BHEL OFS: Bharat Heavy Electrical Limited’s (BHEL) offer for sale (OFS) that kicked off today, February 11, garnered a stellar response from non-retail investors. And tomorrow, retail investors will get their chance to apply for BHEL OFS.
The PSU stock cracked 6% today as the two-day OFS by the promoters, i.e. the government of India, kicked off with a floor price of ₹254 — which is at a 8% discount to the last close of ₹276.10.
The effective discount is now minimal at 2%-3%, with supply pressure likely to persist. Against this backdrop, the key question remains whether retail investors should apply for BHEL OFS when it opens for them tomorrow.
Key concerns around BHEL
Before deciding whether to apply or not, investors must understand that this OFS is a government divestment plan and no proceeds will be received by the company. So this move does not directly improve BHEL’s balance sheet or reduce debt.
BHEL share price has been in a steady uptrend for the last seven years, recording a cumulative 330% return, but this has made its valuations expensive.
“Even at ₹254, BHEL trades at relatively high valuation multiples compared to its return ratios, which are still modest. While earnings have improved and the order book is strong above ₹2 lakh crore, return ratios like ROIC and ROCE are still modest,” said Abhinav Tiwari, Research Analyst at Bonanza.
Valuation-wise, BHEL has re-rated over the last year on the back of government capex push and improving order inflows. The business outlook looks better than it did a few years ago, especially with a focus on thermal upgrades, defence and railways, but analysts are concerned about margin pressure and China policy risks.
Santosh Meena, Head of Research at Swastika Investmart, said BHEL’s business outlook is positive, backed by robust order book (multi-year visibility), infrastructure, railways and defence tailwinds, recent order wins, and expected revenue or margin improvement.
However, China policy risks, amid reports of potential easing of curbs on Chinese bidders, could pressure margins and increase competition; execution risks remain.
For the third quarter of FY26, BHEL posted a three-fold jump in consolidated net profit to ₹390.40 crore, mainly due to increased revenues from key sectors. BHEL’s total income rose 18% to ₹8,691.85 crore from ₹7,385 crore in the year-ago period.
Should retail investors apply for BHEL OFS?
Against this backdrop, analysts believe that as the discount gap has narrowed and BHEL faces valuation challenges, the OFS is suitable only for investors having a longer time horizon and not those looking for quick returns.
Dr Ravi Singh, Chief Research Officer at Master Capital Services, said that BHEL is not a low-risk defensive stock — it remains a cyclical PSU name. So participation makes sense only for investors with patience and a 2–3 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.
He believes even for a long-term investor, a better strategy is to accumulate from the open market gradually rather than buying at one go.
Meena also opined that it’s better to wait and accumulate BHEL stock in the open market if it dips below ₹250 (or lower on volatility/China concerns) and avoiding fixed-price commitment amid uncertainty.
It has strong execution potential, but China bidding risks and high valuations add caution, Meena said, adding that it makes BHEL better suited for optimistic long-term holders than most retail investors seeking quick value.
“We believe investors can avoid applying given limited discount, rich valuation, PSU overhang, and execution risks in large EPC projects,” Tiwari expressed similar views.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions.
