BHEL OFS: The offer for sale (OFS) by the Indian government in PSU company Bharat Heavy Electricals Ltd (BHEL) opens for retail investors today, Thursday February 12. The company, which has fixed a floor price of ₹254 per share for the OFS, opened the OFS for non-retail investors yesterday, February 11.
The Center is offloading up to a 3% stake, with an additional 2% greenshoe option in place. At the base level, the 3% sale is estimated at around ₹2,650 crores. If the greenshoe option is fully exercised, the total transaction size could rise to nearly ₹₹4,422 crore.
This is a pure promoter stake sale. As a result, the proceeds will accrue to the exchequer and not to the company, leaving BHEL’s balance sheet and debt profile unchanged. The seller is the President of India through the Ministry of Heavy Industries, the promoter, which held a 63.17% stake prior to the OFS.
When announced, the floor price implied an almost 8% discount to the then market price of about ₹276. However, the PSU stock corrected sharply after the announcement and slipped closer to ₹260, falling about 5.5%, thereby narrowing the effective discount on offer.
On the share performance front, BHEL has gained 30% over the past one year and 18% in the last six months. That said, it has declined 4% over three months and about 5% in the past month. Over the long term, the stock has delivered multibagger returns of over 570%.
What analysts say: Apply or skip the OFS?
Against this backdrop, analysts are divided and widely agree that the OFS may not suit investors seeking quick listing-day gains. With the discount gap narrowing and valuation concerns emerging, the issue appears more appropriate for investors with a longer investment horizon.
Dr Ravi Singh, Chief Research Officer at Master Capital Services, cautioned that BHEL remains a cyclical PSU stock rather than a low-risk defensive play. He said participation makes sense only for patient investors with a two-to-three-year view.
“Fresh allocation is justified only if one is comfortable with gradual recovery rather than sharp earnings growth. It’s more of a steady improvement story than a breakout growth story at this stage,” he opined.
Singh added that even long-term investors may be better off accumulating the stock gradually from the open market instead of committing a lump sum via the OFS.
On the other hand, JM Financial has stayed constructive and reiterated its Buy rating on the stock. At the OFS floor price, the brokerage estimates BHEL is trading at around 21 times FY28 earnings, compared with roughly 23 times FY28 earnings at prevailing market prices. It has set a target price of ₹355, indicating meaningful upside over the medium term.
The brokerage’s positive view is anchored in India’s long-term thermal power expansion plans. The country aims to reach 340 GW of coal-based capacity by 2047. After factoring in projects under construction and expected retirements, JM Financial estimates that India will still need 170–180 GW of new thermal capacity to sustain its installed base.
Margin recovery is seen as the key swing factor in this cycle. As older, low-margin projects near completion, execution is gradually shifting toward newer, higher-margin orders. JM Financial expects EBITDA margins to improve to 10.7% by FY28 from 4.4% in FY25. It projects revenue, EBITDA and PAT to grow at a CAGR of 20%, 62% and 98%, respectively, between FY25 and FY28, with EPS rising sharply over the same period.
Overall, while BHEL’s long-term fundamentals and order visibility remain supportive, the OFS appears better suited to investors willing to ride out near-term volatility rather than those chasing quick gains.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
