Government’s Small Effort at Filling its Kitty

The Government seems to be leaving no stone unturned, however small or big, in an attempt to achieve its disinvestment target of Rs 30000 crore. It is reportedly very close to finalizing a stake sale in Engineers India Ltd (EIL). As per media reports, the Cabinet Committee on Economic Affairs (CCEA) is likely to decide the EIL stake sale on coming Thursday. There is strong possibility of the stake sale being approved and the follow-on public offering (FPO) for offloading a 10% stake in EIL hitting the markets soon. The Government is expecting to raise around Rs 700 to 800 crore thorugh this disinvestment.

EIL listed on bourses for the first time in 1994-95 raising almost Rs 68 crore through an IPO. Later, in July 2010, it again raised around Rs 960 crore through an FPO. This FPO of EIL was subscribed by more than 13.35 times. The governement is currently holding an 80.40 per cent stake in the company.

EIL is an engineering consultancy and engineering, procurement and construction (EPC) company operating in the oil & gas, metallurgy, infrastructure and other industrial projects. The company operates in two segments; Consultancy & Engineering Projects and Turnkey Projects. EIL posted revenues of Rs 1387 crore in the first half of FY2013 against Rs 1681 crore in H1FY2012. Its net profit saw a marginal increase to Rs 315 crore in H1FY2013 from Rs 294 crore in H1FY2012. Being an engineering consultancy and EPC contractor, its net margin is good and the same increased to 22.73 per cent in H1FY13 from 17.53 per cent in H1FY12.

More clarity on the issue size and the issue pricing details will emerge once the CCEA meets to clear the FPO. Watch this space for the finer details of the issue and our recommendation on what you should be doing with it.