The initial public offering (IPO) of Hindustan Aeronautics Ltd (HAL) is expected to come in the last quarter of the calendar year. The IPO will involve fresh issue of shares as well an offer for sale (OFS) by the government to sell 10% stake.
The DRHP is likely to be filed with Sebi by September and the IPO will be launched in the October-December quarter
– a senior government official told PTI
Hindustan Aeronautics recently used INR4,300 crore out of its cash reserves of INR17,671 crore to buyback 25% of its share capital.
Hindustan Aeronautics has been an IPO candidate since 2012 when it received union cabinet’s approval for a 10% divestment. In the subsequent year, the Navratna defence equipment maker appointed SBI Cap, Goldman Sachs, Barclays and Axis Capital to handle the much-anticipated and long-delayed IPO.
“The buyback was a precursor to the IPO. It helped to right size the capital of HAL given its high net worth, low leverage ratio, large cash balances not being optimally utilised for business purpose,”
The government of India has sole ownership of the company which provides maintenance and overhaul services to aircrafts. Hindustan Aeronautics has a net worth of INR17.12 lakh crore while its revenues grew 5.8% to INR16,524 crore in fiscal year ending March 2016. The company’s profit before taxes improved by 1.2% to INR3,210 crore as it focused on reducing imports and making systems and components locally.
Divestment back on track
After several delays, the government’s stake sale program is back on track as it has set a disinvestment target of INR56,500 crore for the current fiscal ending 31 March 2017. Out of the total, INR36,000 crore is expected to come from minority stake sale in PSUs, and the remaining INR20,500 crore is projected to come from strategic sale in both profit and loss-making companies.
In the past, the government’s plans regarding divesting equity stakes in public sector units (PSUs) have repeatedly hit roadblocks. The list includes IPO of Pawan Hans and Airport Authority of India (AAI) which have remained in the pipeline for long.