BHEL OFS Opens for Retail Investors: Government Aims to Raise Up to ₹4,422 Crore
The Indian government's offer for sale (OFS) in public sector undertaking Bharat Heavy Electricals Ltd (BHEL) has opened for retail investors today, Thursday, February 12. This follows the OFS opening for non-retail investors yesterday, February 11. The government has set a floor price of ₹254 per share for the stake sale.
Stake Sale Details and Financial Implications
The Centre is divesting up to a 3% stake in BHEL, with an additional 2% greenshoe option available. At the base level, the 3% sale is estimated to raise approximately ₹2,650 crore. If the greenshoe option is fully exercised, the total transaction size could increase to nearly ₹4,422 crore.
This is a pure promoter stake sale, meaning the proceeds will go directly to the government exchequer rather than to BHEL itself. Consequently, the company's balance sheet and debt profile will remain unchanged. The seller is the President of India through the Ministry of Heavy Industries, which held a 63.17% stake in BHEL prior to this OFS.
Market Context and Share Performance
When announced, the floor price of ₹254 represented an almost 8% discount to the then market price of about ₹276. However, following the announcement, BHEL's stock corrected sharply, falling about 5.5% to hover closer to ₹260. This movement has effectively narrowed the discount available through the OFS.
In terms of share performance, BHEL has delivered a 30% gain over the past year and an 18% increase in the last six months. However, the stock has declined 4% over three months and about 5% in the past month. Over the long term, BHEL has been a multibagger, delivering returns exceeding 570%.
Analyst Perspectives: To Apply or Skip the OFS?
Analysts are divided on the attractiveness of the BHEL OFS, with a consensus emerging that it may not be suitable for investors seeking quick listing-day gains. Given the narrowing discount and emerging valuation concerns, the issue appears more appropriate for those with a longer investment horizon.
Dr Ravi Singh, Chief Research Officer at Master Capital Services, cautioned that BHEL remains a cyclical PSU stock rather than a low-risk defensive investment. He stated that participation makes sense only for patient investors with a two-to-three-year view.
"Fresh allocation is justified only if one is comfortable with gradual recovery rather than sharp earnings growth. It's more of a steady improvement story than a breakout growth story at this stage," he opined.
Singh added that even long-term investors might be better off accumulating the stock gradually from the open market instead of committing a lump sum via the OFS.
Positive Outlook from JM Financial
On the other hand, JM Financial has maintained a constructive stance, reiterating its Buy rating on BHEL. At the OFS floor price, the brokerage estimates BHEL is trading at around 21 times FY28 earnings, compared with roughly 23 times FY28 earnings at prevailing market prices. JM Financial has set a target price of ₹355, indicating meaningful upside potential over the medium term.
The brokerage's positive view is anchored in India's long-term thermal power expansion plans. The country aims to achieve 340 GW of coal-based capacity by 2047. After accounting for projects under construction and expected retirements, JM Financial estimates that India will still require 170–180 GW of new thermal capacity to sustain its installed base.
Margin recovery is seen as the key swing factor in this cycle. As older, low-margin projects near completion, execution is gradually shifting toward newer, higher-margin orders. JM Financial expects EBITDA margins to improve to 10.7% by FY28 from 4.4% in FY25. It projects revenue, EBITDA, and PAT to grow at a CAGR of 20%, 62%, and 98%, respectively, between FY25 and FY28, with EPS rising sharply over the same period.
Overall Assessment
While BHEL's long-term fundamentals and order visibility remain supportive, the OFS appears better suited to investors willing to ride out near-term volatility rather than those chasing quick gains. The government's stake sale represents a significant financial transaction that could bolster the exchequer while offering retail investors an opportunity to participate in a key PSU with a strong historical performance record.
Disclaimer: The views and recommendations mentioned above are those of individual analysts or broking companies, and not of Bharat Horizon. We advise investors to consult with certified experts before making any investment decisions.
