SUUTI gets a five-year lifeline
Now the special undertaking won’t divest stake in 3 leading firms anytime soon.
The government has granted Special Undertaking of Unit Trust of India (SUUTI) five more years of exemption from liquidating state liabilities. This means that SUUTI, which has invested around Rs 25,000 crore in three leading Indian companies – ITC, Larsen and Toubro (L&T) and AXIS Bank (formerly UTI Bank) — will not divest its stake in these firms in the immediate future.
SUUTI, which was carved out of the erstwhile Unit Trust of India in 2003, was scheduled to wind up in January 2008. Last year, the government extended the exemption till March 2009.
| Getting a long rope | ||||
| Name | Axis Bank | ITC | L&T | Total |
| Holding (%) | 27.02 | 11.89 | 8.99 | |
| Value (Rs cr) | 7943.23 | 9475.00 | 7,896.54 | 25,314.77 |
As a result, it was expected to divest its investments before the extended deadline to pay off the government’s liabilities and wind up its operations.
In 2008, SUUTI had decided to divest its entire 27.02 per cent stake in Axis Bank and even appointed investment bankers for this purpose. However, due to the financial turmoil in the global market, it called off the process, which was expected to start sometime this year.
In fact, UTI was the founder-promoter of Axis Bank and is still the single-largest shareholder. However, at the time of divestment, it was decided that SUUTI would not sell its entire holding to one company. “The mandate was to divest the entire 27 per cent SUUTI stake in such a way that no single company can acquire more than 5 per cent stake. Such a decision was taken to keep the management control unchanged,” said a banker involved in the transaction.
Similarly, SUUTI was planning to divest its holding in ITC and L&T. The government was in a piquant situation in case of ITC. Since its foreign promoters, the UK-based BAT, wanted to increase its holding, SUUTI did not start the process as it wanted to divest its holding to financial investors, including foreign institutional investors (FIIs).
Since some of the schemes of SUUTI were still pending closure, it was proposed to extend the exemption for a period of five years, that is up to March 31, 2014.