Government looks all set to hive off BEML

Going by the recent reports it looks like the BEML stock may be ripe for divesting by the government. As per the latest reports in the press, the government may have just about shortlisted the potential candidates for taking over the 26% stake in BEML. Whether the stake is handed over to 1 company or to multiple companies is a granular decision. The 4 companies shortlisted for the 26% stake in BEML are Tata Motors, Ashok Leyland, Bharat Forge and Megha Engineering. Megha Engineering is a Hyderabad-based player in infrastructure projects execution.

First, the background of this stake sale! DIPAM had originally set 01 March as the deadline for submission of expressions of interest (EOI). This was later extended to 22 March due to COVID 2.0. Now the bids have been analyzed and evaluated and as per reports, the four companies have been shortlisted. The government currently holds 54% in BEML and this stake sale of 26% will make the government of India a minority shareholder in BEML. While divestment price is not known, BEML currently has a market cap of Rs.5,350 crore so the 26% stake would be worth around Rs.1,390-1,400 crore.

BEML is one of the mini-ratna companies of the government and has a strong positioning in defence production, mining, aerospace, construction and even the manufacture of metro trains. Incidentally, BEML also manufactures critical military hardware like the launchers for the Prithvi Missile. Among the bidders, Tata Motors, Ashok Leyland and Bharat Forge have a strong defence franchise in their business models. BEML would help them add defence capabilities at a reasonable price. For the government, it will be one more small step towards its coveted Rs.175,000 crore divestment target for FY22.