NEW DELHI -- State-run Bharat Heavy Electricals Ltd. has recommended that the government divest 5% of its holding in the company through a follow-on public issue.

Bharat Heavy Electricals, a producer of industrial goods and caters to energy and infrastructure companies, at its Monday board meeting also decided to keep 10% of the divestment out of government's shareholding for its employees, according to a company press release.

BHEL, in which the federal government holds a 67.72% stake, also announced a five-for-one stock split to ensure a wider participation in the proposed follow-on offering by making its shares more affordable to retail investors.

At 0925 GMT, BHEL shares were trading 6.19% lower at 1,945.90 rupees, while the broader sensitive index was down 1.85%.

The shares are under pressure because of the news of the public offer, as the share supply would increase and [the follow-on offering share price] is also likely to be priced at a discount," said Daljeet Kohli, head of research, at Indianivesh Securities.

"There were no surprises in the results because the company had already released [provisional] numbers [in early April]," he added.

Whether the federal government accepts BHEL's recommendation to offload stake is to be seen. India's federal government has over the past year been selling 5%-10% stakes in several state-run companies to raise money for social sector projects.

Meanwhile, the company announced a surge of 46.5% in its net profit.