Why is government again monetizing HAL, which had recently done an IPO?

Clearly, the government is again looking to monetize its stake in HAL which has gained sharply in the last few weeks on the back of the huge defence in-sourcing promise of the government. The OFS is slated for 27 August and 28 August.

The government will sell up to 15% stake in Hindustan Aeronautics Limited or HAL through the offer for sale route. Out of this 10% of the stake will be offered and the balance 5% will only be subject to oversubscription, which looks quite likely based on the pricing.

The OFS will sell 3.34 crore shares with the option to retain another 1.67 crore shares as part of any oversubscription. This will take the potential divestment size to Rs.5020 crore at floor price of Rs.1001 per share; representing a 15% discount to the stock CMP of Rs.1177.

Hindustan Aeronautics has already rallied over 30% in the last few weeks since the defence in-sourcing plan announced. Clearly, the government is looking to monetize some of its holdings at higher prices when the iron is still hot. That is good business sense.