EIL follow-on public offer in July

State-run Engineers India Ltd is likely to hit the market with a follow-on public offer for sale of the government's 10 per cent equity in July to raise about Rs 1,000 crore.

"At current market price, (the) government is expected to raise Rs 1,000 crore through sale of its 10 per cent stake in EIL," company Chairman and Managing Director A K Purwaha told said.

The Cabinet had yesterday approved sale of a 10 per cent stake in EIL, which provides engineering consultancy services mostly to oil and gas firms.

Before the FPO, EIL will issue a 1,000 per cent (Rs 100 per share) special dividend, the government with 90.4 per cent stake being the biggest beneficiary at Rs 506 crore besides also getting a dividend tax of Rs 90 crore.

EIL will issue two bonus shares for every one held after that and follow it with splitting the Rs 10 share into two.

He said the EIL's Board is likely to approve the stake sale at its meeting on January 28, following which an extraordinary general meeting of shareholders would be called.

"Keeping in mind the formalities to be completed, I think the follow-on public offer is likely in early part of second quarter (of 2010-11). Q1 would be a challenging but July more realistically possible," Purwaha said.

EIL, which had a cash reserves of Rs 1,320 crore as on March 31, 2009, has till date given Rs 600 crore in dividends to the government on a Rs 25 lakh share capital that formed the company in 1965.

Purwaha said the special dividend and the divestment would give the government about Rs 1,600 crore.

EIL stocks today hit the upper limit at Rs 2,079.70 on the Bombay Stock Exchange on news of government approval of share sale, bonus issue and special dividend. The stock had yesterday closed at Rs 1,733.10 on the bourses.

The company, which has been associated with the setting up of all the refineries, except Reliance Industries' Jamnagar unit and most of the offshore facilities and oil and gas pipeline in the country, had posted a net profit of Rs 119.5 crore on a turnover of Rs 859.6 crore in first half of the current fiscal.

It had reported a net profit of Rs 344.53 crore on a turnover of Rs 1,532.46 crore in 2008-09 fiscal.

Purwaha said the company had an order book of Rs 7,500 crore, 55 per cent of which was made up of engineering, procurement and construction contracts.

"We are confident of achieving 20 per cent growth this year," he said, adding that the company was focusing on Middle-East, Africa, Latin America particularly Brazil, CIS countries like Kazakhstan and Russia for lumpsum turnkey EPC and engineering services contracts.