Tepid reponse for Suuti's L&T stake sale

Govt sells 1.63% as against 3% on offer; SBI emerges as a big buyer

Weak investor demand forced the government to curtail the proposed three per cent stake sale in Larsen and Toubro (L&T), held through Specified Undertaking of the Unit Trust of India (Suuti). The Centre settled for 1.63 per cent stake sale, for Rs 2,100 crore.

The sale was done through a block deal. This is the first time the Centre has offloaded a stake in a company held through SUUTI since March 2014.

State Bank of India bought 5.65 million shares worth Rs 800 crore, data provided by National Stock Exchange (NSE) showed. The rest was taken by other institutional investors like mutual funds, banks and domestic institutional investors. 

 

“The government did not want a situation where most of the shares on offer were picked up only by state-owned institutions, as it would have sent a bad signal. Hence, the stake on offer was trimmed,” said an investment banker. Neeraj Kumar Gupta, secretary for Department of Investment and Public Asset Management (DIPAM) echoed a similar sentiment while interacting with the media. “We could have gone up to three per cent. We got committed investor up to 1.63 per cent and we accepted those,” he said. 

Gupta indicated another 1.5 per cent stake in L&T held by Suuti could also be offloaded in the coming months.

However, other senior government officials involved in the sale said the deal was a positive development, in that it showed the government’s commitment to offload SUUTI stakes. 

“The Centre is committed to sell SUUTI stakes but such transactions will be done in an informed and deliberate manner. There will be no offloading out of desperation,” said an official.

Market players said weak secondary market conditions and a drop in the share price of L&T during Friday’s trade weighed on investor demand.   On Friday, shares of L&T opened at Rs 1,411 apiece — nearly three per cent lower than the previous closing price. The government had set a floor price of Rs 1,415 for the transaction. 

Market sources said, the reduction in size was keeping in mind the investor sentiment. 

Following Friday’s share sale, Suuti holdings in L&T drop to 6.69 per cent. Beside L&T, Suuti owns around 11 per cent each in ITC and Axis Bank. Earlier this year, the government had appointed Citibank, Morgan Stanley and ICICI Securities as investment bankers to manage share sales in companies held in Suuti.

This financial year the government has budgeted Rs 56,500 crore of revenue from disinvestment, including Rs 20,500 crore from strategic sales. 

The department of investment and public asset management has garnered more than Rs 21,000 crore so far this year, the highest ever for the first six months for any given year.