The government on Wednesday approved selling 5 per cent of its stake in power equipment major BHEL that could mop up over Rs 4,326 (nearly USD 1 billion).

“Timing of disinvestment will … depending on market conditions. If markets are where they are today, certainly, we can ask the Department of Disinvestment to defer it,” Minister for Heavy Industries and Public Enterprises Praful Patel said.

“This (stake sale in BHEL) is not a distressed sale. It must realise good value…,” he said, adding stake sale is supposed to take place in the current fiscal.

BHEL’s follow-on public offer is part of the government’s ambitious plan to garner Rs 40,000 crore from disinvestment in this fiscal.

“The government will disinvest five per cent equity in the company, out of its share holding of 67.72 per cent through book building process in the domestic market,” an official release said.

On the basis of BHEL’s market capitalisation of Rs 86,532 crore at close on the Bombay Stock Exchange on Tuesday, five per cent stake in the company is worth over Rs 4,326 crore (nearly USD 1 billion).

Disinvestment of stake in power-equipment major BHEL was approved by the Cabinet Committee on Economic Affairs (CCEA), which met in New Delhi on Tuesday.

After the disinvestment, the government would have 62.72 per cent shareholding in the company.

A price discount of 5 per cent would be given for retail investors, as part of efforts to encourage greater public ownership in Central Public Sector Enterprises, the release said.

Ten per cent of the shares to be offered for sale through further public offer shall be reserved for the employees of the company, which would also be given a price discount of five per cent.

In July, the government appointed four merchant bankers — Morgan Stanley, DSP Merrill Lynch (Bank of America), ICICI Securities and Kotak Mahindra Capital — for BHEL’s follow-on public offer.

Indian stock market has been highly volatile in recent times, especially with rising global economic uncertainties triggered by the European debt crisis and US rating downgrade.

The government has already approved disinvestment in ONGC, SAIL, HCL and NBCC.

So far this fiscal, the government has mopped up Rs 1,162 crore through disinvestment of five per cent stake in Power Finance Corporation.

Last fiscal, the government mopped up Rs 22,763 crore through sale of equity in public sector enterprises.