's issue fares. An increase in defence budget will mean that some of that amount will flow into HAL, which can potentially boost the market sentiment," said a government official.

HAL, a navratna company, will be the third defence PSU to be listed, after Bharat Electronics and Bharat Earth Movers Limited.

The government is looking to divest 10% in the company which may fetch it around Rs 2,000 crore. At present, the government owns 100% stake in the company.

Last week, the government had finalised four merchant bankers to manage HAL's IPO. The four book running lead managers, or BRLMs, are Goldman Sachs, Barclays Securities, SBI Capital Markets, and Enam Securities.

A finance ministry official also confirmed that the government may bring the issue of HAL sometime in March 2012. But some analyst are of view that it will not be advisable to wait for the budget to get HAL listed on the bourses.

"HAL will automatically find investors, both retail and institutional, as it is sitting on a cash pile and is considered to be Asia's largest aircraft company," said an analyst, requesting anonymity.

HAL has Rs 10,000 crore cash reserves and had given around 400 crore dividend to the government in 2010-11. "If HAL issue succeeds, then there will be a positive sentiment for other public sector issues," said the above quoted expert. The government is looking to raise Rs 40,000 crore through stake sale in profit making companies, but has managed to raise only Rs 1,100 crore so far.