The government’s attempts to monetise a portion of the shares held by the Specified Undertaking of UTI (SUUTI) appears to be gathering steam. The finance ministry is considering a proposal to sell some shares of ITC, Axis Bank and Larsen & Toubro, held by SUUTI — the restructured unit of the erstwhile UTI — as the government rushes to meet its disinvestment target for the current financial year.
The proposal involves selling stake through an offer for sale (OFS) in Axis Bank. It could also look at the possibility of creating a basket of the three stocks and sell it through the secondary market. Sources said these proposals were still on the drawing board and the ministry was yet to take a decision on the matter.
It is also not clear whether the ministry is planning such a stake sale in the current financial year or later, but sources said it was unlikely to rush into trimming SUUTI’s holdings in these three stocks, especially ITC and L&T, which did not have majority shareholders.
SUUTI, created in 2002 after the then UTI was wound up following the US 64 fiasco, owns 11.54 per cent in ITC, 23.6 per cent in Axis Bank and 8.3 per cent in L&T. The government had split UTI into two — the existing UTI Mutual Fund and SUUTI. The latter held the assets and liabilities of the schemes of the original UTI and was taken over by the government. The total value of SUUTI’s holding in the three stocks was a little over Rs 47,000 crore on Monday.
If the government opts for an OFS only in Axis Bank, it could look at raising between $500 million and $1 billion (Rs 2,750 crore and Rs 5,500 crore). In the case of a secondary-market sale option for a basket of three stocks, the target could be in the range of $1 billion to $2 billion (Rs 5,500 crore to Rs 11,000 crore), said a source.
The government, which has a disinvestment target of Rs 30,000 crore for this financial year, has raised almost Rs 7,000 crore by selling stakes in NMDC and Hindustan Copper. Over the next couple of weeks, it aims to raise Rs 14,700 crore by selling stakes in National Thermal Power Corporation (Rs 12,000 crore) and Oil India (Rs 2,700 crore)
In 2011, the government had planned to pledge shareholdings of SUUTI to buy shares of state-owned companies in its attempts to meet the disinvestment target.
The chief investment officer of a large private mutual fund said the plan to sell stakes in SUUTI was better than pledging those to cut fiscal deficit.
“If the government sells stakes, it will be taken positively by the markets. Quality stocks will come into the market and highlight the government’s resolve to control fiscal deficit. Pledging is nothing but financial engineering,” said the mutual fund’s chief investment officer asking not to be named.
|VALUE OF SUUTI HOLDINGS|
|Company||Market Cap (Rs cr)||Stake held||Value of holdings (Rs cr)|
|L & T||97,735.28||8.30%||8,112.03|
|Prices as on Jan 07 Source: BS Research Bureau|