Bharat Dynamics extends decline; stock slips 18% in two days

Shares of Bharat Dynamics (BDL) slipped 5 per cent to Rs 315 on the BSE on Wednesday, falling 18 per cent in the past two trading days after the government on Tuesday launched a share sale to divest 15 per cent stake. The stock has fallen below the base price of Rs 330 per share set for the share sale.

“The Promoter proposes to sell up to 18.33 million equity shares of the Company on September 8, 2020, (for non-retail investors only) and on September 9, 2020 (for retail investors and for un-allotted non-retail Investors who choose to carry forward their bids) with an option to additionally sell 9.16 million equity shares (representing 5 per cent of the total issued and paid-up equity share capital of the company),” Bharat Dynamics said in an exchange filing.

On Tuesday, after market hours, BDL informed the stock exchange that the government wished to exercise the complete oversubscription option to the extent of 5 per cent of the total paid-up equity share capital of the company as on June 30, 2020, in addition to the base offer size. Accordingly, the total offer size will be 15 per cent of the total paid-up equity share capital of the company as on June 30, 2020, it said.

The base price for the share sale was set at Rs 330 per share, a discount of 15 per cent to Monday’s close. Retail investors—those applying for up to Rs 200,000 worth of shares—will technically get the shares at Rs 310 as the Centre announced an additional discount of Rs 20 per share to them.

The government currently holds nearly 88 per cent stake in BDL. If the retail portion is fully subscribed the government’s stake will fall below 75 per cent, making BDL compliant with the 25 per cent public shareholding norms.

India’s defence sector has been growing at a modest pace for the past few years. Modernisation of the armed forces and indigenisation of manufacturing has emerged as focus areas. This is an opportune time to embark upon a new phase of self-reliance in the sector by manufacturing technologically advanced equipment within India, the company said.

“DPP 2016 is a step towards creating an industry-friendly structure to facilitate better contract negotiations and improve the pace of contract awards. Breakthroughs like the Make procedure, strategic partnership (SP) model, liberalisation of FDI norms, and creation of a level-playing to the private industry have been introduced. Moreover, the company is working as a co-development partner with DRDO in many projects including Nag, Astra, MPATGM, SAAS, QRSAM, AKASH-NG etc,” BDL said in the 2019-20 annual report.