Analysts are divided on BHEL’s OFS for retail investors

Mumbai: Analysts are divided on recommending retail investors to participate in BHEL’s ₹4,422-crore offer for sale (OFS), with opinions divided between caution on valuation and optimism on the order book. Brokers broadly agree that investors with a medium- to long-term horizon can benefit from bidding on the stock sale. However, short-term investors are unlikely to see any immediate benefit as the OFS itself is not expected to serve as a revaluation catalyst in the near term. The retail tranche of the two-day share sale will open for bids on Thursday after the non-retail portion was subscribed 2.3 times on Wednesday, the first day of the issue. More than 22 crore shares were bid for against the 9.4 crore on the block, prompting the government to activate the green shoe option.

The stock fell 5.6% to ₹260 on Wednesday after the floor price was set at ₹254 per share, compared to Tuesday’s closing price of ₹276, implying a discount of around 8%.

JM Financial said the floor price in the OFS valued the stock attractively and maintained a buy rating with a target price of ₹355 per share, valuing the company at 30 times estimated FY28 earnings.

The government is offloading up to 5% of its stake in BHEL through the two-day OFS. After the sale of the shares, the government will hold 58.17% of the shares in the company.

“The OFS seems more like a disinvestment exercise than a fundamental revaluation,” said Divyam Mour, research analyst at Samco Securities. “While the offer appears visually attractive, the valuation and execution realities warrant careful consideration. We only recommend staggered participation for long-term investors.”

BHEL’s order book has increased from ₹89,813 crore in FY21 to ₹2,19,600 crore in H1FY26, pushing its book-to-bill ratio to 7.2 times, amid a revival in thermal and infrastructure investments, he said. “At a rolling price-to-earnings ratio of 108 times, the stock is pricing in meaningful operating leverage, continued order inflows and a structural improvement in profitability,” Mour said. BHEL shares have risen more than 30% in the past year, compared to the 17% rise in the BSE Capital Goods Index.

Vinod Nair, head of research at Geojit Investments, said the OFS is attractive to retail investors in the long term. “The stock currently trades at a one-year price-to-sales ratio of 2.2 times, close to the three-year average. Valuations remain attractive. We maintain a positive long-term view on the stock,” he said.