A proposal for disinvestment of 10% of government equity in the country's only state-owned aerospace firmHindustan Aeronautics Limited was approved by the Union Cabinet on Thursday.

"The Cabinet Committee on Economic Affairs (CCEA) has approved divestment of 10% equity in HAL out of its holding on 100% through an Initial Public Offer (IPO) in the domestic market as per the SEBIrules and regulations," an official statement said in Delhi.

Addressing the media on the issue, Finance Minister P Chidambaram said it would be basically an IPO and for this purpose, a restructuring of the HALboard will have to be done. He said the IPO would be issued only in the next fiscal only.

The statement said paid up equity of the so far-unlisted company on March 31 this year was Rs120.50 crore.

The disinvestment was being mooted before the CCEA amid government's plans to modernise the company for which Rs20,000 crore would be required over next five years.

The government had set up expert groups under former Cabinet SecretaryBK Chaturvedi for the restructuring of HAL and is awaiting its report for suggesting measures for strengthening it.

HAL is at present handling key projects for the Indian armed forces such as the development of Tejas light combat aircraft, Dhruv advanced light helicopters, indigenous production of Russian-origin Su-30MKI fighter planes.

It is preparing to handle future projects such as the indigenous production of medium multi-role combat aircraft (MMRCA) and fifth-generation fighter aircraft (FGFA), light utility helicopters and multi-role transport aircraft (MTA).