BHEL DISINVESTMENT

Backdoor Entry To FIIs

The following is the text of letter written by Dipankar Mukherjee, deputy leader of the CPI(M) group in Rajya Sabha, to the prime minister Dr Manmohan Singh, on June 4. The letter concerns the nature of the present shareholding pattern in the Bharat Heavy Electricals Ltd (BHEL) in connection with the government’s decision to disinvest 10 per cent of its equity shares. The letter raises important questions about the nature of disinvestment in BHEL shares.

I AM constrained to invite your kind attention to the present shareholding pattern of BHEL, which shows that 22.74 per cent of the 33 per cent shares, disinvested earlier, are held by foreign institutional investors (FIIs).

As you are kindly aware, during the disinvestment of these shares in the early nineties, it was pronounced that eligible investors would comprise mutual funds, investment institutions in the public sector, and the workers. Inspite of this stated objective, it is now clear that during the NDA regime a major chunk of the disinvested shares were cornered by the FIIs, leading to the present situation. Present shareholding of workers is only 0.12 per cent and that of the Indian small investors is 0.89 per cent. Disturbingly, one of the FIIs, the UBS Security Asia Ltd, has recently been debarred by SEBI for one year because of its alleged market manipulation in the “market crash of May 2004,” and it is reportedly holding 0.82 per cent share in BHEL. Another FII, Merill Lynch Capital Market (0.94 per cent share), is reportedly having links with UBS as well as GE Capital. Our earlier apprehension that the major global competitors of BHEL, viz GE (USA), Alstom (France), Simens (Germany) etc, are eyeing for a foothold in BHEL through FIIs, is therefore quite well founded.

In light of the above, I sincerely hope that the government would review its decision of disinvesting 10 per cent of its equity shares which may only facilitate entry of one of the major global competitors of BHEL through the backdoor, either through FIIs and through their front companies in India. (INN)