Bharat Heavy Electricals (BHEL) share surged 25 percent in the early trade on October 18 on the report of government likely to cut its stake in the company.
The government may consider bringing down its stake in state-owned BHEL and National Mineral Development Corporation (NMDC), sources told CNBC Awaaz.
The stake in BHEL may be pared in tranches to 26 percent from 63.17 percent now.
An inter-ministerial group is expected to meet soon to discuss the stake sale.
The government may also look to sell the state-run power player's non-manufacturing units to private players.
Four to five units of BHEL are reportedly marked for sale to private players this fiscal.
Earlier in October, the government cleared disinvestment in five PSUs, a move which is expected to cover nearly 60 percent of its disinvestment target for FY20.
The government has a divestment target of Rs 1.05 lakh crore for the current financial year. In both FY18 and FY19, the divestment proceeds exceeded the target of Rs 1 lakh crore and Rs 80,000 crore respectively.
According to Emkay, a strategic sale will be positive for the stock. Although it may not be quite easy to find a buyer, we think that there is a good value for the strategic buyout for global power and industrial equipment makers as well as domestic companies.
There will likely be investor concerns relating to demand for BHEL as a strategic buyout; however, we believe that being a PSU, BHEL has not been able to sufficiently and effectively diversify itself outside of power sector, despite its capability.
However, a strategic buyout might enable that possibility and open up significant opportunities for BHEL both in the domestic and international markets, it added.
At 09:20 hrs, Bharat Heavy Electricals was quoting at Rs 54.75, up Rs 10.20, or 22.90 percent, on the BSE.Shares of NMDC was quoting at Rs 105.05, up Rs 2.85, or 2.79 percent.