BHEL shares fall over 6% as OFS open for subscription at 8% discount; check details

BHEL shares were in the spotlight today as the power plant equipment manufacturer's stock declined over 6% to the day’s low of ₹259.25 per share on NSE. BHEL shares are trading in the red after the company’s offer for sale (OFS) opened for subscription today, through which the government want to sell up to 5% stake in Bharat Heavy Electricals Ltd (BHEL).

The company has fixed ₹254 per share as the floor price for this OFS, which is around 8% lower compared to yesterday’s closing of ₹276.10 per share. The Indian government plans to divest 3% stake in the company with a green-shoe option to sell an additional 2% stake in the case of full subscription.

If the BHEL offer for sale (OFS) is fully subscribed, then it would fetch the government ₹4,422 crore for 5% stake sale. The BHEL OFS issue will open for non-retail investors on Wednesday, while retail investors can place their price bids on Thursday.

Ahead of OFS opening, the government holds 63.17% stake in BHEL. As of 1:30 pm, BHEL shares are down 5.8% to trade around 260 apiece on NSE. So far this year, BHEL shares are down over 9.5% amid a sell-off in broader markets.

What is offer-for-sale?

Offer-for-sale is a mechanism that allows promoters or the government to sell part of their stake in a listed company directly on the stock exchange. OFS shares are offered for sale at a floor price decided by the seller. Retail investors, mutual funds, and institutions can place bids through their trading accounts. OFS is usually open for 1 or 2 working days, and money raised from OFS goes to the seller, not to the company.

Through OFS, investors gets opportunity to invest in the company’s shares as OFS floor prices are generally lower compared to the market price.