The Department of Heavy Industry is in the process of appointing two more independent directors on the board of BHEL to achieve compliance with listing norms, prior to the power equipment-maker's follow-on public offer.
Bharat Heavy Electricals Ltd (BHEL) has filed draft papers with market regulator Sebi for the proposed divestment of 5% (2.45 crore shares) of the government's stake in the company.
"We are in the process of appointing independent directors. Soon they will be appointed," a top government official said.
As per regulations, half of the company's board should comprise independent directors. Currently, BHEL has 13 directors, including Chairman and Managing Director B P Rao. Out of them, five are independent directors.
According to a top BHEL official, there is a shortage of two independent directors to achieve compliance with Sebi's listing norms.
In its Draft Red Herring Prospectus (DRHP), the state-run entity said it intends to be in compliance with regulatory requirements regarding composition of the board before filing the Red Herring Prospectus with the Registrar of Companies.
"Presently, our board has thirteen directors, of which five are independent directors, while Clause 49 of the Equity Listing Agreement stipulates that independent directors should comprise 50% of our board," it noted.
The proposed BHEL follow-on offer is a part of the government's ambitious Rs 40,000 crore disinvestment target for 2011-12. The disinvestment is expected to raise over Rs 4,000 crore for the government.
The government on August 30 approved the disinvestment of 5% of its shareholding in BHEL. The government holds a 67.72% stake in the power equipment major.
Four merchant bankers— Morgan Stanley, DSP Merrill Lynch (Bank of America), ICICI Securities and Kotak Mahindra Capital— are managing the follow-on public offer.