State-run aerospace and defence firm Hindustan Aeronautics Ltd (HAL) is seeking a valuation of as much as Rs 41,464 crore ($6.4 billion) through its initial public offering that opens on Friday and closes five days later.
The company has fixed a price band of Rs 1,215-1,240 per share for the IPO. Retail investors will get a discount of Rs 25 on the price at which shares are allotted.
The government will sell 34.10 million shares, representing a 10.2% stake, and raise up to Rs 4,229 crore via the IPO.
At the time of filing for the IPO in October 2017, the government had decided to sell 36.15 million shares. However, the company bought back 27.11 million shares from the government two months later.
After this buyback, the company's paid-up capital reduced from 361.5 million to 334.38 million. As a result, the size of the offering shrunk from 36.15 million to 34.10 million shares.
The government, which owns 100% of the company, will get three years from the date of listing to bring its stake down to 75% or below to meet regulatory norms on minimum public holding.
A plan to list HAL was originally approved in 2012 but the firm did not want to make key information public as part of the listing process. In 2013, it sought an exemption from the market regulator regarding the disclosure rule but did not get one.
In October 2017, HAL filed its draft prospectus. In the same month, it got regulatory clearance.
Merchant bankers SBI Capital Markets and Axis Capital will manage the IPO.
HAL will be the only Indian aircraft maker listed on the stock exchanges. However, a number of other companies that make defence equipment are already listed. These include Bharat Electronics Ltd, Reliance Naval (formerly Reliance Defence Engineering), Tata Power, Mahindra & Mahindra, Larsen & Toubro and Cyient.
HAL’s listed global peers include US firm The Boeing Co., European multinational corporation Airbus SE, Lockheed Martin, United Technologies and General Electric.
Proceeds from the HAL IPO would help the government meet the fiscal deficit target for the current financial year, which has been revised from 3.2% to 3.5% of gross domestic product.
Bengaluru-based HAL was incorporated in 1963. It designs, develops, manufactures, repairs, overhauls and services a wide range of products including aircraft, helicopters, aircraft engines, avionics, accessories and aerospace structures.
HAL is India's largest aerospace firm and ranks 39th on the global list of aerospace companies based on annual revenue in dollar terms, according to a 2016 report by Flight International, an aerospace and aviation sector data and analytics firm.
The company reported consolidated net profit of Rs 2,624.7 crore on net revenue of Rs 17,951.5 crore for the financial year ended March 2017. As on 31 July 2017, it had orders worth Rs 63,333 crore in hand.