Govt to soon begin Suuti share sale

Will start with Axis Bank; share sale in 3 tranches, first of which could be in late October or early November

The government is likely to begin the mega share sale in companies held by the Specified Undertaking of the Unit Trust of India (Suuti) with Axis Bank later this month or early next month, say sources.

The government holds 11.5 per cent stake in the lender under Suuti and plans to dispose its holdings in three tranches, to avoid oversupply of paper. At the current market rate, Suuti’s stake in Axis Bank is valued at Rs 14,735 crore. Beside Axis Bank, the government also owns a large chunk in Larsen & Toubro and ITC under Suuti, which it plans to sell over the next three years.

Investment bankers with the Suuti mandate are already making sales pitches to marquee institutional investors. Based on the initial feedback and current market conditions, the tentative price for the share sale has been arrived at Rs 540. The divestment is likely to be done through the offer for sale (OFS) route and the final price will be fixed ahead of the share sale date.

Shares of Axis Bank closed at Rs 534 on the BSE on Wednesday.

“Selling shares in tranches would help the government in minimising the risk. A major part of the stake sale is targeted to be completed during the current financial year, to help meet the divestment target for the year,” said an investment banker.

The decision to start the Suuti share sale with Axis Bank was taken due to ownership-related complications with ITC and L&T, said sources.

Suuti has appointed Morgan Stanley, ICICI Securities and Citibank as bankers to manage the Rs 60,000-crore share sale. JM Financial, HSBC and SBI Capital Markets are among the standby bankers, in case of any conflict of interest.

Suuti has holdings in 51 companies, of which 43 are listed. The bulk of the holdings are in Axis Bank, L&T and ITC. In the unlisted space, Suuti owns stake in National Securities Depository, Stock Holding Corporation of India and North Eastern Development Finance Corporation.

“The Axis stake sale is crucial for the central government, as it would help them to gauge investor sentiment. Depending on the response, they would proceed with other big offerings, including L&T,” said the banker cited above.

The government has segregated the 51 entities into three groups. Group A consists of all the front-line listed companies like Axis Bank, L&T and ITC. Group B consists of unlisted entities. All the smaller listed companies where SUUTI owns stake have been categorised as Group C.

SUUTI is an offshoot of the erstwhile Unit Trust of India (UTI). In 2002, government had split UTI into two entities, SUUTI and UTI AMC. While SUUTI takes care of the assured return plans of UTI, the AMC manages marked-linked schemes.

For the current financial year, the government has outlined a target of Rs 56,500 crore from divestment. Of this, Rs 36,000 crore is estimated to come from minority stake sales in various public sector units, while the remaining Rs 20,500 crore would come from strategic sale in various companies. Of this, the government has managed to garner only Rs 3,183 crore till date. Of this, Rs 2,716 crore was from an OFS in NHPC.