UPDATE 1-India to consider stake sale in BHEL-minister

Published: 21 Jun 2009 17:19:39 PST

* Not averse to 10 pct sale, but no time frame set -minister

* If realised, sale could fetch about $2 bln at current price

* India to encourage blue-chip state firms to expand globally (Adds quotes, details, share price)

NEW DELHI, June 19 - India will consider selling a stake in Bharat Heavy Electricals Ltd <BHEL.BO>, a minister said on Friday, as the government plans to encourage state-run firms to raise funds needed to expand operations at home and globally.

Stake sale plans for state-run firms were revived soon after the Congress party-led coalition was re-elected in May with a stronger majority. The cash-strapped government is looking at options to cut its bloated fiscal deficit.

"Point of disinvestment is still under consideration. Government has definitely a positive thinking on that line," Heavy Industries Minister Vilasrao Deshmukh said, referring to the leading maker of large electrical equipments.

Asked if his ministry could consider sale of up to 10 percent in BHEL, he said: "We are not averse to it."

If realised, it could fetch about $2.1 billion based on the current market price of the company, in which the government owns 67.7 percent, The remainder is held by the public.

In 2005, India had proposed stake sale in BHEL and other state-run firms, but the move was shelved on stiff opposition from the coalition's communist allies.

The left parties, who had later pulled their support from the ruling coalition, were roundly beaten in the national elections that ended last month.

The government has now decided to revive divestments without diluting its holding below 51 percent in state companies. See [ID:nBOM426436]

Indian ministers have named National Hydroelectric Power Corp, Oil India Ltd, Coal India Ltd, telecoms firm BSNL and national carrier Air India as candidates for divestments.

Deshmukh said the proposal for BHEL's stake sale should come from the finance ministry. "Once they decide, we will think of it," he said, declining to give a time frame.

Separately, a document circulated by the ministry said BHEL would sign agreements with two state utilities for power joint ventures and extend its agreement with Siemens AG <SIEGn.DE> for steam turbines and generators.

Blue-chip state firms would be given greater operational freedom and allowed to expand globally, it said.

Shares in BHEL, which has a market value of more than $21 billion, ended up 2.8 percent at 2,090.50 rupees in a Mumbai market whose benchmark index <.BSESN> rose 1.8 percent. The stock rose as much as 3.7 percent during trade.

The stock has risen 53.4 percent so far this year, slightly outpacing the main index that has gained by a half. ($1=48.1 rupees)