Government To Sell 15% Stake In Bharat Dynamics Via Offer For Sale
Akash surface-to-air missiles are displayed by the Defence Research and Development Organisation during the DefExpo 20 in Lucknow, Uttar Pradesh, India. (Photographer T. Narayan/Bloomberg)

Government To Sell 15% Stake In Bharat Dynamics Via Offer For Sale

The Government of India plans to sell up to 15% in the country’s largest missile maker—its second such move in a defence enterprise in less than a month.

As many as 1.83 crore shares of Bharat Dynamics Ltd., amounting to 10% stake, would be sold through an offer for sale, according to an exchange filing. The floor price for the sale has been fixed at Rs 330 apiece—a discount of about 14% to its current market price.

There’s an option for oversubscription for an additional 91.67 lakh shares—or 5% stake. If the offer gets oversubscribed, then the government’s stake in Bharat Dynamics will fall from 87.75% to 72.75%.

The offer will be open to non-retail and retail investors on Sept.8 and Sept.9, respectively. Retail investors will be allocated equity shares at a discount of Rs 20 to the bid price entered by them. If the offer gets fully subscribed, the government would raise around Rs 604.8 crore. An oversubscription would result in the government netting as much as Rs 907.2 crore.

The government had, last month, raised nearly Rs 5,020.8 crore by offloading around 15% stake in Hindustan Aeronautics Ltd.

Bharat Dynamics makes guided missile systems and has a portfolio comprising surface-to-air missiles, anti-tank guided missiles, underwater weapons, launchers, countermeasures and test equipment. The Hyderabad-based company has a near 54% share in the missile market, and has facilities in Bhanur, Telangana, and Visakhapatnam in Andhra Pradesh.

This announcement comes at a time when the government has ordered divestment in state-run enterprises amid increasing requirement for Indian defence companies to ramp up capacities to make products ranging from ammunitions and missile systems.

Bharat Dynamics, according to ICICI Direct Research, enjoys a strong moat due to its niche capabilities in missile manufacturing and significant competitive advantage. The company also has an order book amounting to Rs 7,413 crore, as of April 1—providing revenue visibility for over two years. Major products in its current order book include the Akash weapon system, long-range surface-to-air missile and medium-range surface-to-air missile.

Shares of Bharat Dynamics have risen by more than a third so far this year while the Nifty 500 Index has fallen by 5%.

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