The Centre has decided to jettison the strategic divestment route for Hindustan Machine Tools Ltd and instead place its shares in the stock market for retail investment.

Also Read The Divestment Development: Complete Coverage

Official sources told Business Standard that the Centre will offload approximately 49 per cent of the equity of the engineering company, amounting to about Rs 300 crore (Rs 3 billion) to the public.

They said that as per their assessment, a strategic sale of the company, would not garner more than a couple of hundred crores for the government. So it will be better to tap the market.

The initial forays to find a strategic partner for the company and its subsidiaries has yielded no result till now. The divestment process through formation of a joint venture was initiated for three of its subsidiaries in 2001 without any result.

Before offloading the equity of the company in the market, the government is expected to infuse an additional equity by converting a Rs 200 crore (Rs 2 billion) loan raised by HMT into equity. At present the equity capital of the company is Rs 468.17 crore (Rs 4.68 billion). Of this, the government share is 98.18 per cent.

Sources said that the government, in due course, plans to offload its entire stake in the company. A portion of the proceeds from the projected public issue will be used by the centre to re-structure and technologically upgrade the company, which has lost its position as a blue chip public sector company in the last decade.

HMT Ltd is already listed on the Mumbai and Bangalore stock exchange. The shares of the company were traded at Rs 17.50 when the markets closed on 24 September.

It made a loss of Rs 34.41 crore (Rs 344.1 million) in 2002-03, while in 2001-02 it made a profit of Rs 10.24 crore (Rs 102.4 million).

The company had made massive losses to the tune of Rs 296 .91 crore (Rs 2.97 million) in 1999-2000 due to which an organisational re-structuring was effected leading to conversion of its various business groups into separate subsidiaries.