The Finance Ministry on Thursday decided to exercise the green shoe option as the offer-for-sale of Hindustan Aeronautics Ltd (HAL) has received a good response, with the issue subscribed 4.5 times on day one.

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"Offer for Sale (OFS) of government shares in HAL got great response on day one. Issue subscribed 4.5 times of base size at a clearing price above the floor price by non-retail investors. Govt has decided to exercise the green shoe option. Retail investors get chance to bid tomorrow," DIPAM Secretary Tuhin Kanta Pandey said in a tweet.

The OFS comprised of base issue size of 1.75 per cent or 58.51 lakh shares, with an option to retain over-subscription of an equal quantum.

The government on Wednesday proposed to sell up to a 3.5 per cent stake in HAL at a floor price of Rs 2,450 a share, if fully subscribed, the OFS would fetch about Rs 2,800 crore to the exchequer.

On the first day of OFS, shares of HAL closed 4.87 per cent down at Rs 2,497.40 each on BSE.

The floor price is at a discount of around 6.7 per cent over the closing share price of HAL on BSE.

Also Read: HAL shares drop as government announces OFS at discount to market price — should investors worry?

The government currently holds 75.15 per cent of HAL, which is a Central Public Sector Enterprise (CPSE) under the Defence Ministry.

The proceeds from HAL OFS would add up to the government's disinvestment kitty for the current fiscal.

The government has so far mopped up Rs 31,106.64 crore from disinvestment and share buyback in CPSEs.

The government had last month pegged lower revised estimates of disinvestment revenue estimates for the current fiscal at Rs 50,000 crore, against the budget target of Rs 65,000 crore.